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Bhilai Engineering Corporation Limited and Ors. V. Union of India and Ors. - (High Court of Rajasthan) (27 Jun 2017)

Central Government is empowered not only to frame rules to regulate grant of reconnaissance permits, prospecting licences or mining leases, but also for purpose connected therewith


Mines and Minerals

Present batch of writ petitions is to examine constitutional validity of Rule 64-D of Mineral Concession Rules, 1960, as amended by Government of India under Notification dated 10th April, 2003. By Notification, an amendment is introduced in Rule 64-D of Rules under heading guidelines. Amendment introduced pertains to manner of payment of royalty of minerals on ad valorem basis.

Argument advanced on behalf of Petitioners, while questioning constitutional validity of provision aforesaid, is that Section 9 of Mines and Minerals (Development and Regulation) Act, 1957 provides that, holder of a mining lease granted on or after commencement of 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 leased area at rate for time being specified in Second Schedule in respect of that mineral. Schedule Second appended with Act provides for payment of royalty to tune of 11% of sale price on ad valorem basis. Determination of sale price is an issue relating to conditions of contract between seller and purchaser, as such Central Government is having no authority to fix a notional sale price for determining value of royalty. Amendment introduced under Notification dated 10th April, 2003 permits notional determination of sale price by adding 20% of benchmark value, as such is beyond powers of Central Government. It is emphasised that, authority of Central Government under Section 13 of Mines And Minerals (development And Regulation) Act, 1957 is limited only to 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 manner in which dead rent or royalty shall be payable. As per Petitioners, Act does not permit Central Government to frame Rules beyond prescription of manner in which dead rent or royalty shall be payable.

Clause (I) of sub-section (2) of Section 13 of Act, empowers Central Government to make rules for a limited purpose, but sub-section (1) is wide and that empowers Central Government not only to frame rules to regulate grant of reconnaissance permits, prospecting licences or mining leases, but also for purpose connected therewith. Amendment introduced is for a purpose connected to issues referred in Section 13, as such allegation of incompetence is not well founded. Central Government, before making amendment in Rule 64-D of Rules, constituted a study group that, compared average sale price and average pit's mouth value during year 2001-02. Study disclosed that, sale price was higher than average pit's mouth value for about 20-22%. Study group was of view that, switching over to mode of computation of royalty on ad valorem basis from sale price will result in loss of revenue to State Government, therefore, recommended that, a factor of 20% be added to benchmark value of mineral production published by Indian Bureau of Mines in its monthly statistics of mineral production.

Accordingly, under Notification dated 10th April, 2003 Government of India changed basis for calculation of ad valorem royalty. In light of amendment introduced, royalty is to be charged on benchmark price as declared by Indian Bureau of Mines from time to time through its monthly publication by adding 20% to this benchmark, but 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 Act, also refers rate for time being specified in schedule second in respect of specific mineral. Rate of royalty in no case is going to be altered by amendment impugned. Royalty for rock phosphate shall be 11% of its sale price even after amendment.

Amendment introduced is an outcome of thorough study made by a study group constituted by Government and it is well within statutory authority of Respondents. It is further relevant to notice that, as per conditions of contract, 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 buyer's account".

Fact stated that, Government is not empowered to charge additional royalty with retrospective effect is not correct. Royalty has been charged by Respondents in accordance with provisions of Act and Rules framed thereunder and also in consonance to conditions of trade agreement. Respondents are not going to charge any royalty from Petitioners for period prior to amendment introduced in Rule 64-D of Rules. Charging of royalty is as a consequence of application of a statute and, therefore, principle of estoppel shall also not come in way of Respondents. There is no merit in instant petitions, hence same are dismissed.


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