# THE STATE OF WEST BENGAL AND ORS v. ~ KESORAM INDUSTRIES LTD. AND ORS

- **Citation:** [2004] 1 S.C.R. 564
- **Court:** Supreme Court of India
- **Decided:** 2004-01-15
- **Bench:** V.N. Khare, R.C. Lahoti, B.N. Agrawal, S.8. Sinha, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-west-bengal-and-ors-v-kesoram-industries-ltd-and-ors-19856
- **Pages:** 244

## Headnote

~ '
Constitution of India, 1950:
c
Articles 245, 246, 248,253 and 265-Seventh Schedule, List II. Entries
49 and 50, List/, Entries 52 and 54-West Bengal Taxation Laws (Amendment)
Act, 1992 amending West Bengal Primary Education Act and West Bengal
Rural Employment and Production Act-Levy of education cess and rural
employment cess under the two Acts and the Cess Act, 1880 on coal bearing
D land and other mineral bearing lands-Levy of cesses challenged as regards
coal bearing land and brick-earth bearing land-Held, Per majority (Sinha,
J. dissenting), levy of cesses is intra vires the Constitution-The cesses on coal
bearing land and brick-earth bearing land, being tax on land, are covered by
Entry 49 in List /I-Tax andfee not a subject dealt with by Mines and Minerals
E
(Development and Regulation) Act,1957 and power to levy tax and fee is
available to States so long as they do not interfere with Centre's power of
regulation and control of mines and minerals-Doctrine of occupied fieldDoctrine of pith and substance-Doctrine of public trust-West Bengal Taxation
Laws (Amendment) Act, 1992-West Bengal Primary Education Act, 1973, s. 78West Bengal Rural Employment and Production Act, 1976, s.4-Cess Act, 1880,
F ss. 5 and 6-Mines and Minerals (Development and Regulation) Act,1957.
Seventh Schedule,List II, Entries 5,23,49,50 and 66, List/, Entries 52
and 54-Uttar Pradesh Special Area Development Authorities Act,1986 and
Shakti Nagar Special Area Development Authority (Cess on Mineral Rights)
Rules, 1997 levying cess on mineral rights-Levy of cess challenged by stone
G crushers-Held, Per majority (Sinha,J. dissenting), High Court rightly upheld
levy of the cess as a tax covered by Entry 5 in list II-Besides, levy of the cess
as a tax can also be upheld by reference to Entries 49 and 50 in list IIAlthough it is termed as "cess on mineral right", impact falls on the land
"'
delivering the mineral and thus levy of the cess falls within the scope of Entry
f-,
H
49 in List II-Levy of the cess can equally be upheld as a fee, by reference
564
ST ATE v. KESORAM INDUSTRIES LTD.
565
to Entry 66 in list II, for rendering such services as would improve A
infrastructure and general development of the area, benefits whereof would be
availed by stone crushers also-Uttar Pradesh Special Area Development
Authorities Act, 1986-s. 35-Shakti Nagar Special Area Development Authority
(Cess on Mineral Rights) Rules, 1997-rr. 2 and 3.
Articles 245, 246, 248 and 253-Seventh Schedule, list II, Entry 49, B
and list I Entries 52 and 54 -West Bengal Taxation Laws (Second Amendment)
Act, 1989 amending West Bengal Education Act and West Bengal Rural
Employment and Production Act and levying cesses on tea estates-Held.-
Per majority (Sinha,J. dissenting), the cess levied is on tea-bearing land, a
well defined classification and as such is covered by Entry 49 in List II- C
Declaration under s.2 of Tea Act in term~ of Ent1y 52, list I with regard to
the Union taking control of the tea induslly does not amount to vesting the
power to tax or levy fee in the Central Government by reference to tea or tea
estates-Goodricke Group Ltd upheld-West Bengal Taxation Laws (Second
Amendment) Act,1989-Tea Act, 1953.
Article I 4-Classification of lands for the purpose of tax-Held, different
pieces of land identically situated but being subjected to different uses, or
~
having different potential can be classified s~parately.
Taxation:
D
E
Measure of tax-Levy of cess on coal bearing land, other mineral bearing
lands and tea estates-Assessment of cess by reference to produce dispatched
from land-Held, Per majority (Sinha,J dissenting)-QuantifYing the tax by
reference to annual value of the land on the basis of what it produces or is
capable of producing is a well known mode-Merely because quantum of
produce dispatched from the land is the factor taken into consideration for F
determining the value of the land, ii does not become a tax on the produce.
Royalty-Nature of-Held, royalty i

## Text

_Characters 0–39,963 of 585,485. This is a partial read: ask again with offset=39963 for what follows._

A
THE STATE OF WEST BENGAL AND ORS.
V.
~
KESORAM INDUSTRIES LTD. AND ORS.
JANUARY 15, 2004
B
[V.N. KHARE, CJ., R.C. LAHOTI, B.N. AGRAWAL, S.8. SINHA AND
DR. AR. LAKSHMANAN, JJ.]
~ '
Constitution of India, 1950:
c
Articles 245, 246, 248,253 and 265-Seventh Schedule, List II. Entries
49 and 50, List/, Entries 52 and 54-West Bengal Taxation Laws (Amendment)
Act, 1992 amending West Bengal Primary Education Act and West Bengal
Rural Employment and Production Act-Levy of education cess and rural
employment cess under the two Acts and the Cess Act, 1880 on coal bearing
D land and other mineral bearing lands-Levy of cesses challenged as regards
coal bearing land and brick-earth bearing land-Held, Per majority (Sinha,
J. dissenting), levy of cesses is intra vires the Constitution-The cesses on coal
bearing land and brick-earth bearing land, being tax on land, are covered by
Entry 49 in List /I-Tax andfee not a subject dealt with by Mines and Minerals
E
(Development and Regulation) Act,1957 and power to levy tax and fee is
available to States so long as they do not interfere with Centre's power of
regulation and control of mines and minerals-Doctrine of occupied fieldDoctrine of pith and substance-Doctrine of public trust-West Bengal Taxation
Laws (Amendment) Act, 1992-West Bengal Primary Education Act, 1973, s. 78West Bengal Rural Employment and Production Act, 1976, s.4-Cess Act, 1880,
F ss. 5 and 6-Mines and Minerals (Development and Regulation) Act,1957.
Seventh Schedule,List II, Entries 5,23,49,50 and 66, List/, Entries 52
and 54-Uttar Pradesh Special Area Development Authorities Act,1986 and
Shakti Nagar Special Area Development Authority (Cess on Mineral Rights)
Rules, 1997 levying cess on mineral rights-Levy of cess challenged by stone
G crushers-Held, Per majority (Sinha,J. dissenting), High Court rightly upheld
levy of the cess as a tax covered by Entry 5 in list II-Besides, levy of the cess
as a tax can also be upheld by reference to Entries 49 and 50 in list IIAlthough it is termed as "cess on mineral right", impact falls on the land
"'
delivering the mineral and thus levy of the cess falls within the scope of Entry
f-,
H
49 in List II-Levy of the cess can equally be upheld as a fee, by reference
564
ST ATE v. KESORAM INDUSTRIES LTD.
565
to Entry 66 in list II, for rendering such services as would improve A
infrastructure and general development of the area, benefits whereof would be
availed by stone crushers also-Uttar Pradesh Special Area Development
Authorities Act, 1986-s. 35-Shakti Nagar Special Area Development Authority
(Cess on Mineral Rights) Rules, 1997-rr. 2 and 3.
Articles 245, 246, 248 and 253-Seventh Schedule, list II, Entry 49, B
and list I Entries 52 and 54 -West Bengal Taxation Laws (Second Amendment)
Act, 1989 amending West Bengal Education Act and West Bengal Rural
Employment and Production Act and levying cesses on tea estates-Held.-
Per majority (Sinha,J. dissenting), the cess levied is on tea-bearing land, a
well defined classification and as such is covered by Entry 49 in List II- C
Declaration under s.2 of Tea Act in term~ of Ent1y 52, list I with regard to
the Union taking control of the tea induslly does not amount to vesting the
power to tax or levy fee in the Central Government by reference to tea or tea
estates-Goodricke Group Ltd upheld-West Bengal Taxation Laws (Second
Amendment) Act,1989-Tea Act, 1953.
Article I 4-Classification of lands for the purpose of tax-Held, different
pieces of land identically situated but being subjected to different uses, or
~
having different potential can be classified s~parately.
Taxation:
D
E
Measure of tax-Levy of cess on coal bearing land, other mineral bearing
lands and tea estates-Assessment of cess by reference to produce dispatched
from land-Held, Per majority (Sinha,J dissenting)-QuantifYing the tax by
reference to annual value of the land on the basis of what it produces or is
capable of producing is a well known mode-Merely because quantum of
produce dispatched from the land is the factor taken into consideration for F
determining the value of the land, ii does not become a tax on the produce.
Royalty-Nature of-Held, royalty is not a tax-It is paid to owner of
land who may be a private person and may not necessari(v be a State-Lessor
receives royalty as his income and for lessee royalty paid is an expenditure G
incurred-It is clarified that in India Cement it was not the finding of the
Court that royalty is a tax. (Sinha, J, dissenting).
Cess-A cess may be a tax or fee and is generally used when the levy
is for special administrative expense suggested by the name of the cess itself
H
I r
566
SUPREME COURT REPORTS
[2004] I S.C.R.
)..
A
Interpretation of Constitution:
,._ ,.._
Entries in Lists of Seventh Schedule-Construing of-Explained.
Interpretation of Statutes:
B
Taxing statutes-Interpretation of-Explained.
Words and Phrases:·
~ 1
Expression 'Dispatches' as occurring in the statutes levying cess on
minerals and tea es/ates-Meaning of
c
The West Bengal Legislature, by enacting the West Bengal Taxation
Laws(Amendment) Act, 1992 amended the provisions of the West Bengal
Primary Education Act,1973 and the 'Yest Bengal Rural Employment and
Production Act, 1976, and levied education cess and rural employment cess
on coal bearing land and other mineral bearing land. The cesses were to
D be assessed with reference to dispatches of minerals produced from the
land.
"'
So far as levy of cesses on coal bearing land was concerned, the same
was successfully challenged in writ petitions before the High Court, which
E
held that the cess assessed and computed on the basis of value of coal
produced from the coal bearing land, was directly related to the value of
coal produced from the coal mines and, as such, the cess could not be said
to be on land so as to be covered by Entry 49 in List II of the Seventh
Schedule to the Constitution of India. The said judgment of the High Court
in Kesoram Industries Ltd. (Textile Division) v. Coal India Ltd., AIR (1993)
F Calcutta 78 was challenged by the State Government in CA No. 1532-33
of 1993.
~
As regards levy of cess on brick-earth bearing land, Writ Petition
No. 247 of 1995 was filed before the Supreme Court on behalf of the
persons engaged in brick manufacturing and. owning brick fields,
G contending that brick-earth being a minor mineral was covered under
Mines and Minerals (Development and Regulation) Act, 1957 and by virtue
of declaration made by s.2 thereof, by reference to Entry 54 in List I of
the Seventh Schedule to the Constitution, the field was covered by the 1957
....
Act; that the levy was on dispatch of minor mineral whereas the process
H
of manufacturing bricks did not involve any dispatch of brick-earth as it
!
STATE v. KESORAM INDUSTRIES LTD.
567
was captively consumed in the brick field itself and as such the cess was A
not leviable; and that the State Government was not empowered to levy
any cess on either the extraction of brick-earth or on dispatch thereof. It
was submitted that the same quantity of brick-earth was subjected by the
Central Act to payment of royalty which was a tax and the same quantity
was sought to be levied with cess which was incompetent so far as State B
Legislature was concerned.
!
>-
The State Government of Uttar Pradesh, in exercise of powers under
Rules 2 and 3 of Shakti Nagar Special Area Development Authority (Cess
on Mineral Rights) Rules, 1997 framed under s.35 of the U.P. Special Area
Development Authorities Act, 1986, sought to levy cess on mineral rights C
and took steps for recovery thereof by issuing notices to several stone
crushers who were extracting stone as mineral. Such stone crushers filed
writ petitions before the High Court, which upheld the levy of cess as being
within the competence of State Legislature by reference to Entry 5 in List
II of Seventh Schedule to the Constitution. (Ram Dhani Singh v. Collector, D
Sonbhadra and Ors., AIR [20011 All. 5. Aggrieved, the stone crushers filed
Civil Appeal No. 5027 of 2000.
Levy of cess on tea estates imposed by virtue of the West Bengal
Taxation Laws (Amendment) Act, 1981 by amending the provisions of
West Bengal Primary Education Act, 1973 and the West Bengal Rural E
Employment and Production Act, 1976, was struck down in Buxa, Dooars
Company ltd. v. State of Wes! Bengal, [198913 SCC 211; and as the State
became liable to refund the cess already collected, the State Legislature
brought the West Bengal Taxation (Second Amendment) Act, 1989
amending the West Bengal Primary Education Act and West Bengal Rural F
Employment and Production Act w.e.f. 1981 and levied cesses on tea
estates at a given rate on the dispatch of green tea leaves produced in such.
tea estates. By a validation clause, it was provided that cess collected for
the period prior to the Amendment Act would be deemed to have been
validly levied and collected thereunder. Constitutional validity of the
Amendment Act, 1989 was upheld in Goodricke Group ltd. and Ors v. State G
of West Bengal and Ors., 119951 Supp. 1 SCC 707. But later, when a similar
cess levied under the pari materia provisions of Orissa Rural Employment,
Education and Production Act, 1982 was struck down in State ofOrissa v.
Mahanadi Coal Fields Limited, [19951Supp.2 SCC 686, Writ Petition No.
262 of 1997 was filed before the Supreme Court again challenging the H
568
SUPREME COURT REPORTS
[2004] I S.C.R.
A constitutional validity of the very same amendments which were upheld
in Goodricke 's case, and thus Goodricke was sought to be overruled.
Besides the above matters, some more writ petitions and civil appeals
involving similar issues were filed and all such cases were clubbed together.
The three-Judge Bench before which these cases came up for hearing,
B noticed some conflicting decisions of the Supreme Court on the issues
involved and opined that the matter be referred to a Constitution Bench.
Accordingly, these cases came to be heard by the present Constitution
--1
•
Bench.
C
Disposing of the matters, the Court,
HELD: Per Lahoti, J. (for himself and for V.N. Khare, CJI, B.N.
Agrawal and Dr. AR. Lakshmanan,JJ)
1.1. It is well settled that it is for the Legislature to draft a piece of
D legislation by making the choicest selection of words so as to give
expression to its intention. The ordinary rule of interpretation is that the
words used by the Legislature shall be given such meaning as the
Legislature has chosen to assign them by coining definitions contained in
the interpretation clause and in absence thereof the words would be given
E such meaning as they are susceptible of in the ordinary parlance, may be
by having recourse to dictionaries. However, still, the interpretation is the
exclusive privilege of the Constitutional Courts and the Court embarking
F
upon the ·task of interpretation would place such meaning on the words
as would effectuate the purpose of legislation avoiding absurdity,
unreasonableness, incongruity and conflict. 1678-H; 679-A-BI
1.2. As is with the words used, so is with the language employed in
drafting a piece of legislation. That interpretation would be preferred
,..
which would avoid conflict between two fields of legislation and would
rather import homogeneity. It follows, as a corollary of the abovesaid
G statement, that while interpreting tax laws the Courts would be guided
by the gist of the legislation instead of by the apparent meaning of the
words used and the language employed. The Courts shall have regard to
the object and the scheme of the tax law under consideration and the
purpose for which the cess is levied, collected and intended to be used.
The Courts shall make endeavor to search where the impact of the cess
H falls. The subject matter of levy is not to be confused with the method and
~
\
STATE v. KESORAM INDUSTRIES LTD.
569
--I
manner of assessment or realisation. Legislation in the field of taxation A
and economic activities need special consideration and are to be viewed
with larger flexibility in approach. 1679-B-D; 625-C]
R.K. Garg v. Union of India and Ors., 119811 4 SCC 675, relied on
S.R. Bommai and Ors. v. Union of India, [19941 3 SCC 1, referred to. B
Morey v. Doud, (1957) 354 US 457, referred to.
)
>-
M. C. Seta/vad, Tagore law Lectures "Union and State relations under
the Indian Constitution"(Eastern Law House, Calcutta, 1974); referred to. c
1.3 The Entries in List I and List II of the Seventh Schedule to the
Constitution must be so construed as to avoid any conflict. If there is no
conflict, an occasion for deriving assistance from non-obstante clause
"subject to" does not arise. If there is a conflict, the correct approach is
to find an answer to three questions step by step as under:
D
One - Is it still possible to effect reconciliation between two Entries
so as to avoid conflict and overlapping?
Two - In which Entry the impugned legislation falls by finding out
the pith and substance of the legislation?
E
and
Three - Having determined the field of legislation wherein the
impugned legislation falls by applying the doctrine of pith and substance,
can an incidental trenching upon another field of legislation be ignored?
(672-B-E) F
M.P. V. Sundararamier and Co. v. The State of Andhra Pradesh and Anr.,
(1958) SCR 1422 and D.G. Gouse v. Kera/a, (1980) 2 SCC 410, relied on.
Governor General in Council v. Province of Madras; AIR (1945) PC
98 - referred to.
G
HM. Seervai: Constitutional law of India (Fourth/Silver Jubilee
,.>+
Edition, Vol.3), referred to.
2.1. In the scheme of the Lists in the Seventh Schedule, there exists
a clear distinction between the general subjects of legislation and heads H
570
SUPREME COURT REPORTS
[2004] I S.C.R.
A of taxation. They are separately enumerated. (671-B-C)
Synthetics and Chemicals Ltd. and Ors. v. State of UP. and Ors., (1990(
I SCC 109, relied on.
2.2. Article 265 mandates - no tax shall be levied or collected except
B by authority of law. The scheme of the Seventh Schedule reveals an
exhaustive enumeration of legislative subjects, considerably enlarged over
the predecessor Government of India Act. Entry 97 in List I confers
residuary powers on Parliament. Article 248 of the Constitution, which
.speaks of residuary powers of legislation, confers exclusive power on
, P:irliament to make any law with respect to any matter not enumerated
( .• }.Jl the Concurrent List or the State List. At the same time, it provides that
such residuary power shall include the power of making any law imposing
a tax not mentioned in either of those Lists. It is, thus, clear that if any
power to tax is clearly mentioned in List - II, the same would not be
available to be exercised by Parliament based on the assumption of
D residuary power. (656-F-H; 657-A]
Union of India v. Harbhajan Singh Dhillon, ( 1971 ( 2 SCC 779 and
Mis. Hoechst Pharmaceuticals Ltd. and Ors. v. State of Bihar and Ors., (1983(
4 sec 45, relied on.
E
H.M Seervai: Constitutional Law of India, Fourth/Silver Jubilee Edn.
Vol.3 para 22.191, referred to.
2.3. rt is well-settled that the power to tax cannot be inferred by
implication; there must be a charging section specifically empowering the
State to levy tax. There is nothing like an implied power to tax. The source
F of power which does not specifically speak of taxation cannot be so
interpreted by expanding its width as to include therein the power to tax
by implication or by necessary inference. Power to tax is not an incidental
power. (655-F; 658-D; 659-E(
Taxation, by Cooley (Vol. I, Fourth Edn.); Constitutional Law of India,
G H.M Seervai, Fourth/Silver Jubilee Edn. Vol. 3 para 22.20, referred to.
2.4. 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
H place. Taxing statutes cannot be interpreted on any presumption or
\
ST ATE v. KESORAM INDUSTRIES LTD.
571
assumption. A taxing statute has to be interpreted in the light of what is A
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 a11d open to two interpretations, the benefit of B
interpretation is given to the subject. 1659-B-D]
I
)..
"Principles of Statutory Interpretation, Justice G.P. Singh (Eighth
Edition, 2001), referred to.
3.1. Power of 'regulation and control' is separate and distinct from c
the power of taxation and so are the two fields for purposes of legislation.
Taxation may be capable of being comprised in the main subject of a
general legislative head by placing an extended construction, but that is
not the rule for deciding the appropriate legislative field for taxation
between List I and List II. As the fields of taxation are to be found clearly
enumerated in Lists I and II, there can be no overlapping. There may be D
overlapping in fact but there would be no overlapping in law. The subject
matter of two taxes by reference to the two Lists is 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 E
tax. 1671-C-E)
3.2. A power to regulate, develop or control would not include within
its 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 F
regulation or control having been assumed by another legislature i.e. the
Union. 1661-E-FI
Synthetics and Chemicals Ltd. and Ors v. State ofU.P. and Ors., (1990)
1 sec 109, referred to.
Mis Laxminarayana Mining Co., Bangalore and Anr. v. Taluk G
Development Board and Anr., AIR (1972) Mysore 299, explained and
disapproved.
~
State v. Tucker, 56 U.S. 516, referred to,
H
572
SUPREME COURT REPORTS
(2004] I S.C.R.
A
Taxation, by Cooley (Vol. I, Fourth Edn. Paras 26-27), referred to.
3.3. Entries 52, 53 and 54 in List I are not heads of taxation. They
are general entries. Fields of taxation covered by Entries 49 and 50 in List
II continue to remain with State Legislatures, in spite of Union having
enacted laws by reference to Entries 52, 53, 54 in List I. It is for the Union
B to legislate and impose limitations on the States' otherwise plenary power
to levy taxes on mineral rights or taxes on lands (including mineral bearing
c
lands) by reference to Entries 50 and 49 in List II and lay down the
~ '
limitations on State's power, if it chooses to do so, and also to define the
extent and sweep of such limitations. [671-G-H; 672-A-BI
3.4. The heads of taxation are clearly enumerated in Entries 83 to
92B in List I and Entries 45 to 63 in List II. List III, the Concurrent List,
does not provide for any head of taxation. Entry 96 in List I, Entry 66 in
List II and Entry 47 in List Ill deal with fees. The residuary power of
legislation in the field of taxation spelled out by Article 248 (2) and Entry
D 97 in List I can be applied only to such subjects as are not included in
Entries 45 to 63 of List II. It follows that taxes on lands and buildings in
Entry 49 of List II cannot be levied by the Union. Taxes on mineral rights,
a subject in Entry 50 of List II, can also not be levied by the Union though,
as stated in Entry 50 itself, the Union may impose limitations on the power
of the State and such limitations, if any, imposed by the Parliament by
E law relating to mineral development, to that extent, shall circumscribe the
States' power to legislate. (674-B-D[
3.5. Power to tax mineral rights is with the States; the power to lay
down limitations on exercise of such power, in the interest of regulation,
F 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
G by the Central Government, it is not unconstitutional. A reasonable tax
or fee levied by State Legislation cannot be construed as trenching upon
Union's power and freedom to regulate and control mines and minerals.
[674-D-F; 663-H; 664-A)
..,_
3.6. Power to tax is not outside constitutional limitatidns. It is for
H Parliament to exercise power in the field made available to it by Entries
'
~
STATE v. KESORAM INDUSTRIES LTD.
573
52 and 54 in List I. It is also for Parliament to state by law the limitations A
- and the sweep thereof - which it may choose to impose on the field
available to the State for taxation, by reference to Entry 50 in List II. It
may not be for Courts to venture into enquiry in just an individual case
to find and hold what tax would hamper mineral development if
Parliament has chosen to observe silence by not legislating or failed to say B
something explicit. (663-F-G(
> ,..
4.1. In the field occupied by the Centre for regulation and control,
power to levy tax and fee is available to the State, so long as it does not
interfere with the regulation - the power assumed and occupied by the
Union. (662-E-F(
c
Baijnath Kadio v. The State of Bihar and Ors., (1969( 3 SCC 838 and
Western Coalfields ltd. v. Special Area Development Authority, Korba and
Anr., [1982( I SCC 125, referred to.
Goodricke Group ltd and Ors. v. State of West Bengal and Ors., (1995) D
Supp. I SCC 707, upheld.
State of HG1yana and Anr. v. Chanan Mal, 1197711 SCC 340 and H.R.S.
Murthy v. The Collector ofChittoor and Anr., (196416 SCR 666, relied on.
4.2. As Section 2 of the Mines and Minerals (Development and E
Regulation) Act, 1957 itself provides and indicates, the assumption of
control in public 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 F
• ....
touching (i) the regulation of mines, (ii) the development of minerals, and
(iii) to the extent provided by 1957 Act. Tax and fee is not a subject dealt
with by 1957 Act nor can a power to levy tax or fee be spelled out from
sections 13, 18 and 25 therof. (653-D-E; 655-E)
Synthetics and Chemicals ltd. and Ors v. State of U.P. and Ors., (1990( G
I SCC 109 and The Automobile Transport (Rajasthan) Ltd v. The State of
-<
Rajasthan and Ors., (196311 SCR 491, relied on.
~
State ofOrissa,v. MA. Tulloch and Co., (196414 SCR 461, explained.
4.3. The primary object and the essential purpose of legislation must H
574
SUPREME COURT REPORTS
[2004] I S.C.R.
A 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 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,
B 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
c of the commodity or goods. [673-B-D[
4.4. Entry 23 in List II speaks of 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. Entries 52 and 54 of List
I are both qualified by the expression "declared by Parliament by law to
D be expedient in the public interest". A reading in juxtaposition shows that
the declaration by Parliament must be for the 'control of industries' in
Entry 52 and 'for regulation of mines or for mineral development' in Entry
54. Such control, regulation or development must be 'expedient in the
public interest'. Legislation by the Union in the field covered by Entries
E 52 and 54 would not denude the entire field forming subject matter of
declaration to the State Legislatures. Denial to the State would extend only
to the extent of the declaration so made by Parliament. In spite of
declaration made by reference to Entry 52 or 54, the State would be free
to act in the field left out from the declaration. The legislative power to
tax by reference to Entries in List II is plenary unless the entry itself makes
F the field 'subject to' any other entry or abstracts the field by any
limitations imposable and permissible. [673-D-G I
,, ..
State of Orissa v. MA. Tulloch and Co .. 119641 4 SCR 461 and The
Hingir-Rampur Coal Co. Ltd. v. State ofOrissa, [1961] 2 SCR 537, referred
to.
G
5.1. 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
.._,
H taxation is a far more complex exercise and, therefore, the Legislature has
'
·-'-
STATE v. KESORAM INDUSTRIES LTD.
575
to be given much more nexibility in the latter field. The mechanism and A
method chosen by Legislature for quantification of tax is not decisive of
the nature of tax though it may constitute one relevant factor out of many
for throwing light on determining the general character of the tax.
..
1671-E-GI
Union of India and Ors. v. Bombay Tyre International Ltd, 11983] 4 B
SCC 210 and The Hingir-Rampur Coal Co. Ltd v. Stale of Orissa, 11961] 2
f
).
SCR 537, relied on.
Ra/la Ram v. Province of East Punjab, (1948) FCR 207; Kunnalhat
Thathunni Moopil Nair etc. v. State of Kera/a and Anr., 11961] 3 SCR 77 c
and Ajay Kumar Mukherjee v. Local Board of Barpeta, (1965] 3 SCR 47,
referred to.
Morey v. Doud, 119571 354 US 457, referred to.
Mis. Sainik Motors, Jodhpur v. State of Rajasthan, 11962] l SCR 517 D
and D.G. Gouse and Co. v. State of Kera/a; 1198012 SCC 410, referred to.
Re.: A reference under the Government of Ireland Act 1920 and Section
3 of the Finance Act (Northern Ireland) 1934, (1936) A.C. 352, referred to.
5.2. The method of quantifying the cess by reference to the quantum E
of mineral produced would not alter the character of the levy. There are
myriad methods of calculating the value of the land for the purpose of
quantifying the tax. It does not become excise duty on manufacture and
production of goods merely on account of having relation with the quantity
of product yielded of the land. Rather it is a safe, sound and scientific
method of determining the value of the land to which the product relates. F
The levy of cess in the instant matlers considered as a tax is constitutionally
valid. [681-F-H; 682-AI
Kunnathat Thathunni Moopi/ Nair e/c. v. State of Kera/a and Anr.,
(19611 3 SCR 77, Ajay Kumar Mukherjee v. Local Board of Barpeta, [19651
3 SCR 47; Western Coalfields Ltd v. Special Area Developmenl Aulhority, G
Korba and Anr., [19821 i SCC 125 and Ra/la Ram v. Province of Easl Punjab,
1948 FCR 207, relied on.
~
6.1. 'Land', the term as occurring in Entry 49 of List II, has a wide
connotation. Land remains land though it may be subjected to different
user. The nature of user of the land would not enable a piece of land being H
576
SUPREME COURT REPORTS
[2004) I S.C.R.
A taken out of the meaning of land itself. Different uses to which the land is
subjected or is capable of being subjected provide the basis for classifying
land into different identifiable groups for the purpose of taxation. The
nature of user of one piece of land would enable that piece of land being
classified separately from another piece of land which is being subjected
to another kind of user, though the two pieces of land are identically
B situated except for the difference in the nature of user. The tax would
remain a tax on land and would not become a tax on the nature of its
user. [672-E-GI
Anant Mills v. State of Gujarat, [1975] 2 SCC 115;Kunnathat Thathunni
C Moopil Nair etc. v. State of Kera/a and Anr., (1961 [ 3 SCR 77 and Ajay Kumar
Mukherjee v. local Board of Barpeta, (1965] 3 SCR 47, relied on.
Vivian Joseph Ferreira and Anr. v. The Municipal Corporation of
Greater Bombay and Ors., [1972] I SCC 70 and The Government of Andhra
Pradesh and Anr. v. Hindustan Machine Tools ltd., [1975] 2 SCC 274,
D referred to.
6.2. To be a tax on land, the levy must have some direct and definite
relationship with the land. So long as the tax is a tax on land by bearing
such relationship with the land, it is open for the legislature for the purpose
of levying tax to adopt any one of the well-known modes of determining
E 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.
[672-G-H; 673-A[
6.3. It is open for the Legislature to ignore the nature of the user
F 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
G 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. [628-A-C[
Anant Mills v. State of Gujarat, [1975[ 2 SCC 175;Kunnathat Thathunni
J..
Moopil Nair etc. v. State of Kera/a and Anr., (1961[ 3 SCR 77, Ajoy Kumar
H Mukherjee v. local Board of Barpeta, [1965[ 3 SCR 47; Assistant
...
'
ST A TE v. KESORAM INDUSTRIES LTD.
577
Commissioner of Urban land Tax Madras and Ors. etc. v. Buckingham and A
Carnatic Co. ltd. etc., 1196912SCC55; Ralia Ram v. The Province of East
Punjab, (1948) FCR 207; Sir Byramjee Jeejeebhoy v. Province af Bombay
and Ors., AIR (1940) Born 65); Vivian Joseph Ferreira and Anr. v. The
Municipal Corporation of Greater Bombay and Ors., 11972] I SCC 70; The
Government of Andhra Pradesh and Anr. v. Hindustan Machine Tools ltd.,
1197512 SCC 274; Mis. R.R. Engineering Co., etc. v. Zila Parishad, Bareil/y B
and Anr. etc., 11980] 3 SCC 330; District Board of Farrukhabadv. Prag Dutt
and Ors., AIR (1948) Allahabad 382 (F.B.) and The State of Punjab v. The
Union of India through the Secretary to Government Finance Department,
Government of India, New Delhi, AIR (1971) Punjab and Haryana 155
(F.B.), relied on.
C
7.1. A cess may be a tax or a fee and is generally used when the levy
is for some special administrative expense, suggested by the name of the
ccss, such as, health cess, education cess, road cess etc. [633-F-G; 681-B]
7.2. Royalty is not a tax. Royalty is paid to the owner of land who D
may be a private person and may not necessarily be 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. It is clarified that even in India Cement it was not the finding
of the Court that royalty is a tax. In that case what was impugned was a
levy of cess on royalty and the question was whether such cess on royalty E
was within the competence of the State Legislature. In the majority
judgment the word 'royalty' occurring in the expression - 'royalty is a
tax' is clearly an error attributable either to a Jitenographer's devil or to
sheer inadvertence. What the majority wished to say and has in fact said
is 'cess on royalty is a tax'. A statement caused by an apparent F
typographical or inadvertent error in a judgment of the Court should not
be misunderstood as declaration of such law by the Court.
1642-B-C; 633-D-E; 635-E; 636-A-BI
India Cement ltd. and Ors. v. State of Tamil Nadu and Ors., 11990] 1
sec 12; clarified and distinguished
G
Orissa Cement ltd. v. State of Orissa and Ors., 11991] Supp. I SCC
430 and Buxa Dooars Tea Company ltd. and Ors. v. State of West Bengal
and Ors, 11989] 3 SCC 211, distinguished.
State of M.P. v. Mahalaxmi Fabric Mills ltd. and Ors., 11995] Supp. 1 H
578
SUPREME COURT REPORTS
(2004] I S.C.R.
A SCC 642 and Saurashtra Cement and Chemicals Industries and Anr. etc. etc.
v. Union of India and Ors., 1200111 SCC 91, overruled to the extent they
held royalty to be a tax.
H.R.S. Murthy v. Collector of Chit/or, 1196416SCR666, relied on.
B
D.K. Trivedi and Sons, and Ors. v. Stale of Gujarat and Ors., (19861
(Supp) SCC 20; Laxmi Narayan Agarwalla and Ors. v. State of Grisso and
I )-
Ors., AIR (1983) Orissa 210; Surajdin Laxman!al v. State of M.P., Nagpur
~ •
and Ors., AIR (1960) M.P. 129; Dr. Shanti Saroop Sharma and Anr. v. State
of Punjab and Ors., AIR (1969) Punjab and Haryana 79; Saurashtra Cement
and Chemical Industries Ltd, Ranavav v. Union of India and Anr., AIR
C (1979) Gujarat 180; lnderjeet Singh Sia! and Anr. v. Karam Chand Thapar
and Ors., (19951 6 SCC 166; Ajit Singh v. Union of India and Ors., (19951
Supp. 4 SCC 224 and Quarry Owners' Association v. State of Bihar and
Ors., (20001 8 SCC 655, referred to.
D
Words and Phrases Permanent Edition (Vol.37 A, page 597); Stroud's
Judicial Dictionary of Words and Phrases (Sixth Edition, 2000, Vol.3, page
2341); Words and Phrases, legally Defined (Third Edition, 1990, Vol.4,
page 112); Wharton's Law lexicon (Fourteenth Edition, page 893); Mozley
and Whiteley's Law Dictionwy (Eleventh Edition, 1993, page 243); Prem 's
Judicial Dictionary (1992, Vol. 2, page 1458) and Black's law Dictionwy
E (Seventh Edition, p.1330), referred to.
Coal Matters
8.1. The West Bengal Taxation Laws (Amendment) Act, 1992 is intra
vires the Constitution. The amendments incorporated by the said Act w.e.f.
F 1.4.1992 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 quarry and (iii) land other
than the preceding two categories. These three are well-defined .
G classifications by reference to the user or quality and the nature of product
which it is capable of yielding. The cess is levied on the land. The method
of quantifying the tax is by reference to the annual value thereof. It is well
known that one of the major factors contributing to the value of the land
is what it produces or is capable of producing. Merely because the
quantum of coal produced and dispatched or the quantum of mineral
H produced and dispatched from the land is the factor taken into
'
STA TE v. KE SO RAM INDUSTRIES LTD.
579
·i
consideration for determining the value of the land, it does not become a A
tax on coal or minerals. Being a tax on land it is fully covered by Entry
49 in List II. [674-G-H; 675-A-FJ
8.2. Assuming the impugned levy of cess to be a tax on mineral rights,
it would be covered by Entry 50 in List II. Taxes on mineral rights lie
within the legislative competence of the State Legislature "subject to" any B
limitation imposed by Parliament by law relating to mineral development.
,>
).
Entry 23 in List II speaks of regulation of mines and mineral developments,
subject to the provisions of List I with respect to regulation and
development under the control of the Union. The Central Legislation has
taken over regulation and development of mines and mineral development C
in public interest. By reference to Entry 50 in List II and Entry 54 iri List
I, the Central legislation has not cast any limitations on the State
Legislature's power to tax mineral rights, or land for the matter of that.
Simply because incidence of tax is capable of being passed on to buyers
or consumers by the mine owners with an escalating effect on the price of
the coal, it cannot be inferred that the tax has an adverse effect on mineral D
development. The impugned cess is a tax on coal-bearing and mineral-
..
bearing land. It can at the most be construed to be a tax on mineral rights.
In either case, the impugned cess is covered by Entries 49 and 50 of
List II. (675-8-FJ
8.3. Mahanadi Coalfields* was not correctly decided in as much as E
India Cement Ltd. and Orissa Cement Ltd.** were applied to the levy of
a cess to which they did not apply. In Mahanadi Coalfields Ltd. it was
not rightly opined that the cess was levied on minerals and mineral rights
and not on land. Hence the conclusion reached therein that the State
Legislature did not have the legislative competence and that the State F
legislation trenched upon a field already occupied by Mines and Minerals
(Development and Regulation) Act 1957, a Central Legislation, is
incorrect. [675-G-H; 676-A(
Kesoram Industries Ltd (Textile Division) v. Coal India Ltd., AIR (1993)
Calcutta 78, reversed.
G
*State ofOrissa v. Mahanadi Coal Fields Limited, (1995) Suppl. 2 SCC
-4
686, overruled.
**India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors., [1990)
1SCC12 and Orissa Cement Ltd v. State of0ris$a and Ors., [1991) Supp. H
\
I.-
}.
!-
580
SUPREME COURT REPORTS
[2004] I S.C.R.
A l sec 430 ' distinguished.
t·
Brick-Earth Matters
9.t. Brick-earth is a minor mineral. The verdict in this judgment with
regard to the impugned cess by reference to coal applies to brick-earth as
B well. The field as to taxation cannot be said to have been covered by
Central Legislation, i.e., the l 957 Act, by reference to Entry 54 in List I.
1676-F-GI
... ,
9.2. Quantification of levy by reference to quantity of brick-earth
c
dispatched is a methodology adopted for the purpose .of finding out the
quantity of brick-earth removed from the land. It has a definite and direct
co-relation with the land. The gist and substance of what the Legislature
is taking into account is the brick-earth actually removed. "Dispatched"
has the effect of taking into account the brick-earth "removed" and not
simply "moved" and left behind. The average quantity of brick-earth
D utilized in making bricks, whether on the brick field itself or on a place
nearby, does involve removal - and consequently, dispatch - of the brickearth from the place where it was to the place where it is captively
consumed in making bricks. The fact that the methodology for working
'4
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
E 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 Entries 49 or 50 in List II.
1676-G-H; 677-A-CI
Minor Mineral Matters
F
10.t. The High Court has rightly held that as a tax the impugned
levy of cess is clearly covered by Entry 5 of List II, and it is added, read
with Entries 49 and 50 of List II. The High Court has upheld the validity
of the U.P. Special Area Development Authorities Act, 1986 by relating it
G 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.