# P. KANNADASAN ETC. ETC v. STATE OF TAMIL NADU AND ORS. ETC. ETC

- **Citation:** [1996] Supp. 4 S.C.R. 92
- **Court:** Supreme Court of India
- **Decided:** 1996-07-26
- **Case number:** Civil Appeal No. 9847 of 1996
- **Bench:** B.P. Jeevan Reddy, Suhas C. Sen
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/p-kannadasan-etc-etc-v-state-of-tamil-nadu-and-ors-etc-etc-14500
- **Pages:** 39

## Headnote

Mines & Minerals:
Mines and Minerals (Regulation & Development) Act, 1957-Sections
C 2 and 9-Scope-He/d, Section 2 of the MMRD Act totally and not merely
panly denudes tile States of the power to levy any tax oil the milleral . .-Hence,
before enacting the Cess and other taxes oil Minerals (Validation) Act, 1992
no funher declaration of denudation of the States' power was necessmy-Constitution of India, Schedule VII, List I Entry 54.
D
Cess and Other Taxes on Mineral (Validation) Act, 1992-Section 2( I),
(2), (3) read with Schedule-Validity of-State laws imposillg cess or other
taxes Oil minerals found to be beyond the competence of the State Legislature-Provisions of Section 2 validating such State laws, held, not beyond the
legislative competence of Parliament-Provision in Sectioll 2(1) validating the
E State laws from the date on which they were enacted by the State Legislature
concerned, held, l!Ot bad for retrospectivity-Stalllte /aw-Validating
statute-...:Statute validating a tax retrospectivel.,,-Validity-Taxation-Taxing
statue;-Retrospective validatioll of a valid taxing statute-Constitutioll of
India, Anicle 265.
F
Section 2(1), Schedule and Preamble-Scope of Section 2(1j-Statute
G
law-Validating statute-Language of, whetlzer confmm to any set or standard
fonnul_.-Held, there was no set or standard fonnula to which all Validation
Acts should confonn-Sugarcane Cess (Validation) Act, 1961, Section 3.
Sectioll 2 and Preambl<-Scope of-Held, Section 2 not only validated
the taxes and cesses already recovered but also en1poivered to collect the
unrecovered taxes and cesses--Afere absence of a clause or words con·esponding to Section 3(J)(c) of the Sugarcane Cess (Validation) Act, cannot justify
a different conclusion.
H
Section 2 and the Schedul~Taxes and cesses on milleral levied ill
92
-
P.KANNADASAN v. STATE
93
different States at different rateS"-Levy of the same by Section 2 of the Act by A
Parliament-Held, neither discriminatory nor ultra vires Entry 54 of List I of
Schedule VII nor beyond Parliament's power nor bamd by Mines and
Minerals (Regulation & Development)Act, l957-Geographical discrimination-Justification f01-Mines and Minerals (Regulation & Developmellt) Act,
l957 Section 9.
Sections 1(3) & 2( /)-Statute law-Temporary Act-W710t iS"-Held, a
tempormy Act is one which expires on the expiry of the specified period-In
absence of the mention of such a peiiod, merely because the levies created
by Section 2( I) of the Act were to remain in force 011/y up to the date specified
B
therein ( 4-4-1991 ), the said Act cannot be said to be a temporary one.
C
Section 2(1) and (3 )-Recovery machinery-Survival of, after 4-41991-Notwithstanding the cessation of the levy created by Section 2( I) w.e.f
4-4-1991, the recovery 111achinery, held, continues to re1nain in existence.
Section 2(1) and the Schedule-Object-By virtue of the deeming D
clause in Section 2( I), held, the relevant provisions of the state enactments
must be deemed to have been enacted by the respective State Legislature and
to have remained in force up to 4-4-1991.
Constitution of India :
Articles 245, 246 and 265 read with Schedule VII List I Entries 54 &
97 & List II Entries 23 and SO-Statute law-Validating statute-Constitutional law-Separation of powers.
Schedule VII List-I Entry 54-Before enacting the Cess and Other
Taxes on Mineral (Validation) Act, 1992 no further declaration of denudation
of the States' power was necessary.
Articles 245, 265 & Schedule VII List I Entry 54-fCess/tax levied by an
act enacted under Entry Stf-Pwpose of such cess/tax, held, need not be
regulation of mines and mineral development.
Interpretation of Statutes:
Subsidiary ntle of interpretati01r-Conjunctive or disjunctive-Deeming
provision-Statute la\1>-Legislation by incorporatioir-ln the context of Cess
E
F
G
and Other Taxes on Mineral (Validation) Act, 1992.
H
94
SUPREME COURT REPORTS (1996] SUPP. 4S.C.R.
A
Wards and Phrases : "Imposition and ca/lectia11"-Meaning of-In the

## Text

_Characters 0–39,908 of 97,357. This is a partial read: ask again with offset=39908 for what follows._

A
P. KANNADASAN ETC. ETC.
v.
STATE OF TAMIL NADU AND ORS. ETC. ETC.
JULY 26, 1996
B
[B.P. JEEVAN REDDY AND SUHAS C. SEN, JJ.]
Mines & Minerals:
Mines and Minerals (Regulation & Development) Act, 1957-Sections
C 2 and 9-Scope-He/d, Section 2 of the MMRD Act totally and not merely
panly denudes tile States of the power to levy any tax oil the milleral . .-Hence,
before enacting the Cess and other taxes oil Minerals (Validation) Act, 1992
no funher declaration of denudation of the States' power was necessmy-Constitution of India, Schedule VII, List I Entry 54.
D
Cess and Other Taxes on Mineral (Validation) Act, 1992-Section 2( I),
(2), (3) read with Schedule-Validity of-State laws imposillg cess or other
taxes Oil minerals found to be beyond the competence of the State Legislature-Provisions of Section 2 validating such State laws, held, not beyond the
legislative competence of Parliament-Provision in Sectioll 2(1) validating the
E State laws from the date on which they were enacted by the State Legislature
concerned, held, l!Ot bad for retrospectivity-Stalllte /aw-Validating
statute-...:Statute validating a tax retrospectivel.,,-Validity-Taxation-Taxing
statue;-Retrospective validatioll of a valid taxing statute-Constitutioll of
India, Anicle 265.
F
Section 2(1), Schedule and Preamble-Scope of Section 2(1j-Statute
G
law-Validating statute-Language of, whetlzer confmm to any set or standard
fonnul_.-Held, there was no set or standard fonnula to which all Validation
Acts should confonn-Sugarcane Cess (Validation) Act, 1961, Section 3.
Sectioll 2 and Preambl<-Scope of-Held, Section 2 not only validated
the taxes and cesses already recovered but also en1poivered to collect the
unrecovered taxes and cesses--Afere absence of a clause or words con·esponding to Section 3(J)(c) of the Sugarcane Cess (Validation) Act, cannot justify
a different conclusion.
H
Section 2 and the Schedul~Taxes and cesses on milleral levied ill
92
-
P.KANNADASAN v. STATE
93
different States at different rateS"-Levy of the same by Section 2 of the Act by A
Parliament-Held, neither discriminatory nor ultra vires Entry 54 of List I of
Schedule VII nor beyond Parliament's power nor bamd by Mines and
Minerals (Regulation & Development)Act, l957-Geographical discrimination-Justification f01-Mines and Minerals (Regulation & Developmellt) Act,
l957 Section 9.
Sections 1(3) & 2( /)-Statute law-Temporary Act-W710t iS"-Held, a
tempormy Act is one which expires on the expiry of the specified period-In
absence of the mention of such a peiiod, merely because the levies created
by Section 2( I) of the Act were to remain in force 011/y up to the date specified
B
therein ( 4-4-1991 ), the said Act cannot be said to be a temporary one.
C
Section 2(1) and (3 )-Recovery machinery-Survival of, after 4-41991-Notwithstanding the cessation of the levy created by Section 2( I) w.e.f
4-4-1991, the recovery 111achinery, held, continues to re1nain in existence.
Section 2(1) and the Schedule-Object-By virtue of the deeming D
clause in Section 2( I), held, the relevant provisions of the state enactments
must be deemed to have been enacted by the respective State Legislature and
to have remained in force up to 4-4-1991.
Constitution of India :
Articles 245, 246 and 265 read with Schedule VII List I Entries 54 &
97 & List II Entries 23 and SO-Statute law-Validating statute-Constitutional law-Separation of powers.
Schedule VII List-I Entry 54-Before enacting the Cess and Other
Taxes on Mineral (Validation) Act, 1992 no further declaration of denudation
of the States' power was necessary.
Articles 245, 265 & Schedule VII List I Entry 54-fCess/tax levied by an
act enacted under Entry Stf-Pwpose of such cess/tax, held, need not be
regulation of mines and mineral development.
Interpretation of Statutes:
Subsidiary ntle of interpretati01r-Conjunctive or disjunctive-Deeming
provision-Statute la\1>-Legislation by incorporatioir-ln the context of Cess
E
F
G
and Other Taxes on Mineral (Validation) Act, 1992.
H
94
SUPREME COURT REPORTS (1996] SUPP. 4S.C.R.
A
Wards and Phrases : "Imposition and ca/lectia11"-Meaning of-In the
B
c
context of Cess and Other Taxes 011 Mineral (Validation) Act, 1992.
"Checks and balances"-ln the context of separation of powe1-Con·
stitutian of India.
Section 115 of the Tamil Nadu Panchayat Act, 1958 levied in every
Panchayat Development Block a local cess @ U.45 paise on every rupee of
land revenue payable to the State Government. The validity of the leyy was
challenged in the High Court and the same was dismissed holding that
being a tax on land, it was within the legislative competence of the State
following the decision of H.R.S. Mwthy v. Collector of Chittor*. The writ
appeal was also dismissed by the High Court. This matter was brought to
this Court (India Cemeilt v. State of Tamil Nadu **) wherein it was held
that H.R.S. Murthy was wrongly decided. Following the decision of th"
India Cement a three-Judge Bench of this Court declared identical levies
D imposed by other States (01issa Cement Ltd. v. State of Olissa***) as
incompetent and void. These decisions not only barred the States fron1
collecting the said cess, but <1uite a few of them were obliged to refund
substantial amounts which had already been collected. Parliament then
came to their rescue and promulgated the Cess and Other Taxes on
E
Mineral (Validation) Ordinance, 1992 which was replaced by the Act which
contained only three sections.
In these appeals, it was contended by the appellants that (i) by the
impugned Act Parliament had sought to overturn the decisions of this
Court and the High Courts; (ii) the tax so levied could be operative only
p
from the date of enactment of the Act of Parliament; (iii) there could not
be a leyy wholly and exclusively retrospective; (iv) that the leyy under the
Cess and Other Taxes on Mineral (Validation) Act, 1991 being in addition
to the levy under Section 9 of the MMRD Act, could have been effected
only by making a fresh declaration in terms of Entry 54 of List I of Sch.
VII of the Constitution and that in the absence of such a declaration the
G
leyy under the Validation Act was incompetent; (v) the leyy under the Ces.s
and other Taxes on Mineral (Validation) Act, 1922, being related only 1o
Entry 54 and not Entry 97 of List I of Sch. VII of the Constitution, should
be for regulating the mines or minerals development and the absence of
any material to show that the leyy of the impugned cess/lax was for the
H said purpose, the leyy was bad.
..
-.
-
P. KANNADASAN v. ST ATE
95
Dismissing the appeal, this Court
HELD : 1. The State enactment mentioned in the Schedule to the
impugned enactment viz Cess and Other Taxes on Mineral (Validation)
Act, 1992, did contain provisions creating the levy. These are the very same
provisions n·hich are enacted by Parliament. Section 2(1) of the Cess and
Other Taxes on Mineral (Validation) Act, 1992 says that the said
provisions must be deenied to have been enacted and must be deen1ed
always to have been enacted by Parliament. In such a situation, it is idle
A
B
to contend that Section 2(1) did not create the levy or the impost. It did.
T11~re is no <1ualitative difference bel\veen Section 3 of the Sugarcane Case
(Validation) Act and Section 2 of the impugned Act. The relevant words
C
are the same, viz., "shall be deemed to have been .......... " (119-H; 1211-A-B]
Klishna Chandra Gangopadhayaya v. Union of India, [1975] Supp.
SCR 151, relied on.
Diamond Sugar Mills Ltd. v. State of U.P., (1961] 3 SCR 243 and D
Baijnath Kedia v. State of Bihar, [1969] 3 SCC 838 = (1970] 2 SCR 100,
referred to.
2. There is no set or standard formula to which all Valid~ttion Acts
should conform. Parliament is not bound to adopt identical language every
E
time it enacts a Validation Act. It is open to it to e1nploy such language as
it chooses. All the Court should see is whether the language employed
achieves the purpose which Parliament set out to achieve. The language
employed in Section 2 of the impugned enactment, does achieve the purpose. (122-B-C]
Klislllla Chandra Gangopad!zayaya v. Union of India, (1975] 2 SCC
302 = [1975] Supp SCR 151, relied on.
3. Section 2 of the impugned Act enacts the relevant provisions of
F
the enactments mentioned in the Schedule with retrospective effect. The G
prov1srnns
so enacted do create the levy. Indeed, unless the levy is
validated, recoveries already made cannot be validated. It is for this reason
that the Preamble to the Act says that it is Act "to validate the imposition
and collection of cesses and certain other taxes on minerals under certain
state la\\'s". Once the provisions, which create the levy, are deemed to have
been enacted by Parliament, the levy is very much there with retrospective H
96
SUPREME COURT REPORTS (1996f SUPP. 4 S.C.R.
A
effect. Once there is a valid levy, not only the taxes already collected need
not be refunded but the taxes and cesses which have not already been
collected can also be collected. Merely because sub-section (2) inter a/'ia
states that
11cesses or other taxes on n1inerals realised under any such laws
B
shall be deemed to have been validly ..... realised ...... as ff this section had
been in force at all n1aterial times \\'hen such ........ cesses or taxes \Vere
realised", it does not means that the taxes which were levied but not
collected cannot be collected. The said words in sub-section (2) are not
words of limitation; they are words of validation of put in by way of
abundant caution in view of the judgments and orders of the courts. On
the language of Section 2 which enacts with retrospective effect, !he
C relevant provisions levying cesses and taxes on minerals and also validate
the rules and notifications issued thereunder, it cannot be said that the
levy is validated only for the limited purpose of saving the taxes already
collected, i.e., to stay the refund of taxes already collected. The absence of
a clause or words corresponding to clause (c) in Section 3(1) of the
D Sugarcane Cess (Validation) Act does not make any difference. The said
clause mer~ly sets out the consequence flowing from the validation contained in the main limb of Section 3(1), by way of abundant cautioni. It
cannot be treated as a substantive provision. The meaning of the words
"imposition and collection", occurring in the Preamble, cannot be cut down
by reading them conjunctively. On the contrary, ·the said words indicate
E
the intention to validate the imposition as well as collection. 'Collection'
does not mean what is already collected alone. It means future collection
as well. Neither the Preamble nor Section 2 says that what is already
collected alone is validated. [122-F-H; 123-A-C; 124-A-C]]
F
4. Parliament is competent to enact a law applicable only to a part
of the country or to some States in the country, as the case may be. It is
not necessary that every law made by Parliament must necessarily apply
to the entire country as such. Not only this, Parliament is equally entitled
to prescribe different rates of tax in different States if such different rates
are called for in given circumstances. However, \\-'here Parliament im1>oses
G different rates of a tax in different State, it must satisfy the Court that
such distinction does not amount to discrimination and that it is
reasonable in the circumstances and has a purpose behind it. The historical background of the impugned Act clearly shows the reason behind such
ditferent rates. The challenge in India Ce111e11t* and On·ssa Cen1e11t*** w·as
H not to different rates being levied by different State Legislatures but to the
..
-
P.KANNADASAN v. STATE
97
very legislative competence or the State Legislatures to impose the said A
levy. When Parliament is re-enacting those very provisions, it could not
but adopt those very rates. It is really not a case where Parliamentary
enactment is creating a distinct or different treatment. .Distinction and
different treatment was already there over several decades; each State was
prescribing its O\'n rate on the same mineral; nobody ever questioned it
as discriminatory; indeed it could not be so questioned; the decisions of
the courts had declared the levy by the State Legislature as competent;
Parliament has intervened and by enacting the impugned law in exercise
B
of its undoubted power, validated the levy and all that flows from it. In
such circumstance, there was no other way except to do what has actually ·
been done. Therefore, the exercise cannot be f'aulted on the ground of C
violation of Article 14 of the Constitution. (124-D-E; 125-£-G; 126-A-C]
State of Madras v. N.K. Nataraja Mudaliar, [968] 3 SCR 829, relied
on.
**India Cement Ltd. v. State of Tamil Nadu, [1989] Supp l SCR 692; D
***01issa Cement Ltd. v. State of 01issa, [1991] 2 SCR 105; R.V. Barger,
(1908) 6 CLR 41; Sanjeev Coke Manufactwing Company v. Bharat Coking
Ltd., [1983] 1 SCC 147, referred to.
5. That the MMRD Act sought to bring out uniformity in taxes and
royalties throughout the country does not mean that Parliament cannot
create an excep\ion to the rule it has created by itself. Uniformity in the
rates of tax is an objective ·set out by Parliament in the MMRD Act. It is
not precondition to a law made by Parliament under Entry 54 in List I nor
it is a limitation upon ParliaWent's power. If Parliament has enunciated
E
the principle, it can also create an exception thereto in appropriate cirF ·
cumstances or to meet an exigency. This is precisely what has been dune
in the instant case. The impugned enactment is both an addition_ and an
exception to Section 9 of the MMRD Act. [126-C-D]
6. The decisions of this Court in India Cement and 01issa Cement
are premised upon the assumption that by virtue of the said declaration,
the States are totally denuded of the power to levy any ta~es 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
G
on minerals so long as the declaration in Section 2 stands. Once the H
98
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
A denudation is total, there is no occasion or necessity for any further
declaration of denudation or, for that matter for declarations of denudation. [127-B-C]
7. What is levied under the impugned enactment is a tax/cess and not
a fee. Even in the matter of fees, it is not necessary that the element of q11id
B pro quo shouid be established in each and every case, for it is well settled
that fees can be both regulatory and compensatory and that in the case of
regulatory fees, the element of qllid pro quo is totally irrelevant. Taxes are
raised for augmenting the general revenues of the State and not for any
particular purpose - much less for rendering a particular service. (127-F-G]
c
C01poratio11 of Calc11tta v. Libe1ty Cinema, [1965] 2 SCR 477, relied
on.
8. The impugned Act was indeed enacted and published in April 1992
and Section 1(3) says that the Act shall be deemed to have come into force
D on 15.2.1992. It is, therefore, meaningless to say it has expired or ceased
to have any effect on the 4th day of April, 1991. There are no words
anywhere in the impugned Act indicating that it expires on the expiry of a
particular period or on a particular date. Merely because the cesses and
taxes imposed by it are made effective up to a particular date (4-4-1991),
E
it does not mean that the statute itself expires on that date. The duration
of the levy created by the Act and the life of the Act are two different things;
the!' are not nec~ssarily coextensive. Hence, the said Act cannot be
described as a temporary statute. (128-B-C; H; 129-A]
Maganti Sltbramanyam v State of Andhra Pradesh, [1969] 2 SCC 96;
F
Madurai Dist1ict Central Cooperative Bank Ltd. v. Third ITO, (1976] 1 SCR
135, relied on.
9. The object and purpose of the impugned Act is self evident. Since
it is declared by this Court and other High Courts that the State Legislatures are not competent to levy cesses and taxes on minerals by virtue of
G the decla~ation contained in Section 2 of the MMRD Act (made in terms
~
•
of Entry.54 in List I), Parliament stepped in and enacted the relevant
provisions of the State enactments (mentioned in the Schedule) with
retrospective effect from the date of the levy under each of the said
enactments. The power of Parliament to levy such taxes cannot really be
H disputed. If the States have no power to levy such cesses or taxes, it follows
-
P. KANNADASAN v. STATE
99
that Parliament does have such power. By virtue of the deeming clause A
contained in sub-section (l) of section 2, the relevant provisions of the State
enactment must be deemed to have been enacted on the date they were
enacted by the respective State Legislatures and they must be deemed to
have remained in force u:i to the 4th day of April, 1991. The device a~opted
by Parliament is a well known one. It must be called legislation by incorB
poration. The effect is as if all the relevant provision of the Schedule Acts
are individually and specifically enacted by Parliament; all those
provisions must be read into Section 2(1). The necessary and logical
conse(1uence flowing therefrom is the creation of levy of all cesses and
taxes, levied by State enactments, by Parliament itself. [106-D-H]
10.1 The Constitution of India recognises and incorporates the
doctrine of separation of 1un.vers between the three organs of the State, viz;
the Legislature, the Executive and the Judiciary. Even though the Constitution has adopted the Parliamentary form of Government where the dividc
ing line between the legislature and the executive becomes thin, the theory D
of separation of powers is still valid. The government postulated by the
Constitution of India is a federal form of government. The subjects in
respect of which the Union and the States can make laws are separately
set out in List I and List II of the Seventh Schedule to the Constitution
respectively. The Constitution has invested the Supreme Court and High
Courts with the power to invalidate laws made by Parliament and the State E
Legislatures transgressing the Constitutional limitations. Where an Act
made by a State Legislature is invalidated by the courts on the ground that
the State Legislature was not competent to enact it, the State Legislature
cannot enact a law declaring that the judgment of the court shall not
operate; it cannot overrule or annul the decision of the court. But this does
p
not mean that the other legislature which is competent to enact that law
cannot enact that law. Similarly, it is open to a legislature tu alter the basis
of the judgment. The new law or the amended law so made can be
challenged on other grounds but not on the ground that it seeks to
inefTectuate or circumvent the decision of court. This is what is meant by
"checks and balances" inherent in a system of government incorporating G
the concept of separation of powers. [111-E-H; 112-A-B]
10.2. The decisions of this Court in India Cenzent and Orissa Cement
clearly meant that the power to levy cess/tax on minerals vested exclusively
with Parliament. Since the Supreme Court is the final arbiter on the H
100
SUPREME COURT REPORTS [1996] SUPP. 4S.C.R.
A interpretation of the Constitution, everybody is bound by the declairation
of law. In the circumstances, Parliament stepped in and enacted the
impugned law, avowedly to bail the States out of the predicament. The
impugned enactment makes this objective clear beyond any ~oubt. At the
same time Parliament does not purport to clothe the State Legislatures
B with the powers which they do not possess. Parliament had already
deprived the State Legislatures of the power to levy tax on minerals by
making the declaration contained in Section 2 of the MMRD Act '" far
back as 1957. The said declaration remains intact which means that the
States have no power to levy any tax or cess on minerals so long :~s the
said declaration remains in force. Parliament, therefore, adopted the only
C
legislative course open to it in the circumstances. It created thos" very
levies with retrospective effect by enacting the impugned law. Parliament,
being empowered to make a law with retrospective effect, is entitled to
make the law effective for such anterior period as it thinks appropriate.
In cannot be said that uniess the levy created with retrospective effect is
D also kept alive on the date the law is enacted by Parliament, such a levy
would be incompetent. This would a1nount to evolving a principle unknown
E
F
G
to law and would also a1nount to creating a fetter on Parliament for which
there is no basis in principle. (112-F-H; 113-A; D-E]
**India Cement Ltd. v. State of Tamil Nadu, (1989] Supp 1 SCIR 692;
01issa Cement Ltd. v. State of 01issa, [1991] 2 SCR lll5, explained.
*H.R.S. Mwthy v. Collector of Chittoor, (1964] 6 SCR 666; Indira
Ne/1111 Gandhi v. Raj Narain, (1976] 2 SCR 347; Roi Ramakiishna v. State
of Bihar, (1964] 1 SCR 897; Jaora Sugar Mills (P) Ltd. v. State of M.P.,
[1966] 1 SCR 523 and L/C v. DJ. Bahadu, (1981] 1 SCC 315 = (1981]
SCC (L & S) 111, referred to.
Madan Mohan Pathak v. Union of India, (1978] 3 SCR 334, distinguished.
Comoiin Match Industlies (P) Ltd. v. State of Tamil Nadu, JT (1996)
5 SC 167, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9847 of
1996 Etc. Etc.
H
From the Judgment and Order dated 27.6.94 of the Madras High
P. KANNADASAN v. STATE [B.P. JEEV AN REDDY, J.]
101
Court in W.P. No. 14178 of 1989.
M. Chandrasekharan, Additional Solicitor General, A.K. Ganguli,
K.N. Shkula, T. Thiagarajan, K. Parasaran, V.A. Bobde, Dr. A.M. Singhvi,
P.S. Nair, B. Sen, Guiab Gupta, G.L. Sanghi, R.N. Sachthey, Sr. Advs. V.
Ramasubramaniam, V. Krishnamurthy, (Manish Mishra) for Fox Manda!
& Co., V.A. Subba Rao, A.D.N. Rao, Arvind Kumar Sharma, T. Harish
Kumar, Krishnamurthi Swami, K.K. Mani, Nikhil Nayyar, T.V.S.N. Chari,
B.B. Singh, Mahabir Singh, Praveen Kumar, Suman J. Khaitan, Shahid
Rizvi, T.G.N. Nair, Satish K. Agnihotri, Ashok Mathur, Anip Sachthey,
C.D. Singh, M. Munshi, B.B. Singh, Abbay Sapore, Vivek Gambir, Nccraj
Sharma, Ajit Kumar Sinha, P.R. Seetharaman for the appearing parties.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. Leave granted in the Special Leave Petitions.
The appellants-writ petitioners are challenging the validity of the
Cess and Other Taxes on Minerals (Validation) Act, 1992 (being Act 16
of 1992) enacted by Parliament. The High Courts have repelled the attack.
It is renewed here.
FACTUAL CONSPECTUS:
Section 115 of the Tamil Nadu Panchayats Act, 1958 levied in every
Panchayat Development Block a local cess @ 0.45P on every rupee of land
-
revenue payable to the Government in respect of any land for every fasli.
A
B
c
D
E
The explanation to the section defined "land revenue" to include inter alia
F
royalty and lease amount payable in respect of the land. The validity of the
levy was challenged in the Madras High Court. A learned Single Judge
dismissed the writ petition holding that being a tax on land, it is within the
legislative competence of the State Legislature. The learned Judge followed
the decision of this Court in H.R.S. Munhy v. Collector of Chittom·, [1964]
S.C.R. 666. A writ appeal against the decision of the learned Single Judge G
was dismissed, again following the decision in H.R.S. Mwthy. The matter
was brought lo this Court. It was heard ultimately by a seven-Judge Bench
(India Cement Limited v. State of Tamil Nadu, [1989] Suppl. l S.C.R. 692
which held, the said levy to be outside the legislative competence of the
Tamil Nadu Legislature. This Court held that (1) the levy cannot be H
102
SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.
A sustained under and with reference to Entry 49 of List-II of the Seventh
Schedule to the Constitution of India as a tax on land; (2) The levy is a
levy on minerals and is relaiable to Entries 23 and 50 of List-II; (3) that
on account of the declaration made by Parliament contained in Section 2
of the Mines and Minerals (Development an<:) Regulation) Act, 1957,
B
c
(M.M.R.D. As:t), the State legislatures have been denuded of the power to
levy tax on minerals. Regulation of mines and mineral development takes
within its purview the levy of tax on minerals. Section 9 of the M.M.R.D.
·Act, this Court held, provides for levy of royalty/dead rent on minerals.
The State legislatures cannot,. therefore, impose any tax on minerals. H.R.S.
Mlllt/Jy was wrongly decided. Having so declared, this Court, however,
directed that the said decision shall only have prospective effect. This was
for the reason that the States have been levying and collecting the said c:ess
on the basis of the decision of this Court in H.R.S. Mlllthy. The decision
in India Cement was rendered on 25th October, 1989.
D
Following the decision in India Ceme11t, a three-Judge Bench
declared identical levies imposed by the States of Orissa, Bihar and Madhya Pradesh as incompetent and void 01issa Ceme11t Limited v. State of
Olissa, [1991] 2 S.C.R. 105. Having regard lo the fact that decisions of the
High Courts in Orissa, Bihar and Madhya Pradesh (which were the subject-matter of appeals before this Court) were rendered on different dates,
E
the Bench directed that the said decision shall be operafr e prospectively
with effect from the date of the said judgment, i.e., 4th Ar:ril, 1991 in the
case of State of Bihar, with effect from December 22, 191:9 in the case of
Orissa and with effect from March 28, 1989 in the case of Madhya Pradesh.
F
The aforesaid decisions of this Court had a serious impact on !he
revenues of several State Governments. Not only were they barred from
collecting the ·said cess, .quite a few of them were obliged to refund
substantial amounts which had already been collected. It is well known that
the State Governments in this country are perpetually strapped for funds.
The decisions made their situation more acute. The ParJiamenl then came
G to their rescue and promulgated The Cess and other Taxes on Minerals
(Validation) Ordinance, 1992 on February 15, 1992. The Ordinance has
been replaced by Act 16 of 1992, published in the Gazette of India on 4th
April, 1992. The Act contains only three sections. Having regard to the
several submissions made with respect to its validity, it is appropriate to
· H read all the three sections including the schedule appended thereto :
'
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--
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.]
103
"An Act to validate the imposition and collection of cesses and A
certain other taxes on minerals under certain State laws.
Be it enacted by Parliament in the Forty-third Year of the
Republic of India as follows :
Prefatmy Note- Statement of Objects and Reasons. - Certain State
Acts imposing cesses or other taxes on minerals had been struck
down by Courts including the Supreme Court of India in different
cases. As a result of judgments in these cases, State Government
became liable to refund cesses and other taxes collected by them.
Since refund was likely to have a serious impacl on State revenues
of the concerned State governments and having regard to the fact
thal it is extremely difficult to ensure that the levies collected are
refunded to the large number of end users of minerals who have
actually borne the burden of such levies, the Cess and other Taxes
B
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on Minerals (Validation) Ordinance, 1992 (Ord. 7 of 1992) was
promulgated by the President on the 15th February, 1992, to D
validate collection of such levies by State Governments up to the
4th day of April, 1991.
2. The Bill seeks to replace the aforesaid Ordinance.
I. Sho1t title, extelll and commencement. - (1) This Act may be
E
called the Cess and Other Taxes on Minerals (Validation) Act,
1992.
(2) It extends to the whole of India.
(3) It shall be deemed to have come into force on the 15th day of F
February, 1992.
2. Validation of cerlain State laws and actions taken and things done
thereunder. -
(1) The Laws specified in the Schedule to this Act
shall be, and shall be deemed always to have been, as valid as if
the provisions contained therein relating to cesses or other taxes G
on minerals had been enacted by Parliament and such provisions
shall be deemed to have remained in force up to the 4th day of
April, 1991.
(2) Notwithstanding any judgment, decree or order of any
court, all actions taken, things done, rules n1ade, notifications H
104
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D
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SUPREME COURT REPORTS 11~96] SUPP. 4S.C.R.
issued or purported to have been taken, done, made or issued and
cesses or other taxes on minerals realised under any such laws shall
be deemed to have been validly taken, .done, made, issued or
realised, as the case may be, as if this section had been in force at
all material times when such actions were taken, things were done,
rules ~ere made, notifications \Vere issued, or cesses.or other t£1xes
were realised, and no suit or other proceeding shall be maintained
or· continued in any court for the refund of the cesses or other
taxes realised under any such laws.
(3) For the removal of doubts, it is hereby declared that nothing
in sub-section (2) shall be construed as preventing any person from
claiming refond of any cess or tax paid by him in excess of the
amouni due from him under any such laws.
3. Repeal a11d savings. - (1) The Cess and Other taxes on Minerals
(V~lidation) Ordinance, 1992 (Ord. 7 of 1992) is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action
taken under the said Ordinance shall be deemed to have been done
or taken under the corresponding provisions of this Act.
THE SCHEDULE
(See Section 2)
1. The Andhra Pradesh (Mineral Rights) Tax.Act, 1975 (A.P. Act
14 of 1975).
2. The Andhra Pradesh (Andhra Area) District Boards Act, 1920.
3. The Andhra Pradesh (Telengana Area) District Boards Act,
1955.
4. The Cess Act, 1880 (Bengal Act 9 of 1880) as applicable in the
G
State of Bihar.
H
5. The Karnataka Zilla Parlshads, Taluk Panchayat Samitis, Manda! Panchayat and Nyaya Panchayats Act, 1983 (Karnataka Act 20
of 1985).
6. The Karnataka (Mineral Rights) Tali act, 1984 (Karnataka Act
P. KANNADASAN v. STATE [B.P. JEEV AN REDDY,J.J
105
32 of 1984).
7. The Madhya Pradesh Karadhan Adhiniyam, 1982 (M.P. Act 15
of 1982).
8. The Madhya Pradesh Upkar Adhiniyam, 1982 (M.P. Ace 1 of
A
1982).
B
9. The Maharashtra Zilla Parishads and Panchayat Samitis
(Amendment and Validation) Act, 1981 (Maharashtra Act 46 of
1981).
.
10. The Orissa Cess Act, 1962 (Orissa Act II of 1962).
11. The Tamil Nadu Panchayat Act, 1958 (Tamil Nadu Act XXXV
of 1958).
The Statement of Objects and Reasons appended to the Bill states
c
that cesses and other taxes on minerals imposed by certain State governD
ments were struck down by this Court, on account of which they have
become liable to refund cesses and other taxes collected by them. Since
such refund is likely to have serious impact on the revenues of the concerned State Governments and also because it is extremely difficult to
ensure that the levies collected are refunded to the large number of end
mers of minerals who have actually home the burden of such levies, the
said Act was being made by Parliament. The Preamble to the Act states
E
that it was an Act "to validate the imposition and co//ection of cesses and
certain other taxes on minerals under certain State laws
11
• The Act is
deemed to have come into force on February 15, 1992, the date on which
the Ordinance 7 of 1992 was promulgated by the President. Section 2 which
contains three sub-sections is the main provi.<.;ion in the Act. Sub-section
(1) says that the provisions contained in the laws specified in the Schedule
to the Act relating to cesses and other taxes on minerals, shall be and shall
F
be deemed always to have been as valid as if the provisions contained
therein had been enacted by Parliament and that such provisions shall be
deemed to have remained in force upto the 4th day of April, 1991. G
Sub-section (2) elaborates and elucidates the content of sub-section (1).
Having regard to the decisions of this Court and the High Courts on the
question of validity of cesses and taxes on minerals imposed by the States,
the sub-section opens "1th a non-obstante clause "notwithstanding any
judgment, decree or order of any court". The sub-section then provides
three things. It firstly says that "all actions taken, things done, rules made, · H
106
SUPREME COURT REPORTS (1996) SUPP. 4 S.C.R.
A notifications issued or purported to have been taken, done, made or
B
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issued ...... shall be deemed to have been validly taken done, ·made or
issued ........ as the case may be, as if this section had been in force at all
material times when such actions were taken, things were done, rules were
made and notifications were issued". Secondly, it says that "cesses and other
taxes on minerals realised under any such laws shall be deemed to have
been validly ....... realised ...... as if this section had been in force at all
material times when such ........ cesses or other taxes were realised". The
third thing provided by the sub-section is the declaration that "no suit or
other proceeding shall be maintained or continued in any court for the
refund of the cesses or other taxes realised under any such laws". Sub-sec·
tion (3) is clarificatory in nature. It starts with the words "for the removal
of doubts" and declares that nothing in sub-section (2) shall be construed
as preventing any person from claiming refund of any cess or tax paid by
him in excess of the amount due from him under any of the laws mentioned
in the Schedule. It is a case of stating the obvious by way of abundant
caution.
The object and purpose of the Validation Act is self-evident. Since
it was declared by this Court (and other High Courts) that the State
legislatures were not competent to levy cesses and taxes on minerals by
virtue of the declaration contained in Section 2 of the M.M.R.D. Act (made
in terms of Entry 54 in List-I of the Seventh Schedule to the Constitution),
the Parliament stepped in and enacted the relevant provisions of the State
enactments (mentioned in the Schedule) with retrospective effect from the
date of the levy under each of the said enactments. The power of the
Parliament to levy such taxes cannot really be disputed. If the States have
no power to levy such cesses or taxes, it follow that Parliament does have
such power. By virtue of the deeming clause contained in sub-section (1)
of Section 2, the relevant provisions of the State enactments must be
deemed to have been enacted on the date they were enacted by the
respective State Legislatures and they must be deemed to have remained
in force upto the 4th day of April, 1991. The device adopted by Parliament
G
is a well-known one. It may be called legislation by incorporation. The
effect is an if all the relevant provisions of the Scheduled Acts are individually and specifically enacted by Parliament; all those provisions must
be read into Section 2(1). The necessary and logical consequence flowing
therefrom is the creation of levy of all the cesses and taxes, levied by the
respective State enactments, by Parliament itself. The provisions so enacted
H are, however, declared to be in force upto the 4th day of April, 1991.
'
...
P. KANNADASAN v. STATE(B.P.JEEVAN REDDY,J.)
107
CONTENTIONS·OF THE PARTIES:
S/Sri K. Parasaran, G.L. Sanghi, A.K. Ganguli, B. Sen, V.A. Bobde,
Abhishek Singhvi, Rohinton F. Nariman and Ajit Kumar Sinha urged the
following contentions in support of their attack upon the validity of the Act:
A
1. The impugned Act is a clear case of the Parliament seeking to B
over- turn the decisions rendered by this Court and the High Courts in
exercise of their constitutional power and are, therefore, incompetent and
ineffective.
· 2. The language in Section 2 does not achieve the purpose set out in c
the Preamble. The Parliament must first make a law creating the levy
before it can create a fiction that the law must be deemed to have been
made on an anterior date, i.e., before giving it retrospective effect. The
Parliament cannot relegate even the law-making function to the realm of
fiction. Jn other words, without making a law, the Parliament cannot
declare that the law shall be deemed to have been made by it on an anterior D
date. Section 2 does not bring into existence any levy/imposition. The
language employed in Section 2 is wholly inadequate for the purpose. The
section is a mere exercise in futility .
3. Even if it is held by this Court for any reason that Section 2 has E
indeed created the levy, the creation of the said levy is for the limited
purpose of enabling the State Governments to retain what they have
already collected. Section 2 doses not empower the Parliament or its
agencies to collect taXes which were not collected on or before the 4th day
of April, 1991.. In other words, after 4th day of April, 1991, any tax or cess
levied under the Act (Which means the Scheduled enactments) remaining F
uncollected/unrealised cannot be collected or realised. The idea was to
close the chapter on 4th day of April, 1991: whatever is collected shall not
be refunded and whatever is not collected shall not be collected thereafter.
4. The effect of Section 2 is that cesses and taxes on minerals arc
levied in different States at different rates. This is because the rate of G
tax/cess in each of the concerned States was different. A Parliamentary
enactment cannot levy the same tax/cess at different rates in different
States of the country. It would be discriminatory and violative of Article l4
of the Constitution. No justification has been put forward by the Union of
India in support of such discriminatory treatment. This discriminatory levy H
108
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
A
is antithetical to the basic object underlying M.M.R.D. Act, viz., levy of
uniform royalties/taxes. Indeed, the Act does not extend to the entire
country but only to certain States in the country.
B
5. The declaration made by Parliament in Section 2 of the M.M.R.D.
·Act is not an absolute and unlimited one. Tbe denudation of the State
legislatures is only to the extent provided in the said Act. Section 9 is one
of the provisions of M.M.R.D. Act defining lhe extent of denudation. The
impugned levy created by Section 2 of the impugned Act is in addition to
the levy under Section 9. In other words, the extent of denudation has been
enhanced by the impugned levy. If so, such levy/denudation could have
C been effected· only by making a fresh declaration in terms of Entry 54 of
List-I of the Seventh Schedule to the Constitution. No such declaration
has been made by Parliament and, therefore, the levy is incompetent and
ineffective.
6. The levy in question can be related only to Entry 54 of List-I. It
D cannot be related to Entry 97 of List-I. It so, the levy of cess/tax should be
for the purposes of regulating the mines or mineral development. Absolutely no material is placed before the Court to show that the levy of the
impugned cess/tax is for the said purpose.
E
7. The impugned enactment is a temporary statute. Its effect is only
upto 4th day of April, 1991. On that date, the. purpose of the Act comes
to an end. Thereafter, it is a dead-letter. Since Section 6 of the General
Clauses Act does not apply in the case of a temporary statute, no action
can he taken and no recoveries can be made after 4th day of April, 1991.
Indeed, the relevant provisions of the enactments mentioned in the
F
Schedule to the Act are enacted and kept alive only upto 4th day of ApriL,
1991 which means that even the provisions relating to recovery also cease
to have any force after the said date. Since the recovery machinery is not
available and is not in existence after the said date, no recoveries can be
made after the said date.