G.R. Moolchandani ORDER
Govind Mathur, J.
1. This batch of writ petitions is before us to examine constitutional validity of Rule 64-D of the Mineral Concession Rules, 1960 (hereinafter referred to as 'the Rules'), as amended by Government of India under the notification dated 10.4.2003. By the notification aforesaid an amendment is introduced in Rule 64-D of the Rules under heading guidelines. The amendment introduced pertains to manner of payment of royalty of minerals on ad valorem basis. The amendment introduced reads as follows:-
"Case 1: All non atomic and non fuel minerals and minerals other than aluminium, primary gold, silver, copper, lead, zinc, nickel and tin-
The Indian Bureau of Mines publishes 'Monthly Statistics of Mineral Production' which contains state-wise total value of each mineral produced during a month in a State. The state-wise average value for different individual minerals as published by Indian Bureau of Mines in the 'Monthly Statistics of Mineral Production' shall be the benchmark for computation of royalty by the concerned State Government in respect of any mineral produced any time during a month in any mine in that State. For the purpose of computation of royalty the State Government shall add twenty per cent to this bench mark value. This value shall be reckoned to be the sale price for the purpose of computation of royalty. Also the value of the minerals published in the latest published issue of the 'Monthly Statistics of Mineral Production' will be deemed to be applicable for the mineral mined in the previous month, irrespective of when the royalty actually accrues. If for a particular mineral, the information for a State is not published in a particular issue, the last information available for that mineral in the State in a previous issue shall be referred, failing which the latest published information for the mineral for all-India shall be referred."
2. The argument advanced on behalf of the petitioners, while questioning constitutional validity of the provision aforesaid, is that Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as 'the Act') provides that the holder of a mining lease granted on or after commencement of the Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral. The Schedule Second appended with the Act provides for payment of royalty to the tune of 11% of the sale price on ad valorem basis. The determination of sale price is an issue relating to the conditions of contract between the seller and purchaser, as such the Central Government is having no authority to fix a notional sale price for determining the value of royalty. The amendment introduced under the notification dated 10.4.2003 permits notional determination of the sale price by adding 20% of benchmark value, as such is beyond the powers of the Central Government. It is emphasised that the authority of the Central Government under Section 13 of the Act is limited only to the extent of fixing and collection of fees for reconnaissance permits, prospecting licences or mining leases surface rent, security deposit, fines, other fees or charges and the time within which and the manner in which the dead rent or royalty shall be payable. As per the petitioners, the Act does not permit the Central Government to frame the Rules beyond the prescription of the manner in which the dead rent or royalty shall be payable.
3. To examine the question proposed, we would like to narrate necessary facts as given in DB Civil Writ Petition No. 1692/2005 wherein the pleadings are complete.
4. The petitioner is a company incorporated under the Indian Companies Act, 1956 and is engaged in manufacturing single super phosphate fertilizer. In the process of manufacturing the mineral 'rock phosphate' is an integral part and the company procures that from Rajasthan State Mines and Minerals Limited (a government company incorporated under Indian Companies Act, 1956). As per the terms and conditions of the trade between the petitioner and the Rajasthan State Mines and Minerals Limited the petitioner is required to disclose its requirement of mineral rock phosphate at the inception of the financial year and on having such disclosure the Rajasthan State Mines and Minerals Limited is required to publish its rates and other conditions for supply of mineral rock phosphate. Suffice to mention that the mineral rock phosphate is a major mineral and its excavation, production and distribution is governed by the Rajasthan Mines and Minerals (Development and Regulation) Act, 1957 and the Mineral Concession Rules, 1960.
5. The Rajasthan State Mines and Minerals Limited under a notification dated 31.3.2003 notified the sale price of rock phosphate which was further modified under the circulars dated 9.10.2003, 20.11.2003 and 12.12.2003. On demand of the petitioner, rock phosphate was supplied by the Rajasthan State Mines and Minerals Limited with due invoice including royalty and the same was religiously paid by the petitioner. It is stated that as a matter of fact the liability to pay royalty is of the lease holder i.e. the Rajasthan State Mines and Minerals Limited, but as a condition of contract the liability has been shifted to the consumer, the petitioner in the present case.
6. As per the petitioner, the Rajasthan State Mines and Minerals Limited under the notices dated 15.2.2005 informed that the Government of India under a notification dated 10.4.2003 has changed the formula for computing royalty and on basis of that the liability of the petitioner to pay royalty was redetermined with a due of Rs. 34,47,117/- for the year 2003-04. A demand was also made for a Jhansi Unit of the petitioner company for a sum of Rs. 17,68,700/- against the outstanding dues of royalty.
7. The case of the petitioner is that the amendment introduced is beyond competence of the Central Government as the scope for framing Rules under Section 13 is quite limited i.e. to the extent of the manner in which the dead rent or royalty is required to be paid. It is also stated that as per clause (r) of Section 13 of the Act, the Central Government may make Rules in respect to any other matter which is to be, or may be, prescribed under the Act, but the mode to determine royalty is not a part of the Act, hence no amendment, as made under the notification dated 10.4.2003, could have been made. In addition to the argument aforesaid it is further submitted that no demand could have been made by the Rajasthan State Mines and Minerals Limited in the month of March, 2005 to recover the royalty of the earlier years i.e. of 2003-04. According to learned counsel the amendment introduced could have not been applied retrospectively, specially looking to the fact that entire liability with regard to payment of royalty was already discharged by the petitioner in earlier years. To substantiate the contention, reliance is placed by learned counsel upon a judgment of Supreme Court in State of Rajasthan & Anr. v. Rajasthan Chemists Association, reported in MANU/SC/8811/2006 : (2006) 6 SCC 773. Reliance is also placed upon a Division Bench judgment of this Court in Amarjeet Singh v. State of Rajasthan, reported in MANU/RH/0228/1995 : 1998 (2) RLW 205. In the cases aforesaid it was held that under the Act the competent authority is having no authority to revise royalty or dead rent from back date.
8. While meeting with the argument advanced, it is submitted by learned counsels appearing on behalf of the respondents that the amendments introduced under the notification dated 10.4.2003 are valid, legal, constitutional and do not suffer from any infirmity or illegality as suggested by the petitioners. The Central Government is having ample authority to frame Rules for fixing and collection of fees for reconnaissance permits, prospecting licences or mining leases surface rent, security deposits, fines, other fees or charges and the time within which and the manner in which the dead rent or royalty shall be payable. The Central Government invoked the power under Section 13(2)(i) of the Act and prescribed a manner to determine royalty. It is brought to the notice of the Court that a study group constituted by the Government was of the view that switching over the basis of computation of royalty on ad valorem basis from the sale price will cause in some loss of revenue to the State Government, thus recommended that a factor of 20% should be added to the benchmark value of mineral production published by Indian Bureau of Mines (IBM) in its monthly statistics of mineral production. On basis of the recommendation, necessary research was conducted and the benchmark of 20% was added under the heading of guidelines under Rule 64-D, thus, the amendment introduced is a rational and reasonable.
9. So far as the argument with regard to retrospective application of demand is concerned, it is submitted that as per the conditions of contract the petitioner is liable to pay royalty in accordance with law and necessary condition in this regard is that "any change in royalty or imposition of new levy by any lawful agency shall be to the buyer's account". The petitioner being buyer is liable to pay the royalty from the date appointed and no royalty is demanded for a period prior to the date appointed by the Central Government.
10. Heard learned counsels and considered the rival submissions.
11. At the threshold, we would like to state that the judgments cited by learned counsel appearing on behalf of the petitioners to substantiate the argument that no demand could have been made with retrospective application, are having no applicability in the instant matters. In the cases in hand the provision on basis of which demand is made is having no retrospective application and whatever demand is made i.e. only prospective to the date appointed.
12. The prime argument advanced by learned counsel appearing on behalf of the petitioners is that the amendment introduced under Rule 64-D of the Rules suffers from the vice of the incompetence as Section 13 of the Act permits the Central Government to frame Rules for fixing and collection of fees for reconnaissance permits, prospecting licences or mining leases surface rent, security deposit, fines, other fees or charges and the time within which and the manner in which the dead rent or royalty shall be payable. The amended provision in no manner relates to the scope of the authority given to the Central Government under Section 13 being not coming within any of the criteria referred above. It is asserted that the rates of royalty in respect of minerals referred in second schedule could have only been charged as per the rates given in schedule second which is in consonance to Section 9 of the Act. It is further submitted that even the second schedule could have been amended by the Central Government to enhance or reduce the rate of royalty payable in respect of any mineral with effect from such date as may be specified in the notification. No amendment has been made under schedule second as per sub-section (3) of Section 9 of the Act, therefore, charging of royalty by making an amendment under Rule 64-D is without authority of law.
13. We do not find any merit with the arguments advanced.
14. True it is, that clause (I) of sub-section (2) of Section 13 of the Act empowers the Central Government to make rules for a limited purpose, but sub-section (1) is quite wide and that empowers the Central Government not only to frame the rules to regulate the grant of reconnaissance permits, prospecting licences or mining leases, but also for the purpose connected therewith. We are having no doubt that the amendment introduced is for a purpose connected to the issues referred in Section 13, as such the allegation of incompetence is not well founded. We would also like to state that the Central Government, before making amendment in Rule 64-D of the Rules, constituted a study group that compared the average sale price and average pit's mouth value during the year 2001-02. The study disclosed that the sale price was higher than the average pit's mouth value for about 20-22%. The study group was of the view that switching over to the mode of computation of royalty on ad valorem basis from the sale price will result in loss of revenue to the State Government, therefore, recommended that a factor of 20% be added to the benchmark value of mineral production published by Indian Bureau of Mines in its monthly statistics of mineral production. Accordingly, under the notification dated 10.4.2003 the Government of India changed the basis for calculation of ad valorem royalty. In light of the amendment introduced the royalty is to be charged on the benchmark price as declared by the Indian Bureau of Mines from time to time through its monthly publication by adding 20% to this benchmark, but the rate of royalty in this event too shall remain the same as given in schedule second. Pertinent to notice here that Section 9(2) of the Act also refers the rate for the time being specified in schedule second in respect of the specific mineral. The rate of royalty in no case is going to be altered by the amendment impugned. The royalty for rock phosphate shall be 11% of its sale price even after the amendment.
15. An effort is also made to address that the amendment introduced is not having any rational and i.e. also not a reasonable one. We do not find any merit in this argument as the amendment introduced is an outcome of thorough study made by a study group constituted by the Government and it is well within the statutory authority of the respondents. It is further relevant to notice that as per conditions of contract the petitioner is liable to pay royalty in accordance with law and necessary condition in this regard is that "any change in royalty or imposition of new levy by any lawful agency shall be to the buyer's account".
16. We are also of the view that the fact stated that the Government is not empowered to charge additional royalty with retrospective effect is not correct. The royalty has been charged by the respondents in accordance with the provisions of the Act and the Rules framed thereunder and also in consonance to the conditions of trade agreement. The respondents are not going to charge any royalty from the petitioners for the period prior to the amendment introduced in Rule 64-D of the Rules. The charging of royalty is as a consequence of the application of a statute and, therefore, the principle of estoppel shall also not come in the way of the respondents.
17. In entirety, we do not find any merit in these petitions for writ, hence the same are dismissed.
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