# \. ORISSA CEMENT LTD AND ORS. ETC. ETC v. STATE OF ORISSA AND ORS. ETC. ETC

- **Citation:** [1991] 2 S.C.R. 105
- **Court:** Supreme Court of India
- **Decided:** 1991-04-04
- **Case number:** Civil Appeal Nos. G 4353-54 of 1983
- **Bench:** S. Ranganathan, N.M. Kasliwal, S.C. Agrawal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/orissa-cement-ltd-and-ors-etc-etc-v-state-of-orissa-and-ors-etc-etc-11133
- **Pages:** 83

## Headnote

Orissa Cess Act, 1962: Sections 5-7-Constitutional validity of.
Orissa Cess Rules, 1963: Rule 6A.
Bengal Cess Act (Act IX of 1880) (As applicable to State of
Bihar): Sections 4, 5, 6 and 9-Constitutional validity of.
Madhya Pradesh Upkar Adhiniyam, 1981: Part IV-Section 11Constitutional validity of.
Madhya Pradesh Karadhan Adhiniyam 1982: Part IV-Section
A
B
c
9-Constitutional validity of.
D
Madhya Pradesh Mineral Areas Development Cess Rules, 1982:
Rule 3 and JO.
Land Cess-Levy of cess based on royalty derived from mining
lands-Nature, c~aracter and validity of-State Legislatures-Legislative competence of-Whether denuded by enactment of Mines and
E
Minerals (Regulation and Development) Act, 1957.
'Royalty'-Whether tax.
'Land Revenue'-Connotation of.
Constitution of India, 1950: Seventh Schedule-List I Entries 52
and 54-List II Entries 5, 18, 23, 45, 49, 50 and 66-State LawCentral Law-Doctrine of occupied field-State Act encroaching field
occupied by Central Act-Effect of.
F
Articles 142, 246 and 265-Cess-Constitutional invalidityConsequences of-Refund of cess whether automatic and inevitable
consequence-Declaration of invalidity and determination of relief in
G
consequence whether two different things-Relief whether discretion of
Court-Power of Court to mould or restrict the relief-Doctrine of prospective overruling and doctrine of unjust enrichment-Applicability of.
Article 277;_Essential requirements of the Article-Discussed.
Practice and Procedure: Undertaking given by "the partiesH
105
106
SUPREME COURT REPORTS
I 1991] 2 S.C.R.
A directions given by Supreme Court-Effect of.
The States of Orissa, Bihar and Madhya Pradesh levied a cess
which was based on the royalty derived from mining lands. The cess
was levied by these States under their respective statutes viz. Orissa
Cess Act, 1962, Bengal Cess Act, 1880 (as applicable to the State of
B
Bihar), Madhya Pradesh Upkar Adhiniyam 1981 and Madhya Pradesh
Karadhan Adhiniyam, 1982.
The assessees challenged the constitutional validity of the cess by
filing various petitions in the High Conrts of Orissa, Bihar and Madhya
Pradesh. The High Court of Orissa declared the cess unconstitutional
C
on the ground that it was beyond the legislative competence of the State
Legislatures, but rejected the prayer of the assessees for a direction to
the State to grant refund of the cess collected from the assessees.
Against the decision of the Orissa High Court the assessees have ftlecl
appeal in this Court whereas the State of Orissa bas filed a cross.
appeal. The High Court of Madhya Pradesh also declared the levy of
D
cess unconstitutional on the ground that it was beyond the legislative
competence of the State legislature. Against the decision of the Madhya
Pradesh High Court the State of Madhya Pradesh has filed an appeal in
this Court. On the other hand the High Court of Patna dismissed the
writ petition of the assessee. Against the decision of the Patna High
Court the assessee has filed an appeal in this Court.
E
In appeal to this court, it was contended on behalf of the State of
Orissa; that (i) the levy of cess being referable to Entries 45, 49 and 50
of the State List of the Seventh Schedule of the Constitution the
impugned legislation was within the legislative competence of the State
legislature; (ii) the limitations imposed in the statute on the modes of
F
utilisation of cess supports a view that the cess i~ fee on which the State
legislature is competent to legislate under Entry 23 read with Entry 66
of the State List; (iii) since the impugned Act was concerned with the
raising of funds to enable panchayats and Samitbis to discharge their
responsibilities of local administration and take steps for proper
development of the area under their jurisdiction, the impugned legislaG
tion was referable to Entry 5 of State List; and (iv) the enactment of the
Central Legislation viz. Mines and Minerals (Regulation and Development) Act, 1957 bas not denuded the State legislature of its compe

## Text

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-\.
ORISSA CEMENT LTD AND ORS. ETC. ETC.
v.
STATE OF ORISSA AND ORS. ETC. ETC.
APRIL 4, 1991
[S. RANGANATHAN, N.M. KASLIWAL AND
S.C. AGRAWAL, JJ.]
Orissa Cess Act, 1962: Sections 5-7-Constitutional validity of.
Orissa Cess Rules, 1963: Rule 6A.
Bengal Cess Act (Act IX of 1880) (As applicable to State of
Bihar): Sections 4, 5, 6 and 9-Constitutional validity of.
Madhya Pradesh Upkar Adhiniyam, 1981: Part IV-Section 11Constitutional validity of.
Madhya Pradesh Karadhan Adhiniyam 1982: Part IV-Section
A
B
c
9-Constitutional validity of.
D
Madhya Pradesh Mineral Areas Development Cess Rules, 1982:
Rule 3 and JO.
Land Cess-Levy of cess based on royalty derived from mining
lands-Nature, c~aracter and validity of-State Legislatures-Legislative competence of-Whether denuded by enactment of Mines and
E
Minerals (Regulation and Development) Act, 1957.
'Royalty'-Whether tax.
'Land Revenue'-Connotation of.
Constitution of India, 1950: Seventh Schedule-List I Entries 52
and 54-List II Entries 5, 18, 23, 45, 49, 50 and 66-State LawCentral Law-Doctrine of occupied field-State Act encroaching field
occupied by Central Act-Effect of.
F
Articles 142, 246 and 265-Cess-Constitutional invalidityConsequences of-Refund of cess whether automatic and inevitable
consequence-Declaration of invalidity and determination of relief in
G
consequence whether two different things-Relief whether discretion of
Court-Power of Court to mould or restrict the relief-Doctrine of prospective overruling and doctrine of unjust enrichment-Applicability of.
Article 277;_Essential requirements of the Article-Discussed.
Practice and Procedure: Undertaking given by "the partiesH
105
106
SUPREME COURT REPORTS
I 1991] 2 S.C.R.
A directions given by Supreme Court-Effect of.
The States of Orissa, Bihar and Madhya Pradesh levied a cess
which was based on the royalty derived from mining lands. The cess
was levied by these States under their respective statutes viz. Orissa
Cess Act, 1962, Bengal Cess Act, 1880 (as applicable to the State of
B
Bihar), Madhya Pradesh Upkar Adhiniyam 1981 and Madhya Pradesh
Karadhan Adhiniyam, 1982.
The assessees challenged the constitutional validity of the cess by
filing various petitions in the High Conrts of Orissa, Bihar and Madhya
Pradesh. The High Court of Orissa declared the cess unconstitutional
C
on the ground that it was beyond the legislative competence of the State
Legislatures, but rejected the prayer of the assessees for a direction to
the State to grant refund of the cess collected from the assessees.
Against the decision of the Orissa High Court the assessees have ftlecl
appeal in this Court whereas the State of Orissa bas filed a cross.
appeal. The High Court of Madhya Pradesh also declared the levy of
D
cess unconstitutional on the ground that it was beyond the legislative
competence of the State legislature. Against the decision of the Madhya
Pradesh High Court the State of Madhya Pradesh has filed an appeal in
this Court. On the other hand the High Court of Patna dismissed the
writ petition of the assessee. Against the decision of the Patna High
Court the assessee has filed an appeal in this Court.
E
In appeal to this court, it was contended on behalf of the State of
Orissa; that (i) the levy of cess being referable to Entries 45, 49 and 50
of the State List of the Seventh Schedule of the Constitution the
impugned legislation was within the legislative competence of the State
legislature; (ii) the limitations imposed in the statute on the modes of
F
utilisation of cess supports a view that the cess i~ fee on which the State
legislature is competent to legislate under Entry 23 read with Entry 66
of the State List; (iii) since the impugned Act was concerned with the
raising of funds to enable panchayats and Samitbis to discharge their
responsibilities of local administration and take steps for proper
development of the area under their jurisdiction, the impugned legislaG
tion was referable to Entry 5 of State List; and (iv) the enactment of the
Central Legislation viz. Mines and Minerals (Regulation and Development) Act, 1957 bas not denuded the State legislature of its competence
to enact the impugned legislation since the scope and subject matter of
the two legislations are entirely different and the impugned State Legislation does not encroach upon the field covered by the Central LegislaH
tion i.e. 1957 Act.
.I
ORISSA CEMENT v. STATE OF ORISSA
107
On behalf of the assessees it was.contended inter alia that (i) all the
State levies were ultra vires for the reasons given by this Court in the
India Cement case; (ii) the State cannot seek to sustain the levy under
the Bengal Cess Act 1880 by relying on Article 277 of the Constitution;
and (iii) the levy being unconstitutional the Court should direct the
States to refund the cess collected from the assessees because (a) a
refund is the automatic and inevitable consequence of the declaration of
invalidity of tax and (b) the States have given undertakings before this
Court that they would refund the amount collected in case the levy is
declared invalid by this Court.
Disposing of the appeals, this Court,
HELD: 1. The levy of cess under sections 5 to 7 of the Orissa Cess
Act, 1962 is beyond the competence of the State Legislature. [169B]
1.1 A royalty or the tax thereon cannot be equated to land revenue.
Therefore the cess cannot be brought under Entry 45 of List II. [142D]
India Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1
S.C.C. 12, followed.
1.2 A tax on royalties cannot be a tax on minerals and is outside
the purview of Entry 50 of List II. Even otherwise, the competence of the
State Legislature under the said Entry is circumscribed by "any limitations imposed by Parliament by law relating to mineral development".
The Mines and Minerals (Regulation and Development) Act, 1957 is a
A
B
c
D
E
law of Parliament relating to mineral development and Section .9 of the
said Act empowers the Central Government to fix, alter, enhance or
reduce the rates of royalty payable in respect of minerals removed from
F
the land or consumed by the lessee. Sub-Section (3) of Section 9 in terms ·
States that the royalties payable under the Second Schedule to that Act
shall not be enhanced more than once during a period of three years.
This is a clear har on the State legislature taxing royalty so as, in effect,
to amend the Second Schedule to the Central Act. This is exactly what
the impugned Act does. Therefore the validity of the impugned Act
cannot be upheld by reference to Entry 50 of List II. And if the cess is
taken as a tax falling under Entry 50 it will be ultra vires in view of the
provisions of the Central Act. [144B, 153B-D, 1680]
India Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1
S.C.C. 12, followed.
G
H
A
B
108
SUPREME COURT REPORTS
I 1991] 2 S.C.R.
Hingir Rampur Coal Co. Ltd. & Ors. v. State of Orissa & Ors.,
[ 1961] 2 S.C.R. 537, Justice Wanchoo's dissent explained.
1.3 There is a difference in principle between a tax on royalties
derived from land and a tax on land measured by reference to the
income derived therefrom. A tax on buildings does not cease to be such
merely because it is quantified on the basis of the income it fetches. But
in the impugned legislation the levy is not measured by the income
derived by the assessee from the land, as is the case with lands other
than mineral lands. The measure of the levy is the royalty paid, in
respect oftbe land, by the assessee to his lessor which is quite a different
thing. The Impugned statute only purports to levy a cess on the annual
C
value of all land. There is a clear distinction between tax on land and
tax on income arising from land. The former must be one directly
imposed on land, levied on land as a unit and bearing a direct relationship to it. A tax on royalty cannot be said to be a tax directly on land as a unit.
Hence the cess is outside the purview of Entry 49 List II. [148H, 149A-D]
D
Ajay Kumar Mukherjea v. Local Board of Barpeta, [1965] 3
S.C.R. 47; Ra/la Ram v. The province of East Punjab, [1948] F.C.R.
207; Buxa Dooars Tea Co. v. State. [1989] 3 S.C.R. 2ll; Bhagwan
Dass Jain v. Union of India, [1981] 2 S.C.R. 808 and R.R. Engineering
Co. v. Zita Parishad, [1980] 3 S.C.R. 1, referred to.
E
Union of India v. Bombay Tyre International, [1984] 1 S.C.R.
347; Re: A reference under the Government of Ireland Act, 1920 and
Section 3 of the Finance Act (Northern Ireland). 1934, (1963) 2 All.
E.R. Ill, cited.
2. If the levy in question cannot be described as a tax on land, it
F cannot be described as fee with regard to land either. [ 169A]
2.1 Section 10 of the Orissa Cess Act, 1962 earmarks tl_te
purposes of utilisation of only fifty per cent of the proceeds of the cess
and that, too, is limited to the cess collected in respect of "lands other
than lands held for carrying on mining operations". Therefore the levy
'
G cannot be correlated to any services rendered or to be rendered by the
State to the class of persons from whom the levy is collected. Accordingly the levy cannot be treated as a fee which the State legislature is
competent to legislate for under entry 66 of the State List. I 153E-F]
2.2 Even assuming that the levy is a fee, the State legislature can
H impose a fee only in respect of any of the matters in the State List. The
ORISSA CEMENT v. STATE OF ORISSA
109
entry relied upon for this purpose i.e. Entry 23 is Itself "subject to the
A
provisions of List I with respect to regulatfon and development" of
-!.
mines and minerals under the control of the Union. Under Entry 54 of
List I, regulation of mines and mineral development is in the field of
parliamentary legislation "to the extent to which such regulation and
developruent under the control of the Union is declared by Parliament
by law to be expedient in the public interest". Such a declaration ls a
contained in Section 2 of the Mines and Minerals (Regtilatlon and
Deveiopruent) Act, 1957. The validity of the impugtied Act cannot be
upheld by reference to Entry 23 List II. [ 153G-H, .154A, 168D]
3. There ls a difference between the 'object' of the Act and its
'subject'. The object of the levy may be to strengthen the fmances of c
local bodies hut the Act has nothing to do with municipal or local
administration. Accordingly State's reliance on Entry 5 of List II is
plainlytootenuous. [164D]
4. The answer to the question whether the State Leglslature was
'>
denuded of its competence to enact the impugned legislation because of D
the Parliament having enacted the Mines and Minerals (Regulation and
Development) Act, 1957 depends on a proper understanding of the
Scope of the Act and an assessment of the encroachment made by the
impugned State leglslation into the field covered by it. [ 16ID]
4.1 The mere declaration of a law of Parliament that it is expeE
dient for an industry or the regulation and development of mines and
. '
minerals to be under the control of the Union under Entry 52 or Entry
54 of List I does not denude the State legislatures of their leglslatlve
powers with respect to the fields covered by the several entries in List II
or List III. Particularly, in the case of a declaration under Entry 54, this
legislative power is eroded only to the extent control is assumed by
F'
the Union pursuance to such declaration as spelt out by the leglslaiive enactment which makes the declaration. The measure of erosion
turns upon the field of the enactment framed in pursuance of the
declaration. [ 161E-F]
Cl '
4.2 In assessing the field covered by the Act of Parliament in
G
question, one should be guided not merely by the actual provisions of .
the Central Act or the rules made thereunder but should also take into
account matters and aspects which can legitimately be brought within
the scope of the said statute. Viewed in this light and in the light of the
provisions of the Bihar Cess Act the conclusion seems Irresistible that
the State Act has trespassed iDto the field covered by the Central Act H
110
SUPREME COURT REPORTS
[ 1991] 2 S.C.R.
A viz. Mines and Minerals (Regulation and Development) Act, 1957. [ l6JF]
B
4.3 The impugned legislation which stands impaired by the
Parliamentary declaration under Entry 54, can hardly be equated to
the law for land acquisition or municipal administration which are
traceable to different specific entries in List II or List III. [ l63G-H)
Hingir Rampur Coal Co. Ltd. & Ors. v. State of Orissa & Ors.,
[1961] 2 S.C.R. 537; State of Orissa v. M.A. Tulloch & Co., [1964] 4
S.C.R. 461 and Indian Cement & Ors. v. State of Tamil Nadu & Ors.,
[1990] l S.C.C.12, followed.
State of Haryana v. Chanan Mal, [1976) 3 S.C.R. 688; Ishwari
C Khatan Sugar Mills (P) Ltd. v. State of U.P., [1980] 3 S.C.R. 331 and
Western Coalfields Ltd. v. Special Areas Development Authority.,
[1982] 2 S.C. R. 1, distinguished.
llldian Tobacco Co. Ltd. v. Union, [1985) Supp. 1 S.C.R. 145;
D State of West Bengal v. Union, [1964] l S.C.R. 371; Central Coalfields
v. State of M.P., A.I.R. (1986) M.P. 33; M. Karunanidhi v. Union of
India, (1979] 3 S.C.R. 254; State of Tamil Nadu v. Hind Stone etc.,
[1981] 2 S.C.R. 742; I. T.C. v. State of Kamataka, [1985] Suppl. S.C.R.
145; Bharat Coking Coal v. State of Bihar, [1990] 2 Scale 256; Kannan
Dewan Hills Co. v. State of Kera/a, [1973) 1 S.C.R. 356; Baijnath
E Kedia v. State of Bihar, (1970] 2 S.C.R. 100; H.R.S. Murthy v. Co/.
lector of Chiuoor & Ors. [1964] 6 S.C.R. 666; Ch. Tika Ramji & Ors.
v. State of U.P., [1956] S.C.R. 393; Laxmi Narayan Agarwala v. State,
A.I.R. (1983) Ori. 210; Bherulal v. State, A.l.R. (1965) Raj. 161;
Sharma v. State, A.I.R. (1969) P&H 79 and Saurashtra Cement &
Chemicals Industries Ltd. v. Union, A.I.R. (1979) Guj. 180, referred
F to.
Trivedi & Sons v. State of Gujarat, [1986] Suppl. S.C.C. 20,
cited.
5. Section 6 of the Bengal Cess Act, 1880 specifically enacts that
G
the cess will be on royalty from mines and quarries and on the annual
net profit of railways and tramways. The further amendments to
Section 6 have not changed this basic position. Though the section
refers also to the value of the mineral-bearing land, that furnishes only
the maximum upto which the cess, based on royalty, could go. Therefore, the cess is levied directly on royalties from mines and quarries.
H
The different notifications issued by the State of Bihar under sedion 6
ORISSA CEMENT v. STA'fE OF ORISSA
111
of the Act determining the rate of cess on the amount of royalty of all
minerals of the State place the matter beyond all doubt. The levy is a
percentage or multiple of the royalty depending upon the kind of
mineral and in the case of iron ore-the method of extraction and nature
A
of the process employed. There are no clear indications in the statute
that the amounts are collected by way of fee and not tax. Section 9
indicates that only a small percentage goes to the district fund and the
B
remaining forms part of the consolidated fund of the State "for the
construction and maintenance of other ·works of pnblic utility". How-
-~
ever, the proviso does require at least ten per cent to be spent for
purposes relating to mineral development. Even the assumption that
the levy can be treated, in part, as a fee and, in part, as a tax will not
advance the case of the respondents. Therefore, the levy of cess under
the Bengal Cess Act, 1880 is declared invalid. [I69C-F, H, 170A]
C
India Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1
S.C.C. 12, followed.
·•
Central Coalfields Ltd. v. State, (CWJC 2085/89 decided on o
6.11.90 by Patna High Court, referred to.
5.1 The attempt to sustain the tax under the Bengal Cess Act,
1880 on the basis of Article 277 cannot also succeed. [ 17 IC]
Ramkrishna Ramanath v. Janpad Sabha, [1962] Suppl. 3 S.C.R. E
70; Town Municipal Committee v. Ramachandra, [1964] 6 S.C.R. 947,
referred to.
6. The levy of cess under section 11 of the Madhya Pradesh
Upkar Adhiniyam, 1981 is not covered by Entry 49 or Entry 50 of List II
and is therefore, ultra vires .. [172B]
F
M.P. Lime Manufaciurers' Association v. State, A.I.R. (1989)
M.P. 264, referred to.
•,
6.1 Under Section 9 of the Madhya Pradesh Karadhan Adhiniyam, 1982 the proceeds of the cess are to be utilised only towards the G
general development of mineral-bearing areas. Although there is no
provision for the constitntion of a separate fund for this purpose as is
fonnd in relation to the cesses levied under Part II or Part III of the Act
yet this consideration alone does not preclude the levy from being
considered as a fee. The clear ear-marking of the levy for purposes
connected with development of mineral areas was rightly considered by
H
A
B
c
D
E
112
SUPREME COURT REPORTS
I 1991] 2 S.C.R.
the High Court, as sufficient to treat it as a fee. The High Court was
also right in holding that such a fee would be refer.uble to item 23 but
out of bounds for the State Legislature, after the enactment of the Mines
and Minerals (Regulation and Development) Act, 1957. [ 17 IF-H]
Srinivasa Traders v. State, [1983] 3 S.C.R. 843, referred to.
7. The grant of refund is not an automatic consequence of a
declaration of illegality i.e. where the levy of taxes is found to be unconstitutional, the Court is not obliged to grant an order of refund. There-
.._
fore a fmding regarding the invalidity of a levy need not automatically
result in a direction for a refund of all collections thereof made earlier.
The declaration regarding the invalidity of a provision and the determination of the relief that should be granted in consequence thereof are
two different things and, in the latter sphere, the Court has, and must
be held to have, a certain amount of discretion. Once the principle that
the Court has a discretion to grant or decline refnnd is recognised, the
ground on which such discretion should be exercised is a matter of
consideration for the Court having regard to all the circumstances of
the case. The Court can grant, mould or restrict the relief in a manner
most appropriate to the situation before it in such a way as to advance
the interests of justice. The Court is entitled to refuse the prayer for
good and valid reasons. Laches or undue delay or intervention of third
party rights would clearly be oue of those reasons. Unjust enrichment of
the refundee may or may not be another. Also there is no reason why
the vital interests of the State should not be a relevant criterion for
deciding that a refund should not be granted. [l85H, J86A-C,D& E 18ID-E,]
7.1 In the Instant case though the levy of the cess is unconstitutional. yet there shall be no direction to refund to the assessees of any
F
amounts of cess collected until the date on which the levy in question
has been declared unconstitutional. This, in rej!ard to the Ribar cases,
will be the date of this judgment i.e. 4.4.1991. In respect of Ori•sa and
Madhya Pradesh eases the relevant date will be tfle date on which the
concerned High Court has decl•red the levy unconstitutional i.e.
22.12.1989 in case ofOrissa and 21!.3.19~6 in fpse of Madhya Pradesh.
G
The dates of the judgments of the appropriate High Court, may not
constitute a declaration of law within the scope of Article 141 of the
Constitution, hnt it cannot he gainsaid that the State cannot, on any
ground of equity, be permitted to retain the cess collected on and after
the date of the High Court's judgment. Accordingly the States should
refund the amounts of cess collectert •fter the relevant dates to assessees
H directly or to the Coalfields from whom they were collected, with
-
J
OR!SSA CEMENT v. STATE OF ORISSA
113
interest at the rate directed by this Court or mentioned in the undertaking from the date of the relevant jndgment to the actual date of repayment. The Coalfields, when they get the refunds, should pass on the
same to their cnstomers, the assessees. [186F-G, 1878-C]
India Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1
A
S.C.C. 12, followed.
B
Linkletter, 14 L.Ed. (2d) 601; Sunburst, 77 L.Ed. 310; Mahabir
Kishore & Ors. v. State of Madhya Pradesh, [1989] 4 S.C.C. l;
Chhotabhai Jethabhai Patel & Co. v. Union of India, [1962] 2 Suppl.
S.C.R. l; State of Madhya Pradesh v. Bhailal Bhai & Ors., [1964] 6
S.C.R. 261; Tilok Chand Motichand v. Munshi, [1969] 2 S.C.R. 824;
Ramchandra Shankar Deodhar v. State of Maharashtra, [1974] 2
S.C.R. 216; Shri Vallabh Glass Works Ltd. v. Union of India, [1984] 3
S.C.R. 180; State of M.P. v. Nandlal Jaiswal, [1986] 4 S.C.C. 566; D.
Cawasji & Co. v. State of Mysore, [1975] 2 S.C.R. 511; Salonah Tea
Co. Ltd. v. Superintendent of Taxes, [1988] l S.C.C. 401 and Lakshmi
Narain Agarwala v. State, A.I. R. (1983) Orissa 210, referred to.
Behram Khursheed Pesikaka v. State of Bombay, [1955] 1 S.C.R.
613; R.M.D. Chamarbaugwala v. Union of India, [1957] S.C.R. 930;
M.P. V. Sundararamier & Co. v. State of Andhra Pradesh & Anr.,·
[1958] S.C.R. 1422; West Ramnad Electric Distribution Co. v. State of
Madras, [1963] 2 S.C.R. 747; M.L.Jain v. State of U.P., [1963] Suppl.
1 S.C.R. 912; K.T. Moopil Nayar v. State of Kera/a & Anr., [1961] 3
S.C.R. 77; Balaji v. I. T. 0. Special Investigation Circle, [1962] 2 S.C.R.
983; Raja Jagannath Bakshi Singh v. State of U.P., [1963] l S.C.R. 220;
Prem Chand Garg v. Excise Commissioner, U.P. Allahabad, [1963]
Suppl. 1 S.C.R. 885 and /.C. Golaknath & Ors. v. State of Punjab &
Ors., [1967] 2 S.C.R. 762, cited.
8. The nndertaking given by the parties or interim 'directions
given by the Court cannot be understood in such a manner as to conflict
with the Court's fmal decision. [ 1878]
c
D
E
F
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. G
4353-54 of 1983 etc. etc.
'From the Judgment and Order dated 7.3.1983 of theOrissa High
Court in O.J.C. No. 1517 of 1978.
A.K. Ganguli, G. Ramaswamy, T.S. Krishnamurthy Iyer, Dr. H
A
.P·
114
SUPREME COURT REPORTS
I 1991) 2 S.C.R.
L.M. Singhvi, Shanti Bhushan, P. Chidambram, R.B. Datar, T.V.
S.K. Iyer, V.A. Bobde B. Sen, M.S. Gujral, R.F. Nariman, P.H.
Parekh Ms. Shalini, Soni, K.K. Lahiri, J.B. Dadachanji, S. Sukumaran, P.N. Gupta, R.K. Mehta, A.K. Panda, Sakes Kumar, Ashok
Singh, Satish Agnihotri, D. Goburdhan, D.N. Mishra, Shri Narain,
Abhey Sapra, Sandeep Narain, Mrs. Kirti Misra, Harish N. Salve,
B S.R. Grover, K.J. John, M.P. Sharma, Ms. Deepa Dixit, Sanjay
Parekh, Praveen Kumar, Darshan Singh, K.V. Sreekumar, T.G.N.
Nair, B.R. Agrawal, S.K. Bagga, Mrs. S.K. Bagga, Rameshwar Nath
and A.M. Dittia for the appearing parties.
c
The Judgment of the Court was delivered by
RANGANA THAN, J. These are connected batc,hes of Civil
Appeals and Special Leave Petitions. We grant special leave to appeal
in all the petitions (condoning the delay in the filing of the unnumbered one referred to below) and proceed to dispose of all the appeals
by this common judgment. The details of the appeals and petitions are,
D for sake of convenient reference, tabulated below:
E
I.
F
2.
G
3.
High Court Date of
Civil Appeal/
Name of
Appellant
judgment
SLP Nos.
Orissa
17.4.19.80
C.A. 2053-2080/80Tata Iron & Steel
Co. Ltd.
7.3.1983
· C.A. 4353-4354/830rissa Cement Ltd.
22.12.1989
S.L.P. 1479/90
State of Orissa
22.12.1989
S.L.P. --/90 Orient Paper &
Industries Ltd.
&Anr.
13.7.1990
S.L.P. 11939/90
-doBihar
10.2.1986
C.A. 592/86
Tata Iron & Steel
Co. Ltd.
Madhya
28.3.1986
C.A. 1641-1662/86StateofM.P.
Pradesh
'H
We shall discuss later the manner in which these appeals and
petitions have arisen.
i~
'
ORJSSA CEMENT v. STATE OF ORISSA {RANGANATHAN. J.J
115
THE ISSUE
A
....
The validity of the levy of a "cess", based on the royalty derived
from mining lands, by the States of Bihar, Orissa and Madhya Pradesh
is challenged in these petitions and appeals. A seven-Judge Bench of
this Court in India Cement, [1990] 1 S.C.C. 12 struck down a similar
B
levy under a Tamil Nadu Act as beyond the legislative competence of
the State Legislature. The assessees, in the matters now before us,
claim that the issue here is directly and squarely governed by the above
I
·-'
decision. The States, on the other hand, claim that the nature and
character of the levies imposed by them is totally different from that of
the Tamil Nadu levy and that they are entirely within the scope of the c
States' Legislative powers under the Constitution. This is the issue to
be decided in these matters. As the impugned enactments of Bihar,
Orissa and Madhya Pradesh mutually differ from one another in some
respects, they will need separate consideration. However, the basic
issue being the same, all these matters have been heard together and it
is found convenient to dispose of them all by this common judgment.
D
We may mention in passing that, initially, these matters were listed
before a Bench of two Judges of this Court. It referred the matters on
17 .8. 1990 to the learned Chief Justice for the constitution of a larger
Bench. The matters have come up before us in pursuance of the directions of the Hon'ble Chief Justice.
E
THE LEGISLATIVE ENTRIES
-- >
It will be convenient, at the outset, to refer to the various entries
of the Union and the State Lists in the Seventh Schedule to the Con-
-'~
stitution which have a bearing on the issues to be discussed. These are:
··~
F
List /-(Union List)
'·
Entry 52:
, ~I'
Industries, the control of which by the Union declared by Parlia-
'
ment by law to be expedient in the public interest.
G
Entry 54:
Regulation of mines and mineral development to the extent to
which such regulation and development under the control of Union is
\
declared by Parliament by law to be expedient in the public interest.
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••
...,
A
B
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116
SUPREME COURT REPORTS
[ 1991) 2 S.C.R.
List IJ-(State List)
Entry 18:
Land, that is to say, rights in or over land, land tenures including
the relation of landlord and tenant, and the collection of rents; transfer
and alientation of agricultural land; land improvement and agricultur.il
land; colonization.
Entry 23:
Regulation of mines and mineral development subject to the
,_
provisions of List I with respect to regulation and development under
the control of the Union.
Entry 45:
Land revenue, including the assessment and collection of
revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues.
O
Entry 49:
Taxes on lands and buildings.
Entry 50:
Taxes on mineral rights subject to any limitations imposed by
£
Parliament by law relating to mineral development.
F
!Entry 66:
Fees in respect of any of the matters in this List, but not including fees taken in any court.
EARLIER HISTORY
Before proceeding to consider the provisions of the enactments
impugned, and the issues debated, before us, it is necessary to set out
oeertain earlier controversies that led to India Cement.
ffingir RampurCase [1961-2 S.C.R. 537]
As early as in 1960, this Court had to consider the constitutional
validity of the Orissa Mining Areas Development Fund Act, 1952
'(Orissa Act XXVH of 1952). S. 3 of the Act empowered the State
Government to constitute mining areas whenever it appeared to the
Government that it was necessary and expedient to provide amenities
...l
ORISSA CEMENT v. STATE OF ORISSA [RANGANATHAN, J.]
117
like communications, water supply and electricity for the better
development of such areas or to provide for the welfare of the residents or workers in areas within which persons employed in a mine or
a group of mines reside or work. S. 4 empowered the State Government to impose and collect a cess or fee on the minerals extracted the
rate of which was not to exceed 5% of the valuation of the minerals at
the pit'smouth. S.5 provided for the constitution of the Orissa Mining
Areas Development Fund. The proceeds of the cess recovered in
pursuance of S. 4 along with other subsidies from Government, local
authorities and other public subscriptions were credited to the fund
and the expenses for such collection debited thereto. The fund has to
be utilised to meet expenditure incurred in connection with such
development measures as the State Government might draw up for the
purposes above mentioned as well as for the purposes specified in
clauses (a) to (e) of S.5(5). The validity of this levy of cess was challenged by the petitioner coal company in the Hingir Rampur case
as ultra vires the powers of the State Legislature because (a) the cess
was not a fee but a duty of excise on coal which was a field covered by
Entry 84 of List I in the Seventh Schedule and repugnant to the Local
Mines Labour Welfare Fund Act, 1947 (Central Act XXXII of 1947);
and (b) even if it was treated as a fee relatable to Entries 23 and 66 of
List II in the Seventh Schedule, it was hit by Entry 54 of List I read
with the Mines and Minerals (Development & Regulation) Act, (Central Act LIII of 1948) ('the MMRD Act' for short) or by Entry 52 of
List I read with the Industries (Development and Regulation) Act
('the IDR Act' for short), 1951 (Central Act LXV of 1951). The first of
the above arguments was based on the fact that the cess was fixed at a
percentage of the valuation of the mineral concerned at pit's mouth.
This argument was based on two considerations. The first related to
the form and the second to the extent of the levy. Repelling the argument, it was held that the extent of levy of a fee would always depend
upon the nature of the services intended to be rendered and the financial obligations incurred thereby and cannot by itself alter the character of the levy from a fee into that of a duty of excise except where the
correlation between the levy and services is not genuine 01 real or
where the levy is disproportionately higher than the requirements of
A
B
c
D
E
F
the services intended to be rendered. So far as the first consideration G
was concerned, it was observed that the method in which the fee is
recovered is a matter of convenience and by itself it cannot fix upon
the levy the character of a duty: of excise. Though the method in which
an impost is levied may be relevant in determining its character its
significance and effect cannot be exaggerated, The court, therefore,
came to the conclusion that the cess levied by the impugned act was
H
118
SUPREME COURT REPORTS
[1991) 2 S.C.R.
A
neither a tax nor a duty of excise but a fee.
The second argument turned on the impact of the MMRD Act on
•
the State's power to levy a fee under Entry 66 read with Entry 23 of
List II as a consequence of the declaration contained in S.2 of the
Central Act. The Court agreed that a declaration by Parliament in
B
terms of Entry 54 of List I operated as a limitation on the legislative
competence of the State Legislature itself and observed:
"If Parliament by its law has declared that regulation and
development of mines should in public interest be under
the control of the Union, to the extent of such declaration
c
the jurisdiction of the State Legislature is excluded. In
other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54,
and if the said declaration covers the field occupied by the
impugned Act, the impugned Act would be ultra vires not
because of any repugnance between the two statutes but
D
because the State Legislature had no juristiction to pass the
law."
(underlining ours)
However, the answer to the argument was easily found by the Court
inasmuch as the declaration on the terms of Entry 54 of List I relied on
E
for the coal company was founded on Act Lill of 1948 which was an
Act of the Dominion Legislature and not an Act of Parliament. However, the Court did not stop here. It proceeded to review the provisions of Central Act LIII of 1948 and concluded that, if this Act were
held to contain the declaration referred to in Entry 23, there would be
no difficulty in holding that the declaration covered the field of conserF
vation and development of minerals, and that the said field was indistinguishable from the field covered by the impugned Act. In coming to
this conclusion the Court pointed out that the rule-making powers
conferred on the Central Government under Section 6(2) of the Act
included the levy and collection of royalties, fees and taxes in respect
of tninerals, mines, quarried, excavated or collected. The circumsG
tance that no rules had in fact been framed by the Central Government
in regard to the levy and collection of any fees, it was held, would not
make any difference, The Court observed:
"What Entry 23 provides is that the legislative compet•:nce
of the State Legislature is subject to the provisions of List I
H
with respect to regulation and development under the con-
...
~-
4
(.'
~
ORISSA CEMENT v. STATE OF ORISSA [RANGANATHAN, J.]
119
trol ofthe Union, and Entry 54 in List I requires a declaration by Parliament by law that regulation and development
of niines should be under the control of the Union in public
interest. Therefore, if a Central Act has been passed for
the purpose of providing for the conservation and development of minerals, and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject-matter covered
by the said declaration. In order that the declaration should
be effective it is not necessary that rules should be made or
enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the
regulation and development of mines under the control of
the Union. In such a case the test must be whether the
legislative declaration covers the field or not. Judged by
this test there can be no doubt that the field covered by the
impugned Act is covered by the Central Act LIII of 1948."
A
B
c
The Court then considered the argument based on Entry 52 of List I
D
and the provisions of the ID R Act but came to the conclusion that the
vires of the impugned Act could not be successfully challenged on this
ground.
Wanchoo J., delivered a separate dissenting judgment. He held
that the levy was not a fee or a land cess but a duty of excise. He
E
pointed out (at p.579-80) how taxes could be turned into fees on the
so-called basis of quantification with the help of the device of creating
a fund and attaching certain services to be rendered out of monies in
the fund. In this view, he did not consider the question how far the
Central Acts of 1948 and 1951 impaired the State's competence to levy
the fees in question. He negatived the State's attempt to bring the levy
F
in question (treating it as a tax) within the scope of Entry 50 of List II.
He was of opinion that the expression "taxes on mineral rights" referred to taxes on the right to extract minerals and not taxes on the
minerals actually extracted. He held that the cess in the present case
was not a tax on mineral rights but a tax on the minerals actually
produced. It was no different in pith and substance from a tax on goods
G
produced which comes under Item 84 of List I ~duty of excise.
Tulloch case [ 1964] 4 SCR 461.
The same issue regarding the competence of the Orissa State
Legislature to levy the very same cess came up for consideration again
H
A
B
c
D
E
F
G
H
120
SUPREME COURT REPORTS
[ 1991] 2 S.C.R.
in the Tulloch case. The scenario had changed because the levy now
challenged was in respect of the period July 1957 to March, 1958 by
which time the MMRD Act, 1957 (Central Act 67 of 1957) had been
enacted in place of the earlier MMRD Act (Central Act Llll of 1948).
The 1948 Act, which had earlier provided for the regulation of mines
and oil fields and for the development of minerals, was now limited
only to oil fields and the 1957 Act provided for the regulation of mines
and mineral development. S. 2 of the 1957 Act, like the predecessor
1948 Act, contained the following declaration in terms of Entry 54 of
List I. It read:
"It is hereby declared that it is expedient in the public
interest that the Union should take under its control the
regulation of mines and the development of minerals to the
extent hereinafter provided".
but unlike the earlier one this was a declaration contained in an Act of
Parliament which had the effect of impairing the legislative competence of the State under Entry 23 read with Entry 66 of the State List.
The hurdle which prevented the Supreme Court from considering the
provisions of the 1948 Act as a bar to the levy of the cess was therefore
out of the way. The Court analysed in detail the provisions of the
impugned State Act as well as the two Central Acts. It referred to its
conclusion in the Hingir-Rampur case that the field covered by the
impugned State Act was covered by the 1948 Act and observed that
this fully applied to the State Act vis-a-vis the 1957 Act also, particularly as Ss. 18(1) and (2) of the 1957 Act were wider in scope and
amplitude and conferred larger powers on the Central Government
than the corresponding provisions of the 1948 Act. Counsel for the
State attempted to distinguish the ambit of the 1957 Act from that of
the 1948 Act. But the Court pointed out that the argument could not
prevail. S. 13 of the 1957 Act contained an express Pfovision for the
levy of a fee. S. 25-though not as categorically as ~- 6 of the 1948
Act-clearly implied a power to levy "rent, royalty,
0
iax, fee and other
sums" and, besides, S. 18 of the Central Act of.1957 were wider in
scope and amplitude and conferred larger powers on the Central
Government than the corresponding provisions of the Act of 1948. It
was reiterated, referring to Hingir-Rampur and distinguishing Ch.
Tika Ramji & Ors. etc. v. The State of Uttar Pradesh & Ors., [1956]
S.C.R. 393 that it was incorrect to think that, until rules were made
under S. 13 or steps taken under S.25 to collect fees etc., the Central
Act would not cover the field. The Court observed, further:
•
•
---1
•
'
ORISSA CEMENT v. STATE OF ORISSA [RANGANATHAN, J.]
121
"But even if the matter was res integra the argument cannot
A
be accepted. Repugnancy arises when two enactments both
within the competence of the two Legislatures collide and
when the Constitution expressly or by necessary implication provides that the enactment of one Legislature has
superiority over the other then to the extent of the repugnancy the one supersedes the other. But two enactments
B
may be repugnant to each other even though obedience to
each of them is possible without disobeying the other. The
test of two legislations containing contradictory provisions
is not, however, the only criterion of repugnancy, for if a
competent legislature with a superior efficacy expressly or
impliedly evinces by its legislation an intention to cover the
C
whole field, the enactments of the other legislature
whether passed before or after would be overborne on the
ground of repugnance. Where such is the position, the
inconsistency is demonstrated not by a detailed comparison
of provisions of the two statutes but by the mere existence
of the two pieces of legislation. In the present case, having
D
regard to the terms of s. 18( !) it appears clear to us 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."
Meeting the argument that the power to levy a fee was an independent
-- ,
head of legislative power under each of the three legislative lists and
that the levy of tax under the State Act could be traced to this entry,
the Court pointed out the fallacy underlying the argument in ti)e following words:
"The material words of the Entries are: "Fees in respect of
any of the matters in this List". It is, therefore, a prerequisE
F
ite for the valid imposition of a fee that it is in respect of a
"matter in the list".