Supreme Court of India
KIRLOSKAR FERROUS INDUSTRIES LTD. AND ANR.versusUNION OF INDIA & ANR.
- Citation
- 2026 INSC 679
- Decided
- 13 July 2026
- Disposal
- Dismissed
Holding
The Court held that the explanations to Rule 38 of the 2016 Rules and Rule 45(8)(a) of the 2017 Rules, which include royalty, DMF and NMET payments in the sale value for computing the average sale price, are constitutionally valid, do not violate Articles 14 or 19(1)(g), and are not ultra‑vires Section 9 of the MMDR Act.
Summary
The petitioners, Kirloskar Ferrous Industries Ltd. and a shareholder, challenged the constitutional validity of the explanations appended to Rule 38 of the 2016 Minerals Concession Rules and Rule 45(8)(a) of the 2017 Mineral Conservation and Development Rules, which require that royalty, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) payments be included in the sale value for computing the average sale price (ASP) used to determine royalty. They argued that this inclusion violated Articles 14 and 19(1)(g) of the Constitution and was ultra‑vires Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 because it departed from the ad valorem concept. The Union of India contended that the measure was a legitimate fiscal tool to prevent price manipulation and revenue loss, within its legislative competence under Entry 54 of List I. The Court examined the presumption of constitutionality of subordinate legislation, the rational nexus between the levy and its purpose, and precedents on fiscal measures and found the explanations to be a reasonable means of preventing evasion. It held that the explanations do not breach Articles 14 or 19(1)(g) and are not ultra‑vires Section 9. Consequently, the writ petition was dismissed.
Issues considered
- Whether the explanations to Rule 38 of the 2016 Rules and Rule 45(8)(a) of the 2017 Rules, which include royalty, DMF and NMET payments in the sale value for computing ASP, are ultra vires Articles 14 and 19(1)(g) of the Constitution.
- Whether those explanations are ultra vires Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957.
- Whether the inclusion of royalty, DMF and NMET in the sale value violates the ad valorem concept prescribed under the Act.
- Whether the measure is manifestly arbitrary, unreasonable or disproportionate.
- Whether the legislature has the competence to prescribe such a method of levy to prevent evasion.
Legislation cited
- Constitution of Indias. 14, s. 19(1)(g)
- Mineral (Auction) Rules, 2015
- Mineral Concession Development Rules, 1988
- Mineral Conservation and Development Rules, 2017s. Explanation to Rule 45(8)(a), s. Rule 45(8)(a)
- Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016s. Explanation to Rule 38, s. Rule 38
- Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015
- Mines and Minerals (Development and Regulation) Act, 1957s. 9, s. 9(1), s. 9(2), s. 9(3)
- National Mineral Exploration Trust Rules, 2015
Headnote
Issue for Consideration Issue arose whether the explanations appended to r.38 of the 2016 Rules and r.45(8)(a) of the 2017 Rules ultra vires Arts.14 and 19(1)(g) of the Constitution as well as s.9 of the MMDR Act to the extent that the levy provides for inclusion of royalty and DMF and NMET in the sale value. Headnotes† Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 – Explanation appended to r.38 – Mineral Conservation and Development Rules, 2017 – Explanation to r.45(8)(a) – Constitutional validity
Subjects
Explanations appended to Rule 38 of the 2016 Rules and Rule 45(8)(a) of the 2017 RulesInclusion of royalty, DMF and NMET in sale valueRoyaltyDistrict Mineral Foundation (DMF)National Mineral Exploration Trust (NMET)Average Sale Price (ASP)Ad valoremArticle 14Article 19(1)(g)Section 9 of the MMDR Act
Judgment
[2026] 8 S.C.R. 104 : 2026 INSC 679
Kirloskar Ferrous Industries Ltd. and Anr.
v.
Union of India & Anr.
(Writ Petition (C) No. 733 of 2025)
13 July 2026
[J.B. Pardiwala and K.V. Viswanathan,* JJ.]
Issue for Consideration
Issue arose whether the explanations appended to r.38 of the
2016 Rules and r.45(8)(a) of the 2017 Rules ultra vires Arts.14
and 19(1)(g) of the Constitution as well as s.9 of the MMDR Act
to the extent that the levy provides for inclusion of royalty and
payments made towards DMF and NMET in the sale value.
Headnotes†
Minerals (Other than Atomic and Hydro Carbons Energy
Minerals) Concession Rules, 2016 – Explanation appended to
r.38 – Mineral Conservation and Development Rules, 2017 –
Explanation to r.45(8)(a) – Constitutional validity of – Writ
petition that the Explanation appended to r.38 of the 2016
Rules and the Explanation appended to r.45(8)(a) of the 2017
Rules, both of which include the payments made towards
royalty, District Mineral Foundation-DMF and National Mineral
Exploration Trust-NMET as a component of the sale value,
while computing the average sale price, violative of Arts.14
and 19(1)(g) as being manifestly arbitrary, and ultra vires s.9
of the MMDR Act, since s.9 read with the Schedule is based
on the concept of ad valorem:
Held: Explanation to r.38 of the 2016 Rules and r.45(8)(a) of the
2017 Rules, insofar as they provide for inclusion of royalty and
payments made towards District Mineral Foundation-DMF and
National Mineral Exploration Trust-NMET in the sale value for
computing the average sale price for determination of royalty,
is constitutional and valid – Impugned Rules not violative of
Arts.14 and 19(1)(g) – Impugned provisions not ultra vires s.9
of the MMDR Act – Measure of levy and the decision not to
exclude royalty and payments made towards DMF and NMET not
* Author
[2026] 8 S.C.R. 105
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
arbitrary and has nexus and rational connection with the nature
of the levy – Measure adopted in the Explanations to r.38 of the
2016 Rules and r.45(8)(a) of the 2017 Rules for computation of
sale value which, in turn, is an essential factor in computation of
the Average Sale Price-ASP, fully justified – Nothing capricious
or irrational about the measure and it cannot be said that it has
been adopted without any determining principle nor the measure
excessive or disproportionate for it to be characterized as
manifestly arbitrary – Comparison with coal completely unjustified
as there is no concept of ASP in coal and that too based on data
given by the miners – As a means to check evasion, a measure
has been prescribed under which ad valorem will be arrived at
to check manipulation and to strike at evasion, certain factors
have been loaded on to the sale value and nothing illegal in the
same – Measure of levy, as provided, read with the explanation,
is intended to ensure that, to the extent possible, loss of revenue
is offset – Such loss of revenue occurs due to manipulation of
prices – When a measure of levy is prescribed to check evasion,
individual hardships cannot be determinative – Afterall, the
grundnorm is “Salus populi suprema lex”-regard for the public
welfare is the highest law – Private rights will have to cede to
public interest – Constitutional Court called upon to pronounce on
the validity of such fiscal measures should be loath to interfere,
for any interference in the absence of legitimate grounds would
put public interest in jeopardy – Thus, measure not unreasonable
or disproportionate, and no infirmity in the impugned provisions –
Constitution of India – Mines and Minerals (Development and
Regulation) Act, 1957. [Paras 92, 94-97, 100, 103]
Case Law Cited
Balaji v. ITO (1961) 43 ITR 393; Sardar Baldev Singh v. CIT,
Delhi & Ajmer [1961] 1 SCR 482 : 1960 SCC OnLine SC 147;
Navnit Lal C. Javeri v. K.K. Sen, Appellate Assistant Commissioner
of Income Tax, Bombay [1965] 1 SCR 909; Union of India and
Anr. Etc. Etc. v. A. Sanyasi Rao and Ors. Etc. Etc. [1996] 2 SCR
570 : (1996) 3 SCC 465; State of Madras v. V.G. Row [1952]
SCR 597 – relied on.
State of Tamil Nadu and Another v. P. Krishnamurthy and Others
[2006] 3 SCR 396 : (2006) 4 SCC 517; Mineral Area Development
Authority & Anr. v. M/s Steel Authority of India and Another
106 [2026] 8 S.C.R.
Supreme Court Reports
[2024] 7 SCR 1549 : (2024) 10 SCC 1; Union of India & Ors. v.
Bombay Tyre International Ltd. and Others [1984] 1 SCR 347 :
(1984) 1 SCC 467; M/s R.R. Engineering Co. v. Zila Parishad,
Bareilly and Anr. [1980] 3 SCR 1 : (1980) 3 SCC 330; Hingir-
Rampur Coal Co., Ltd. and Others v. State of Orissa and Others
[1961] 2 SCR 537 – referred to.
Ralla Ram v. Province of East Punjab, 1948 SCC Online
FC 9 – referred to.
List of Acts
Minerals (Other than Atomic and Hydro Carbons Energy Minerals)
Concession Rules, 2016; Constitution of India; Mines and Minerals
(Development and Regulation) Act, 1957; Mineral Conservation
and Development Rules, 2017; Mines and Minerals (Development
and Regulation) Act, 2015; Mineral (Auction) Rules, 2015; National
Mineral Exploration Trust Rules, 2015; Mines and Minerals
(Contribution to District Mineral Foundation) Rules, 2015; Mineral
Concession Development Rules, 1988.
List of Keywords
Explanations appended to Rule 38 of the 2016 Rules and Rule
45(8)(a) of the 2017 Rules; Levy provides for inclusion of royalty
and payments made towards DMF and NMET in the sale value;
Royalty; District Mineral Foundation-DMF; National Mineral
Exploration Trust-NMET; Component of the sale value; Computing
of the average sale price; Concept of ad valorem.
Case Arising From
CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.
733 of 2025
Under Article 32 of the Constitution of India
Appearances for Parties
Advs. for the Petitioner(s):
Dr. A. M. Singhvi, Balbir Singh, Shyam Divan, Sr. Advs. Mahesh
Agarwal, Ninad Laud, M S Ananth, Avishkar Singhvi, Ms. Aanchal
Mullick, Ms. Kamakshi Sehgal, Siddharth Seem, Ivo Dcosta,
Naman Tandon, Abhinav Agrawal, Piyush Bhardwaj, Shivam
Sengupta, Ms. Ishani Shekhar.
[2026] 8 S.C.R. 107
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
Advs. for the Respondent(s):
R Venkataramani, Attorney General for India, Tushar Mehta,
Solicitor General, Vikaramjeet Bannerjee, K. M. Nataraj, A.S.Gs.,
Sudarshan Lamba, Ms. Ameyvikrama Thanvi, Chitvan Singhal,
Abhishek Kumar Pandey, Raman Yadav, Kartikay Aggarwal, Ms.
Deboshree Mukherjee, Ms. Yamika Khanna, Ms. Hina Bhardwaj,
Vikash Kumar, P. V. Yogeswaran, Ms. Shailja Singh, Mrs. Prerna
Dhall, Ms. Rajnandani Kumari, Ambuj Swaroop, Kapil Katare,
Prashant Singh.
Judgment / Order of the Supreme Court
Judgment
K.V. Viswanathan, J.
INDEX*
A. SUMMARY OF FACTS: AN EARLIER ROUND IN THIS COURT ... 3
B. BRIEF OVERVIEW OF THE FACTS .......................................... 10
C. PLEADINGS AND CONTENTIONS ............................................ 15
i. PETITIONERS’ CASE ........................................................ 15
ii. RESPONSE OF THE UNION OF INDIA ........................... 28
D. QUESTION FOR CONSIDERATION .......................................... 43
E. ANALYSIS AND DISCUSSION .................................................. 44
F. MAINTAINABILITY AND ESTOPPEL ........................................ 44
G. CERTAIN FUNDAMENTAL PRINCIPLES ................................. 45
H. PRESUMPTION OF CONSTITUTIONALITY ............................. 46
I. LIBERAL CONSTRUCTION OF LEGISLATIVE ENTRIES ....... 47
J. NATURE OF ROYALTY .............................................................. 49
K. CONSIDERATION OF THE LEGAL PROVISIONS IN ISSUE 50
HEREIN .......................................................................................
L. MEASURE OF LEVY AND NATURE OF LEVY ........................ 53
M. MEASURE OF LEVY – AS AN ANTIDOTE TO CHECK 60
EVASION ....................................................................................
N. APPLICATION OF LAW TO THE FACTS .................................. 71
O. CONCLUSION ............................................................................. 81
* Ed. Note: Pagination as per the original Judgment.
108 [2026] 8 S.C.R.
Supreme Court Reports
1. The petitioners in the present writ petition are challenging the
constitutional validity of the Explanation appended to Rule 38 of the
Minerals (Other than Atomic and Hydro Carbons Energy Minerals)
Concession Rules, 2016 (hereinafter “the 2016 Rules”) as being ultra
vires Articles 14, 19(1)(g) of the Constitution of India and Section 9
of the Mines and Minerals (Development and Regulation) Act, 1957
(for short “the MMDR Act”) to the extent that the rule provides
for inclusion of payments made towards Royalty, District Mineral
Foundation (“DMF”) and National Mineral Exploration Trust (NMET”)
in the sale value. Equally, the Explanation to Rule 45(8)(a) of the
Mineral Conservation and Development Rules, 2017 (hereinafter
“the 2017 Rules”), which is in identical terms, is also challenged
on the same ground.
SUMMARY OF FACTS: AN EARLIER ROUND IN THIS COURT : -
2. The petitioners earlier filed a Writ Petition (C) No. 715 of 2024 calling
in question the validity of the impugned rules. A detailed judgment
was passed on 07.11.2024, and the writ petition was disposed of on
19.05.2025. During the course of hearing of the said writ petition, it
was noticed that when a situation with regard to non-deduction of
payments made towards Royalty, DMF and NMET from the value
of coal was provided for, the Central Government remedied the
situation. During the course of hearing, it was brought to the notice
of the Court that, on 06.04.2021, Ministry of Mines had constituted
a Committee for examining the issue and on 25.05.2021, a notice
was issued by the Committee inviting comments and suggestions
on this issue and pursuant thereto, a Report dated 31.01.2022 was
submitted by the Committee to the Ministry of Mines.
3. It was recorded in the said judgment dated 07.11.2024 that pursuant
to the aforesaid Report, a notice dated 25.05.2022 initiating public
consultation on amending the MMDR Act had also been issued.
The relevant portion of the notice reads as under: -
“1. Calculation of ASP: Removing the cascading
impact of royalty on royalty
(ii) A committee was constituted by the Ministry of Mines
under chairmanship by Shri Praveen Kumar, IAS (Retd.)
with members from Ministry of Mines, NITI Aayog,
Ministry of Steel, Indian Bureau of Mines (IBM) and
[2026] 8 S.C.R. 109
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
Indian Statistical Institute to examine the incidence of
double calculation of royalty. The committee concluded
that since the sale value already includes royalty, DMF
and NMET, the lessee pays royalty on royalty, DMF and
NMET. Due to this, there is an additional charge on the
miners under the current methodology.
(vi) Accordingly, it is proposed to (i) introduce new section
in the MMDR Act regarding ASP; (ii) the provision shall
specifically provide that ex-mine price for determination
of ASP shall exclude GST, export duty, royalty, DMF &
NMET & such other levies as may be prescribed; (iii)
the change will be applicable for all the MLs, whether
auctioned/ granted before or after the commencement of
the proposed MMDR Amendment Act, for the minerals
removed or consumed from the leased area after the
commencement of the said Act; and (iv) adoption of new
formula only for the future dues for existing MLs arising
after the amendment”
Since no action was thereafter taken, the matter was argued on merits.
4. This Court further observed that exclusion of payments made towards
royalty and contribution towards DMF and NMET for coal but not
for other minerals cannot be termed as arbitrary and unreasonable,
merely because the computation for one differs from the other in
certain aspects. This Court also observed that deference needs to
be shown to the law-making authorities in deciding how royalty must
be computed in respect of different mineral grades/concentrates.
5. Thereafter, what this Court observed is very crucial. This Court
observed that while different treatment of the two minerals may not
be in excess of the powers or domain of the respondents or the
differential treatment may not be in breach of any statutory provision,
the court cannot ignore or overlook the fact that the legislature itself
has acknowledged the anomaly in compounding of royalty for the
purpose of computation of Average Sale Price (hereinafter ‘ASP’).
This Court further observed that even the respondent-Union of India
had acknowledged that the differing mechanism for coal and other
minerals is not based on any fine distinction between the two, but
rather an anomaly in the 2016 Rules and 2017 Rules, and it is for
that reason that a Committee had been constituted to look into
110 [2026] 8 S.C.R.
Supreme Court Reports
the same and that the Committee had proposed amendments for
rectifying the same.
6. In view of this position, this Court pronounced its judgment in the Writ
Petition (C) No. 715 of 2024 with the following operative directions:-
“83. In view of the decisions referred to above, we may
only say that since the respondents herein are already
in seisin of the anomaly in computation of royalty and
the policy is being reconsidered on the grounds raised
by the petitioners herein, we do not say anything further
as regards the provisions in question other than what
we have observed. We clarify that this decision shall not
preclude the petitioners from challenging the final policy
decision that the respondents may take on completion
of the ongoing consultation process.
84. In view of the aforesaid, we grant the respondents
a period of 2-months from the date of pronouncement
of this judgment to conclude the public consultation
process undertaken for amending the MMDR Act initiated
pursuant to the Notice dated 25.05.2022 and take a final
decisive call in regard to the cascading impact of royalty
on royalty in the calculation of the ‘average sale price’
by virtue of the Explanation(s) to Rule 38 of the MCR,
2016 and Rule 45 of the MCDR, 2017.
85. The challenge to the validity of Explanation(s)
appended to Rule 38 of the MCR, 2016 and Rule 45 of
the MCDR, 2017 is answered accordingly.
86. The Registry shall notify this matter before an
appropriate Bench after a period of two months from
the date of pronouncement of this judgment to report
compliance of our directions.”
7. According to the petitioners, pursuant to the judgment dated
07.11.2024 in Writ Petition (C) No. 715 of 2024, a representation
was filed by them on 12.11.2024. This was followed up by filing I.A.
No. 22190 of 2025 before this Court on 24.01.2025. By an order of
03.02.2025, this Court directed the respondents to file a report or
an appropriate affidavit within two weeks pointing out the progress
in the matter subsequent to the pronouncement of the judgment.
[2026] 8 S.C.R. 111
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
8. According to the petitioners, an affidavit was filed on 21.02.2025
stating that the Department of Legal Affairs had concurred with the
proposal and the file was pending consideration before the Cabinet
Secretariat. A further order was made by this Court on 28.02.2025
granting one month’s time to the respondents to file an appropriate
report or decision taken on this aspect. Since no decision was
taken, on 05.04.2025, the petitioners filed an affidavit highlighting
the state of affairs. Pursuant thereto, a last opportunity was given
to the respondents by an order of 08.04.2025.
9. The Union of India filed an application seeking modification of order
dated 08.04.2025 stating that the Cabinet Secretariat would no
longer be preparing any proposal since it would be the concerned
Ministry itself which would be taking a decision and ultimately, on
17.05.2025, the Union of India filed an affidavit intimating its final
decision of not amending the rules as it would seriously impact the
revenue of the States.
10. By an order of 19.05.2025, this Court made an order expressly
granting liberty to the petitioners to raise a fresh challenge to
the decision not to amend, on all grounds available to them in
law. Paras 8 to 11 of the order dated 19.05.2025 are extracted
hereinbelow.
“8. Since, the Central Government has taken a policy
decision not to reconsider the Rule 38 of the MCR,
2016 and Rule 45 of the MCDR, 2017 respectively in
consonance with what fell from this Court in the impugned
judgment, there is no other option left for the petitioners
but to question the legality and validity of such decision
by filing a fresh petition before this Court.
9. We grant liberty to the petitioners to question the
decision taken by the Central Government on all grounds
available to them in law.
10. If according to the petitioners the decision which the
Central Government has taken and placed on record
is not in the spirit of the original judgment of this Court
dated 07-11-2024 they may raise such ground in their
fresh petition.
11. With the aforesaid liberty we close this matter.”
112 [2026] 8 S.C.R.
Supreme Court Reports
11. It must also be recalled that earlier in the main judgment of
07.11.2024, this Court had observed that since the respondents are
already in seisin of the anomaly in computation of royalty and the
policy is being reconsidered on the grounds raised by the petitioners
herein, this Court was not saying anything further as regards the
provisions in question other than what has been observed. This Court
also observed that the judgment of 07.11.2024 will not preclude
the petitioners from challenging the final policy decision that the
respondents may take. It is pursuant to the liberty granted that the
present petition has been filed.
BRIEF OVERVIEW OF THE FACTS: -
12. The principal contention raised is that the Explanation appended to
Rule 38 of the 2016 Rules and the Explanation appended to Rule
45(8)(a) of the 2017 Rules, both of which include the payments made
towards royalty, District Mineral Foundation (DMF) and National
Mineral Exploration Trust (NMET) as a component of the sale value,
is ultra vires Section 9 of the MMDR Act. The impugned Rules are
set out hereinunder:-
“38. Sale Value.- (2016 Rules)
Sale value is the gross amount payable by the purchaser
as indicated in the sale invoice where the sale transaction
is on an arms’ length basis and the price is the sole
consideration for the sale, excluding taxes, if any.
Explanation - For the purpose of computing sale
value no deduction from the gross amount will be
made in respect of royalty, payments to the District
Mineral Foundation and payments to the National
Mineral Exploration Trust.
45. Monthly and annual returns- (2017 Rules)
(8) In case of mining of minerals by the holder of a
mining lease, the –
(a) sale value is the gross amount payable by the
purchaser as indicated in the sale invoice, where
the sale transaction is on an arms’ length basis
and the price is the sole consideration for the
sale, excluding taxes, if any.
[2026] 8 S.C.R. 113
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
Explanation.- For the purpose of computing sale
value, no deduction from the gross amount shall be
made in respect of royalty, payments to the District
Mineral Foundation and payments to the National
Mineral Exploration Trust.”
13. The relevant sections and the Rules, which have a bearing in
deciding the controversy, are extracted hereunder:-
Section 9 of the MMDR Act
“9. Royalties in respect of mining leases.―
(1) The holder of a mining lease granted before the
commencement of this Act shall, notwithstanding
anything contained in the instrument of lease or in any
law in force at such commencement, 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 after such commencement,
at the rate for the time being specified in the Second
Schedule in respect of that mineral.
(2) The holder of a mining lease granted on or after
the commencement of this 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.
(2A) The holder of a mining lease, whether granted
before or after the commencement of the Mines and
Minerals (Regulation and Development) Amendment Act,
1972 shall not be liable to pay any royalty in respect of
any coal consumed by a workman engaged in a colliery
provided that such consumption by the workman does
not exceed one-third of a tonne per month.
(3) The Central Government may, by notification in the
Official Gazette, amend the Second Schedule so as
to enhance or reduce the rate at which royalty shall
be payable in respect of any mineral with effect from
such date as may be specified in the notification:
114 [2026] 8 S.C.R.
Supreme Court Reports
Provided that the Central Government shall not
enhance the rate of royalty in respect of any mineral
more than once during any period of three years.”
14. Entry 24 of the Second Schedule
“Second Schedule
24. Iron Ore: Fifteen per cent. of
(CLO, Lumps, fines and average sale price on
concentrates all grades)” ad valorem basis.
The main argument is that as per Section 9(2) read with Entry 24 of
the Second Schedule, what is prescribed is that the rate of royalty
will be 15% of average sale price on ad valorem basis. Ad valorem,
the petitioners contend, means according to value.
15. Rule 42 of the 2016 Rules reads as under:
“42. Computation of average sale price.
(1) The ex-mine price shall be used to compute average
sale price of mineral grade/concentrate.
(2) The ex-mine price of mineral grade or concentrate
shall be:
(a) where export has occurred, the free-on-board (F.O.B)
price of the mineral less the actual expenditure incurred
beyond the mining lease area towards transportation
charges by road, loading and unloading charges, railway
freight (if applicable), port handling charges/export duty,
charges for sampling and analysis, rent for the plot at
the Stocking yard, handling charges in port, charges for
stevedoring and trimming, any other incidental charges
incurred outside the mining lease area as notified by
the Indian Bureau of Mines from time-to-time, divided
by the total quantity exported.
(b) where domestic sale has occurred, sale value
of the mineral less the actual expenditure incurred
towards transportation, loading, unloading, rent for
the plot at the stocking yard, charges for sampling
and analysis and any other charges beyond mining
lease area as notified by the Indian Bureau of Mines
[2026] 8 S.C.R. 115
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
from time-to-time, divided by the total quantity
sold.
(c) where sale has occurred, between related parties
and/or where the sale is not on arms’ length basis,
then such sale shall not be recognized as a sale for
the purpose of this rule and in such case, sub-clause
(d) shall be applicable.
(d) where sale has not occurred, the average sale price
published monthly by the Indian Bureau of Mines for that
mineral grade/concentrate for a particular State:
Provided that if for a particular mineral grade/concentrate,
the information for a State for a particular month is not
published by the Indian Bureau of Mines, the last available
information published for that mineral grade/concentrate
for that particular State by the Indian Bureau of Mines
in the last six months previous to the reporting month
shall be used, failing which the latest information for All
India for the mineral grade/concentrate, shall be used.
(3) The average sale price of any mineral grade/
concentrate in respect of a month shall be the
weighted average of the ex-mine prices of the non-
captive mines, and any merchant sale done by the
captive mines, computed in accordance with the
above provisions, the weight being the quantity
despatched from the mining lease area of mineral
grade/concentrate relevant to each ex-mine price.”
16. What is contended is that, by virtue of a subordinate legislation,
an explanation is appended in a manner as to deviate from the
concept of ad valorem by loading to the ad valorem, payments
made towards the royalty, DMF and NMET already paid. This, the
petitioners contend, is ultra vires Section 9 of the MMDR Act. The
further argument is that revision can only be once every three years.
17. The stand of the Union of India is that this is a measure adopted
since there was price manipulation in iron ore. Hence, to save
revenue, this method was adopted. They also articulated the reason
why coal stands on a different footing by highlighting the difference
in the price fixation mechanism.
116 [2026] 8 S.C.R.
Supreme Court Reports
PLEADINGS AND CONTENTIONS: -
18. We have heard Dr. Abhishek Manu Singhvi, Mr. Balbir Singh,
learned Senior Counsels and Mr. Ninad Laud, learned Counsel for
the petitioners and Mr. R. Venkataramani, learned Attorney General
for India on behalf of the respondents.
PETITIONERS’ CASE
19. To understand the controversy, a brief enumeration of the averments
in the pleadings filed by the parties as well as the contentions made
by them are adverted to. Petitioner No. 1 is a Company holding a
mining lease in the State of Karnataka for the purpose of captive
production of pig iron at its manufacturing facilities in Koppal and Hiriyur
in Karnataka. Petitioner No. 2 is a shareholder of Petitioner No. 1.
20. Pursuant to the amendment notified on 27.03.2015 to the Mines and
Minerals (Development and Regulation) Act, 2015, auction was made
the basis of allotment of mines. The Mineral (Auction) Rules, 2015
(hereinafter “the Auction Rules 2015) were also notified. Petitioner
No. 1 secured a mining lease after successfully participating in the
auction.
21. Rules 8, 9 and 13 of the Auction Rules 2015, read as under:-
“8. Bidding parameters: - (1) The State Government
shall specify in the tender document the minimum
percentage of the value of mineral despatched, which
shall be known as the “reserve price.”
(2) The value of mineral despatched shall be an
amount equal to the product of,-
(i) Mineral despatched in a month; and
(ii) Sale price of the mineral (grade-wise and
State-wise) as published by Indian Bureau of
Mines for such month of despatch.
(3) The bidders shall quote, as per the bidding
parameter, for the purpose of payment to the State
Government, a percentage of value of mineral
despatched equal to or above the reserve price
and the successful bidder shall pay to the State
Government, an amount equal to the product of,-
[2026] 8 S.C.R. 117
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
(i) percentage so quoted; and
(ii) value of mineral despatched.
(4) Where an area is being auctioned for more than one
mineral, the percentage of value of mineral desptched
as quoted by the successful bidder under sub-rule (3)
shall be applicable for the purpose of payment to the
State Government in respect of each such mineral.
(5) If subsequent to grant of a mining lease, one or more
new minerals are discovered, the percentage of value of
mineral despatched as quoted by the successful bidder
under sub-rule (3) shall be applicable for the purpose
of payment to the State Government in respect of each
such mineral.
9. Bidding Process.-
(1)…..
(2)…..
(3)…..
(4) The auction shall be an ascending forward online
electronic auction and shall comprise of the following
rounds, namely:-
(a) First Round of Auction to be held in the following
manner, namely:-
(i) the bidders shall submit-
(A). a technical bid comprising amongst others,
documentary evidence to confirm eligibility as
per the provisions of the Act and the rules
made thereunder to participate in the auction,
bid security and such other documents and
payments as may be specified in the tender
document; and
(B) An initial price offer which shall be a
percentage of value of mineral despatched;
(ii) only those bidders who are found to be eligible
in accordance with the terms and conditions of
118 [2026] 8 S.C.R.
Supreme Court Reports
eligibility specified in rule 6 and whose initial
price offer is equal to or greater than the reserve
price, referred to as “technically qualified bidders”,
shall be considered for the second round of
auction;
(iii) the highest initial price offer amongst the
technically qualified bidders shall be the floor price
for the second round of online electronic auction;
(iv)…..
(b) Second Round of Auction to be held in the following
manner, namely:-
(i) the qualified bidders may submit their final price
offer which shall be a percentage of value of mineral
despatched and greater than the floor price:
Provided that the final price offer may be revised till
the conclusion of the auction as per the technical
specifications of the auction platform;
(ii) The auction process shall be annulled if none of the
qualified bidders submits a final price offer on the online
electronic auction platform;
(iii) the qualified bidder who submits the highest final
price offer shall be declared as the “preferred bidder”
immediately on conclusion of the auction.
13. Payments under mining lease.—(1) The lessee
shall pay royalties and dead rent to the State
Government as specified in the Act and the rules
made thereunder.
(2) The lessee shall pay the applicable amount
quoted under rule 8 to the State Government on a
monthly basis.
(3) The lessee shall contribute such amounts as may
be required under the Act to-
(a) the designated account of the National Mineral
Exploration Trust; and
[2026] 8 S.C.R. 119
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
(b) the designated account of the District Mineral
Foundation.
(4) The lessee shall also pay such other amounts as
may be required under any law for the time being in
force to the concerned authorities.”
22. In exercise of powers under Sections 9C(2), (3), (4) and Section 13
of the MMDR Act, the Union of India notified the National Mineral
Exploration Trust Rules, 2015 (“the NMET Rules”) which dealt with
the manner of deposit and disbursal of the funds collected under the
NMET. Under Rule 7 of the NMET Rules, the holder of mining lease
or prospecting license-cum-mining lease shall pay to the Trust a sum
equivalent to two per cent of the Royalty under sub-section (4) of
Section 9C of the MMDR Act by depositing the same in the Public
Account of the State under the Head booked for the said purpose.
23. On 17.09.2015, in exercise of powers under Section 9B (5) and (6)
of the MMDR Act, Respondent No. 1-Union of India notified the
Mines and Minerals (Contribution to District Mineral Foundation)
Rules, 2015 (“the DMF Rules”). Rule 2(a) of the DMF Rules states
that every holder of a mining lease or a prospecting license-cum-
mining lease shall, in addition to the royalty, pay to the District
Mineral Foundation of the District in which the mining operations
are carried on, an amount at the rate of ten percent of the royalty
paid in terms of the Second Schedule.
24. As set out hereinabove, royalty under the Second Schedule for iron
ore was 15% of the Average Sale Price (ASP) on ad valorem basis
and that was payable under Section 9 of the MMDR Act. The net
result was, while there was a levy of 15% of ASP on ad valorem
basis towards royalty, there was a levy of 2% of the royalty towards
NMET, and there was a levy of 10% of the royalty towards DMF.
25. Sale value in the manner provided under Rule 42(2) of the 2016
Rules and Rule 45(8) of the 2017 Rules was to be the basis for
the ex-mine price. Based on the ex-mine price, average sale price
is arrived at in the manner provided under Rule 42(3) of the 2016
Rules. The petitioners are aggrieved by the fact that the explanation
appended to both Rule 38 and Rule 45(8)(a), expressly prescribed
that no deduction from the gross amount shall be made in respect
of payments made towards royalty, payments to the DMF and
payments to the NMET.
120 [2026] 8 S.C.R.
Supreme Court Reports
26. As pointed out earlier, under Entry 24 of the Second Schedule, the
royalty was 15% of the average sale price on ad valorem basis.
Rule 42 of the 2016 Rules deals with the method of computation
of average sale price. Rule 42 of the 2016 Rules has already been
set out.
27. It will be noticed that under Rule 42(3) of the 2016 Rules, the average
sale price of any mineral grade/concentrate in respect of a month
was the weighted average of the ex-mine prices of the non-captive
mines, computed in accordance with Rule 42(2), the weight being
the quantity despatched from the mining lease area of mineral grade/
concentrate relevant to each ex-mine price.
28. Rule 43 of the 2016 Rules reads as under:-
“43. Publication of average sale price.- The Indian
Bureau of Mines shall publish the average sale price of
each mineral grade/concentrate removed from the mining
leases in a month in a State within 45 days from the due
date for filing the monthly returns as required under the
Mineral Concession Development Rules, 1988.”
Under Rule 43 of the 2016 Rules, the Indian Bureau of Mines was
to publish the ASP of each mineral grade/concentrate removed
from the mining leases in a month in a State within 45 days from
the due date for filing the monthly returns as required under the
Mineral Concession Development Rules, 1988. Hence, post the
filing of the return and within 45 days, the Indian Bureau of Mines
notifies the ASP. It is while computing the ASP that the sale value
factor comes in and as a component of the sale value, payments
made towards royalty, DMF and NMET are not deducted which has
resulted in the petitioners being aggrieved.
29. Under Rule 45 of the 2017 Rules, monthly and annual returns are
obliged to be filed by the lessee. The monthly return was to be filed
online before the 10th of every month. The return was to be in the
prescribed Form. Amongst the other things required in the Form is
the extent of iron ore despatched during the month.
30. According to the petitioners, the impugned provisions result in the
payment of royalty on royalty and further it results in payment of
royalty, DMF and NMET twice in case of auctioned mines, that is,
once as part of auction premium and a second time upon removal
[2026] 8 S.C.R. 121
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
of the minerals. According to the petitioners, under Rule 8 of the
Auction Rules, 2015, a reserve price is to be fixed. Under Rule 8(2),
the value of mineral despatched was to be an amount equal to the
product of the mineral despatched in a month and sale price of the
mineral (grade-wise and State-wise) as published by the Indian
Bureau of Mines for such month of despatch and under Rule 8(3), the
bidder was to quote, as per the bidding parameter, for the purpose of
payment to the State Government, a percentage of value of mineral
despatched equal to or above the reserve price. They contend that as
part of the auction premium also, the ASP notified by Indian Bureau
of Mines, comes into operation. According to them, if the ASP is to
be loaded with the amount paid towards royalty, DMF and NMET,
it tantamounts to double payment at the stage of computation of
premium. Further, at the time of removal of mineral also they are
obliged to pay royalty, DMF and NMET, which in turn, is based on
the average sale price. Here again, they contend that the failure to
deduct royalty, DMF and NMET constitutes payment of royalty on
royalty with a cascading effect. Petitioners contend that it amounts
to increasing the rate of royalty as it leads to a compounding effect
on payment of royalty.
31. According to the petitioners, Rule 38 of the 2016 Rules and Rule
45 of the 2017 Rules, more particularly, the explanations thereof,
which permit this cascading effect, are ultra vires Section 9 of the
MMDR Act, since Section 9 read with the Schedule is based on
the concept of ad valorem. According to them, the plain meaning of
ad valorem is according to value and there cannot be any artificial
addition to the value.
32. Pointing to Entry 10 of the Second Schedule dealing with Coal, they
contend that for Coal under the Notes appended to the Second
Schedule with effect from 14th July, 2020, the cascading effect which
was prevailing for the said product was rectified by introducing the
following clause.
“Notes:
Explanation:- For the purposes of this sub-entry.-
(i)………..
(ii) Actual price means the sale invoice value of
coal, net of statutory dues including taxes, levies,
122 [2026] 8 S.C.R.
Supreme Court Reports
royalty, contribution to National Mineral Exploration
Trust and District Mineral Foundation.”
33. According to the petitioners, the anomaly was rectified, vis-à-vis
Coal with effect from 14.07.2020. The petitioners refer to the notice
for public consultation issued on 25.05.2022 where the anomaly
of cascading effect was highlighted and how a proposed clause
excluding the components was suggested. Thereafter, the petitioners
point to the writ petition filed being Writ Petition No. 715 of 2024
which has already been discussed hereinabove. The petitioners
also adverted to the judgment of this Court dated 07.11.2024. The
petitioners contend that based on the judgment of 07.11.2024, they
filed a representation on 12.11.2024 and consequential proceedings
in this Court.
34. The petitioners contend that the explanations appended to Rule
38 of the 2016 Rules and Rule 45(8)(a) of the 2017 Rules are
ultra vires the MMDR Act, violative of Articles 14 & 19(1)(g) of the
Constitution of India as being manifestly arbitrary. The petitioners
contend that while all conceivable expenditure is excluded yet the
impugned explanations add payments made towards royalty, DMF
and NMET contributions. They contend that, being expenses, it
ought not to be part of the average sale price. The petitioners seek
to demonstrate by the following chart appended to the writ petition
about the purported cascading effect in the levy:-
Description Existing If anomaly Difference
(with is (Excess
anomaly) removed payment)
Average sale price = 119.80 100 19.8
Ex-mine (100)+ Royalty (15)+
DMF (4.5)+ NMET (0.3)
Applicable Amount/Premium 119.80 100 19.8
(assuming 100%)
Royalty, DMF, NMET to be 20.13 16.8 3.33
paid by lease holders on
Average sale price including
Ex-mine + Royalty + DMF +
NMET
Premium + Royalty + DMF 139.93 116.8 23.13
+ NMET
[2026] 8 S.C.R. 123
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
35. The petitioners further contend that under the proviso to Section 9(3)
of the MMDR Act, a fixed royalty is contemplated for three years
whereas by this process there is change every month.
36. Petitioners also referred to the recommendations of Shri Praveen
Kumar and Dr. Aruna Sharma Committees which, according to
them, recommended the amendment to remove the purported
cascading effect. Aggrieved with the inaction of the Union and by
virtue of the liberty granted by this Court, the present writ petition
has been filed.
RESPONSE OF THE UNION OF INDIA: -
37. The writ petition was vehemently opposed by the Union of India
represented by the learned Attorney General. The principal argument
on maintainability is that there is no violation of fundamental right
either under Article 14 or Article 19(1)(g). It is also contended that
the provisions were not ultra vires the provisions of the MMDR
Act. It was submitted that Section 9 of the MMDR Act read with
the Second Schedule authorised the fixation of the rates of royalty
as well as the method of computation of royalty and manner of
payment of royalty.
38. Elaborating further, it is contended that under the Second Schedule,
the royalty on minerals is levied either on ad valorem basis or on
tonnage basis. The Union of India contends that the rate of royalty
and the method of computation is different from mineral to mineral.
It is contended that fixation of rates of royalty is covered within
the scope of “regulation of mines and mineral development”. It is
submitted that the object of empowering the Central Government to
specify rates of royalty for major minerals was to ensure a certain
level of uniformity in mineral prices in view of the domestic and
international market.
39. The judgment in Writ Petition (C) No. 715 of 2024 was cited by the
Union of India in their support. It is contended that pursuant to the
judgment of this Court dated 07.11.2024 in Writ Petition (C) No. 715
of 2024, extensive consultation process was undertaken and for
good and valid grounds, it was decided not to amend the Act and
the Rules as they now stand. It is submitted that there is nothing
capricious or irrational about the impugned rules warranting judicial
review under the doctrine of manifest arbitrariness.
124 [2026] 8 S.C.R.
Supreme Court Reports
40. According to the Union of India, the impugned rules simply explain
the mechanism under which the sale value is to be calculated by
taking into account all the payments that a leaseholder has to make
to the government. It is submitted that comparison of methodologies
of calculation of royalty for different minerals and to make a point
of discrimination is completely untenable as for some minerals, the
levy is on tonnage basis; some are based on international prices
and some are on ASP arrived on the basis of returns. Even for the
same mineral, there are different methodologies.
41. The Union submitted that comparison with coal was completely
unjustified. It was submitted that there was monopoly in coal
production by Coal India Limited and Singareni Collieries Company
Limited. Unlike coal, in iron ore, various small and large private
sector miners operate in the market. This necessitated the evolution
of a mechanism like ASP for calculation of royalty to deal with the
menace of under-invoicing.
42. The Union of India contended that for auction of coal blocks for
commercial mining, from 2020, royalty was to be calculated on
notional price or the actual price of coal whichever is higher. The
Union of India contends that notional price is arrived from the
National Coal Index [NCI]. Elaborating further, it was contended
that the NCI is a price index combining the prices of coal from three
sales channels:
i) notified prices of Coal India Limited and Singareni Collieries
Company Limited (both Public Sector Undertakings);
ii) auction prices of Coal India Limited and Singareni Collieries
Company Limited; and
iii) import prices.
It was contended that the NCI price was adopted to check the issue
of under-invoicing when coal production started from commercial
mines. The Union of India contended that under Article 14, only
equals ought to be treated equally and not unequals equally and
that there is no violation of Article 14 by treating coal and iron ore
differently, in the manner of levy.
43. It is further contended that laws relating to economic activity should
be viewed with greater latitude and crudities and inequities in
complicated experimental economic legislation are bound to exist and
[2026] 8 S.C.R. 125
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
that cannot be a ground to strike it down. It is contended that there
must be free play in the joints to experiment in the economic policy.
44. The Union of India contends that ASP is dependent upon market
forces and is not decided by the government. In fact, it is contended
that ASP is calculated based on the data given by the miners. It is
denied that there is continuous increase in royalty on a month-to-
month basis, as according to the Union, the ASP of each month
is separately compiled and there is no impact of ASP of previous
month in the ASP of the following month.
45. Disputing the chart handed over by the petitioners, the learned
Attorney General, in turn, relied on the following chart:
“1…..
The correct representation of computation of ASP will
be as follows:
Scenario/ Basis for Total levies Effective Excess
Month calculating payable rate of Payment
royalty [16.95% of royalty, DMF
(ASP) the ASP, and NMET
i.e., royalty payment on
15% of the Mineral
ASP + Value
DMF (10%
of 15%)
= 1.5% +
NMET (3%
of 15%) =
0.45%]
Jan. 2026 Rs.100.00 Rs.16.95 16.95% No
(Actual/ex
mine price)
Feb. 2026 Rs.105.00 Rs.17.80 16.95% No
(Actual ex
mine price)
Mar. 2026 Rs.98.00 Rs.16.61 16.95% No
(Actual ex
mine price)
Mar. 2027 Rs.110.00 Rs.18.65 16.95% No
(Actual ex
mine price)
2. ASP for each month is determined based on returns
for the said month. Previous month ASP is not carried
126 [2026] 8 S.C.R.
Supreme Court Reports
forward. Thus, in the above scenarios, ASP of Month
of Feb., 2026 is different from ASP for month of Jan.,
2026 and depends on market price on which the mineral
is sold.
● Each month’s ASP is derived from a fresh,
independently declared ex-mine price.
● The effective statutory rate remains constant.
● There is no mathematical mechanism by which
levies paid in one month influence the base of the
next month.
Hence, compounding or cascading is impossible.”
46. It is submitted that policy decisions ought not to be lightly interfered
with. Dealing with the Committees headed by Shri Praveen Kumar and
Dr. Aruna Sharma, it was contended that they are recommendatory
in nature and cannot have any binding force.
47. Contending that there is price manipulation and that lessees are keen
to revise the calculation of ASP to reduce the burden of premium
which they had quoted in the auction voluntarily, it is submitted that
since the lease premium is a percentage of ASP and the premium
amounts are significant, there have been instances of deliberate
manipulation.
48. An additional affidavit dated 02.02.2026 has been filed explaining
the evolution of the royalty regime since inception. In the said
affidavit, elaborating on the concept of ASP, it is submitted that
it was a mechanism introduced to address the mischief/issue of
under-invoicing of mineral sales by lessees and to arrive at true
sale value of the mineral.
49. It is submitted that instances have emerged where even under
the regime of the 2016 Rules, miners were trying to reduce the
sale value in an attempt to lower the ASP. According to the Union,
this undermined the statutory scheme of royalty and was causing
substantial loss to the exchequer.
50. Dealing with the cases of States of Orissa and Karnataka and the
manipulation of ASP of iron ore by the lessees during the period
between August, 2022-January, 2023, a note was appended to the
affidavit. The following extract from the note is significant: -
[2026] 8 S.C.R. 127
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
“While calculating the ASP of Iron ore in certain
grades for the Month of August-22 to January-23,
it was observed that ASP was considerably lower
compared to the previous month during few
consecutive months, despite of the fact that ex-
mine price reported by the individual mine was
almost at the same level that of previous month.
An analysis of despatches was made by the IBM
based on the last 6 months data from August-22
to January-23 and revealed that there is a drastic
change in pattern of the production and despatches
by some of the lease holders during last 6 months.
This may be probably due to some malpractices
adopted by some unscrupulous miners. Miners who
have reported higher ex-mine price in the previous
month has made no despatches in the subsequent
months that distorted/lowered the monthly ASP as
published by IBM. Based on the analysis following
has been observed:
A. Odisha
1. ASP for Grade 51% to 55% Fe lumps
The ASP of grade 51% to 55% Fe lumps was lowered by
43% in the month of September-22 against August-22;
ASP was again slightly increased in the month of
October-22 and November-22 and again falls down in
the month of December-22 resulting about 50% fall in
ASP from August 22. On analysing the despatches
and EMP data, it was observed that the two mines
those have reported the highest ex-mine price in
the month of August-22 with about 25% of despatch
(each mine) are not despatching or despatching very
less quantity in the subsequent months; at the same
time the mine which have reported lowest EMP in
the month of August-22 increased its despatches
from less than 50% in August-22 to almost 100% in
December-22, which distorted and decreased the
ASP from August 22 to January 23 by approximately
50%. The graph and Table depicting the changes in,
EMP, Despatch Quantity and ASP is given as below:
128 [2026] 8 S.C.R.
Supreme Court Reports
Grade wise despatch and ex-mine price from August
22 to January 23
Name of Mine Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23
(Mine Code)
Ex- Des- Ex- Des- Ex- Des- Ex- Des- Ex- Des- Ex- Des-
Mine patch Mine patch Mine patch Mine patch Mine patch Mine patch
Price Price Price Price Price Price
BHANJPALI 3043 738 3400 403 3372 829
(30ORI13043)
NUAGAON1 3100 700 2600 1974 2600 24
(40ORI13050)
RAIKELA 1459 1246 1232 9357 1287 12396 1233 5998 1346 17865 1200 4081
& TANTRA
(30ORI13035)
B. Karnataka
1. Grade 45% Fe to 51% Fe Lumps
The ASP of grade 45% to 51% Fe lumps was down by
63% in the month of September 22 as compared to the
August 22 and 33% in the month of November-22 as
compared to October-22. On analysis, it was observed
that in the month of September-22 four mines have
reported despatches and the main reasons for
lowering of ASP was changes in reporting pattern
of Narayana Iron Ore Mine (30KAR03188) mines of
JSW. Being a Non-Captive Mine and as nature of use
is Captive Consumption, Narayana Iron Ore Mine
(30KAR03188) mines of JSW have reported about
80% (42237t) of total despatches in this grade with
applicable IBM published price as per rule 43 of
[2026] 8 S.C.R. 129
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
MCR 2016 i.e. ASP of July 2022 during the month.
i.e. Rs 771/t, whereas, in the month of August when
applicable ASP was Rs. 1831/t the same mine had
reported only 226 tons of despatches. Secondly,
the Haddinapade Mines reported an EMP of 2243
with 93% despatches reported nil despatches in the
month of September-22. Further, Narayana Iron Ore
Mine (30KAR03188) mines of JSW reported an EMP
of Rs. 2215/t with a despatch of 55% in the month
of October-22, however, reported nil despatches in
the month of November-22. The graph and Table
depicting the changes in ASP and despatches is
given as below:
Grade wise despatch and ex-mine price from August
22 to January 23
Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23
Name of Mine (Mine Ex- Ex- Ex- Ex- Ex- Ex-
Code) Des- Des- Des- Des- Des- Des-
Mine Mine Mine Mine Mine Mine
patch patch patch patch patch patch
Price Price Price Price Price Price
DINDADAHALLI
FE ML 2658
1198 1860 1568 8070 1314 5434 1745 2636
26.35 ACRES
(30KAR07034)
DONIMALAI5320H
30KAR03113 690 4000 741 32000
(30KAR03113)
HADDINAPADE
2243 3000 1179 5914 1179 6086 1121 12000 1078 16392 1078 3176
(30KAR03156)
HARGINADONA
846 419 894 171 894 420 890 9097 890 49
(30KAR03133)
130 [2026] 8 S.C.R.
Supreme Court Reports
KAREKURCHI (ML
890 890 14973
2028) (40KAR19021)
NARAYANA
IRON ORE MINE 1837 226 771 42237 2215 9799
(30KAR03188)
Sankalapuram 188
1745 6000
AC(30KAR03065)
Smt. Susheelamma
1800 4000
mine(40KAR07023)
Conclusion
Based on the above it is concluded that in most of
the cases the ASP’s as calculated based on weighted
average of EMP’s, where despatched quantity is taken
as the weight. However, at some instances the change
in calculated ASP’s is significant and reason for the
same is a drastic change in the despatched pattern
by the individual mines, where few of the mines
have quoted the lowest EMP’s in one month and had
suddenly increased its despatches in another month.
Secondly, at some instances few of the mines have
quote the higher ex-mine price in one month but have
either reduced the despatched quantity or made no
despatches in subsequent months. In both the cases it
lowers the ASPs of that month or subsequent months
in different grades and for different States.”
Similar trend has been demonstrated for other grades of iron ore
in the State of Orissa and similar trend has been noticed in other
grades of iron ore in the State of Karnataka also.
51. It is contended by taking the example of the two States that where
the average of the ex-mine price [EMP] was low, higher despatches
were shown and where higher EMP was shown, reduced despatch
quantity was shown. The idea, according to the Union of India, was
to reduce the ASP on both counts in different grades of iron for
different sets.
52. It is vehemently contended that regulatory interventions squarely
attracted the provisions to suppress the mischief and advance the
remedy and to arrive at the fair value of the mineral. The Union
of India further contended that the petitioners are estopped from
challenging since they have participated in the auction with full
[2026] 8 S.C.R. 131
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
notice. It is also submitted that the rule is very clear and for any
future auction also the parties are put on notice.
53. Dealing with the estimated loss for the State Governments in case
the explanations are struck down, the Union of India, in its counter
affidavit, dated 25.11.2025 avers as follows: -
“65. That it is submitted that challenge to the Rule that
defines sale value has a larger implication in the auction
regime as currently more than 585 mineral blocks
have been successfully auctioned in the Country after
introduction of auction for mineral blocks in 2015 and
the basis for calculation of reserve price is the ASP.
It is further submitted that the Rules sought to be
impugned, is considered, the same shall have wide
ramifications on the mineral blocks already auctioned
and would tantamount to change in the conditions of
the tender(s) pursuant to which the successful miners
have got the mines. Such change in measure of royalty
and auction premium are as essential components
of auction. Those who participated in auction and
decided to quote low auction premium considering the
explanation to Rule 38 of MCR 2016 would claim that
auction parameters have been changed post-auction
and would allege undue enrichment and unfair benefit
to the preferred/successful bidder. Successful bidders
for all the blocks auctioned are selected based on the
existing definition of sale value.
66. Applying changes on existing non-auctioned
and auctioned mining lease would result in lower
royalty and auction premium payable to States.
The committee that suggested changes regarding
royalty on royalty calculated that for an ad valorem
royalty rate of 15%, there would be reduction of
State revenue to an extent of 15 to 17%. Since, 2015,
more than 585 mineral blocks have been auctioned.
The estimated loss to the State Government due
to revenue reduction would run into lakhs of crore
rupees and there would be commensurate benefit
to the existing lease holders.
132 [2026] 8 S.C.R.
Supreme Court Reports
67. It is stated that the Answering Respondent had
calculated a loss of around Rs.1.94 to 2.20 lakh crore
over the next 50 years, i.e., around Rs. 4000 crore
per year for just 149 auctioned MLs (auctioned till
April, 2022).
68. It is submitted that during FY 2023-24, the iron ore
production in the country was 277 million tonnes out of
which the share of auctioned mines was 66 million tonnes
(39 working mines) and 211 million tonnes was produced
from non-auctioned mines (140 working mines). The total
value of 277 million tonnes of iron ore produced in the
country was approximately Rs. 1 lakh crore.
72. It is submitted that the total loss of revenue
to the State Governments based on FY 2023-24
production data would be approximately Rs. 6,200
crore per year. This loss would accrue each year for
the entire lease period of 50 years. Thus, the total
loss to the State Governments if both the production
and prices remain at FY 2023-24 level, would be more
than Rs. 3 lakh crore. Further, this loss is only for
mineral iron ore. If other minerals are also taken into
consideration then the loss would increase further.
73. it is submitted that with passage of time, more number
of auctioned mines will come into production and non-
auctioned mines would keep expiring. Therefore, the
share of production of iron ore from auctioned mines
would increase substantially in the coming years. The
Central Government has envisaged a production target
of 450 million tonnes of iron ore in FY 2029-30 in line
with the requirement of the Steel industry as per the
National Steel Policy, 2017.
74. Even if it is assumed that the prices of iron ore remain
constant at 2023-24 levels, the value of 450 million tonnes
of iron ore produced in FY 2029-30 would be around
1.6 lakh crores. It may be assumed that the share of
production of iron ore from non-auctioned mines would
be 250 million tonnes in 2029-30 and remaining 200
million tonnes would be produced from auctioned mines.
[2026] 8 S.C.R. 133
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
76. Therefore, the total loss of revenue based
on estimated production in FY 2029-30 based on
2023-24 prices would be approximately Rs. 14,000
per year just for iron ore alone. This loss when
extrapolated over the lease period of 50 years
would be approximately Rs. 7 lakh crore. This
amount would obviously increase with increase in
operationalization of auctioned mines and increase in
value of minerals and their production. Further, even
other minerals are also taken into consideration, as
the rules applies to all minerals, the loss would be
in lakhs of crores over the lease period.”
54. The petitioners, in their rejoinder affidavit dated 06.12.2025, while
disputing the contentions of the Union, advert to the following chart
to demonstrate how the existing method of computation of ASP
under the impugned rules is resulting in a cascading impact on the
payments of royalty by enhancing the rate of royalty every month: -
Effective
Total Rate of Excess
Basis for levies royalty, DMF Payment
Scenario Calculating Payable and NMET (occasioned
Royalty (ASP) (16.95% of payment on due to the
the ASP) the Mineral anomaly)
Value
Rs. 100/-
Ideal Scenario
(Actual Rs. 16.95 16.95% Rs. 0.00
(If no anomaly)
ex-mine price)
Rs. 116.95 / + 2.87
Scenario with
(ex-mine price Rs. 19.82 19.82 % (Immediate
anomaly
+ levies) Inflation)
Rs. 119.82
Cascading + 3.35
(Value +
Impact Rs. 20.30 20.30% (Compounding
Month 1
(Month 2) starts)
levies)
Rs. 120.30
Cascading + 3.44
(Value +
Impact Rs. 20.39 20.39% (Further
Month 2
(Month 3) Inflation)
levies)
True Value of Mineral (Ex-Mine Price): Rs.100.00
Total Statutory Levies: 16.95% (Royalty 15% + DMF 1.5% + NMET
0.45%)
134 [2026] 8 S.C.R.
Supreme Court Reports
QUESTION FOR CONSIDERATION: -
55. In the above background, the question that arises for consideration
is whether the explanations appended to Rule 38 of the 2016 Rules
and Rule 45(8)(a) of the 2017 Rules are ultra vires Article 14 and
Article 19(1)(g) of the Constitution as well as Section 9 of the MMDR
Act to the extent that the levy provides for inclusion of royalty and
payments made towards DMF and NMET in the sale value?
ANALYSIS AND DISCUSSION: -
56. Before addressing the core issue, we need to clear the deck by
dealing with certain preliminary aspects which were argued before us.
MAINTAINABILITY AND ESTOPPEL : -
57. On behalf of the Union, it was feebly contended that the writ petition
is not maintainable since there was no violation of fundamental
rights under Articles 14 and 19(1)(g) of the Constitution of India.
It was argued that there was also no case made out about the
impugned provisions being ultra vires the MMDR Act. These are
not arguments on maintainability but are aspects dealing with the
merits of the matter.
58. In any event, the aspect of maintainability need not detain us any
further as this Court, in its order of 19.05.2025, set out hereinabove,
expressly reserved liberty for the petitioners to challenge the decision
of the government. This order of 19.05.2025 was made pursuant to
the judgment of 07.11.2024.
59. Equally, the argument that the petitioners are estopped from
challenging since they participated in the auction, does not appeal
to us. The petitioners are challenging the validity of certain Rules.
Irrespective of the fact that the Rule was on the Statute Book when
they participated in the auction, this Rule will operate for future
purposes also.
CERTAIN FUNDAMENTAL PRINCIPLES :-
60. While navigating the aspect of constitutional validity of explanation
to Rule 38 of the 2016 Rules and the explanation to Rule 45(8)
(a) of the 2017 Rules, we need to bear in mind certain basic legal
principles which will help us to resolve this conundrum.
[2026] 8 S.C.R. 135
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
PRESUMPTION OF CONSTITUTIONALITY :-
61. At the very outset is the fundamental principle - the presumption
of constitutionality. Today, it is beyond cavil that the presumption
of constitutionality not just applies to plenary legislation but also to
subordinate legislation. Of course, it is a rebuttable presumption and
the burden will be on the petitioners to displace the presumption.
62. In State of Tamil Nadu and Another vs. P. Krishnamurthy and
Others,1 R.V. Raveendran J., speaking for this Court, felicitously
set out the aspect of presumption of constitutionality in the context
of subordinate legislation thus: -
“15. There is a presumption in favour of constitutionality
or validity of a subordinate legislation and the burden
is upon him who attacks it to show that it is invalid.
It is also well recognised that a subordinate legislation
can be challenged under any of the following grounds:
(a) Lack of legislative competence to make the
subordinate legislation.
(b) Violation of fundamental rights guaranteed under the
Constitution of India.
(c) Violation of any provision of the Constitution of India.
(d) Failure to conform to the statute under which it is
made or exceeding the limits of authority conferred by
the enabling Act.
(e) Repugnancy to the laws of the land, that is, any
enactment.
(f) Manifest arbitrariness/unreasonableness (to an extent
where the court might well say that the legislature never
intended to give authority to make such rules).
16. The court considering the validity of a subordinate
legislation, will have to consider the nature, object and
scheme of the enabling Act, and also the area over
which power has been delegated under the Act and then
1 (2006) 4 SCC 517
136 [2026] 8 S.C.R.
Supreme Court Reports
decide whether the subordinate legislation conforms to
the parent statute. Where a rule is directly inconsistent
with a mandatory provision of the statute, then, of course,
the task of the court is simple and easy. But where the
contention is that the inconsistency or non-conformity
of the rule is not with reference to any specific provision
of the enabling Act, but with the object and scheme of
the parent Act, the court should proceed with caution
before declaring invalidity.”
LIBERAL CONSTRUCTION OF LEGISLATIVE ENTRIES :-
63. The second principle to be borne in mind is that legislative entries
which are fields demarcated under the Seventh Schedule are to
be liberally construed and would take in subsidiary and ancillary
matters. The MMDR Act, which is the enabling Statute under which
the Rules are enacted, is legislated pursuant to the field demarcated
under Entry 54 of List I. In Sardar Baldev Singh vs. CIT, Delhi &
Ajmer2, this Court held that legislative entries have to be read in a
very wide manner so as to include all subsidiary and ancillary matters.
64. In Mineral Area Development Authority & Anr. vs. M/s Steel
Authority of India and Another,3 this Court, while explaining how
the fixation of rates of royalty under Section 9 read with the Second
Schedule is covered within the scope of “Regulation of Mines and
Mineral Development” held as under: -
“144. The expression “regulation of mines” can be
understood in the backdrop of above discussion
to mean the management of both the process of
extracting minerals as well as the place where such
minerals will be extracted from sub-surface levels. The
MMDR Act gives shape and meaning to the expression
“regulation of mines and mineral development” through
its provisions and the subordinate rules. To that effect,
we find provisions under the MMDR Act pertaining to
prospecting or mining operations under lease or licence,
[MMDR Act, Section 4] restrictions on the grant of
2 1960 SCC OnLine SC 147/[1961] 1 SCR 482
3 (2024) 10 SCC 1
[2026] 8 S.C.R. 137
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
mineral concessions, [MMDR Act, Section 5] periods for
which prospecting licences [MMDR Act, Section 7] or
mining leases [MMDR Act, Section 8] may be granted
or renewed, and royalties in respect of mining leases.
[MMDR Act, Section 9] Chapter III deals with the
procedure for obtaining mineral concessions in respect
of land in which the minerals vest in the Government.
Chapter IV empowers the Government to frame rules
for regulating the grant of mineral concessions. Chapter
V deals with the special powers of Central Government
to undertake prospecting or mining operations in respect
of lands in which the minerals vest in the Government
of a State or any other person. [ MMDR Act, Section 17]
Thus, Chapters II to V of the MMDR Act invariably
deal with aspects regulating the place of extraction of
minerals and the process by which mines are worked.
These provisions govern aspects such as conceding land
to a person for carrying out mining operations (mining
concession) or granting licences for working mines and
winning minerals, which are integral to the concept of
“regulation of mines”. The fixation of rates of royalty
under Section 9 read with the Second Schedule is
also covered within the scope of “regulation of mines
and mineral development”.
65. Similarly in Union of India vs. A. Sanyasi Rao,4 this Court held
that the legislature has got a wide discretion to pick and choose
persons and objects for legislating and even the rates for taxation.
NATURE OF ROYALTY: -
66. In Mineral Area Development Authority (supra), dealing with the
nature of Royalty, this Court held as under: -
“133. There are major conceptual differences between
royalty and a tax:
(i) the proprietor charges royalty as a consideration for
parting with the right to win minerals, while a tax is an
imposition of a sovereign;
4 (1996) 3 SCC 465
138 [2026] 8 S.C.R.
Supreme Court Reports
(ii) royalty is paid in consideration of doing a particular
action, that is, extracting minerals from the soil, while
tax is generally levied with respect to a taxable event
determined by law; [Goodyear (India) Ltd. v. State of
Haryana, (1990) 2 SCC 71, para 27] and
(iii) royalty generally flows from the lease deed as
compared to tax which is imposed by authority of law.
134. Under the MMDR Act, the Central Government fixes
the rates of royalty, but it is still paid to the proprietor
by virtue of a mining lease. In case the minerals vest
in the government, the mining lease is signed between
the State Government (as lessor) and the lessee in
pursuance of Article 299 of the Constitution. Through the
mining lease, the Government parts with its exclusive
privilege over mineral rights. A consideration paid under a
contract to the State Government for acquiring exclusive
privileges cannot be termed as an impost. Since royalty
is a consideration paid by the lessee to the lessor under
a mining lease, it cannot be termed as an impost.
365.1 Royalty is not a tax. Royalty is a contractual
consideration paid by the mining lessee to the lessor for
enjoyment of Mineral rights. The liability to pay royalty
arises out of the contractual conditions of the mining
lease. The payments made to the government cannot be
deemed to be a tax merely because the statute provides
for their recovery as arrears.”
CONSIDERATION OF THE LEGAL PROVISIONS IN ISSUE
HEREIN : -
67. In the present matter, the real controversy is as to what would
be the base figure on which the percentage of Royalty would
be calculated. Payments made towards DMF, NMET are only a
percentage of Royalty. Under Section 9(3) read with Entry 24 of the
Second Schedule, Royalty on iron ore is levied at 15 per cent of
the average sale price on ad valorem basis. Rule 42, which deals
with average sale price, speaks of sale value. Rule 38 and Rule 45
of the 2016 Rules and the 2017 Rules respectively, deal with the
components that would go to constitute sale value. Explanations
[2026] 8 S.C.R. 139
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
have been appended to Rule 38 and 45(8)(a) respectively, stating
that the amounts paid towards Royalty, DMF and NMET would not
be excluded from the sale value.
68. Rules 8, 9 and 13 of the Auction Rules, 2015, which have been
discussed hereinabove, explained how the bidder bids the auction
premium as percentage of the average sale price.
69. As per Rules 8 & 9, the bidders submit a bid which is the percentage
of the value of the minerals despatched or also known as reserve
price. Definition of value of mineral despatched in Rule 8(2) says,
value of mineral despatched = mineral despatched x sale value.
70. So, both for payment of premium and for computation of Royalty,
DMF and NMET, average sale price is the base figure and in average
sale price, the “sale value” is an important component. The real
question is whether providing that amounts paid towards Royalty,
DMF and NMET will not be excluded from the sale value makes
the provision ultra vires the Constitution or the Statute.
71. Being a levy, albeit contractual, backed by statutory provisions,
the Rules of interpretation applicable to fiscal Statutes and the
principles set out thereon will definitely come into play. Granted
legislative competence, the legislature and the subordinate Rule
making authority will have full liberty to prescribe the manner of
levy, the determination of the rates and the method of computation
of the levy. The only requirement is that it should comport with the
constitutional provisions and the parent Statute and that the nexus
between the measure of levy and the levy ought to be reasonable
and the measure must have some relationship with the nature of
the levy.
MEASURE OF LEVY AND NATURE OF LEVY : -
72. In Mineral Area Development Authority (supra) this Court clearly
reiterated the well-settled distinction between the subject matter of
a levy and the standard by which the amount of levy is measured.
This Court explained that the measure of the levy is not the true
test of the nature of the levy. The following paragraphs in the said
judgment make for useful reading:-
“302. It now a well-settled principle that the
determination of the principles for assessing the
140 [2026] 8 S.C.R.
Supreme Court Reports
amount of tax is within the legislative domain [S.
Kodar v. State of Kerala, (1974) 4 SCC 422, para 10].
The quantification or measurement of liability is done
on the basis of the procedures laid down by the
competent legislature [Shaktikumar M. Sancheti v.
State of Maharashtra, (1995) 1 SCC 351, para 3]. In
situations where the legislature selects one method
out of the many available for assessing tax, the courts
should not strike down the levy on the ground that
the legislature should have adopted another method
unless the method is capricious, fanciful, arbitrary or
clearly unjust [Khandige Sham Bhat v. CIT (Ag), 1962
SCC OnLine SC 15, para 10]. Although the liability
may be quantified or measured in many ways, there
is a clear distinction between the subject matter of
a tax and the standard by which the amount of tax
is measured.
303. The pith and substance or true nature and
character of the legislation must be determined with
reference to the legislative subject matter and the
charging section [Federation of Hotel & Restaurant
Assn. of India v. Union of India, (1989) 3 SCC 634,
para 37] The charging section levying a tax and
defining the persons who are liable to pay the tax
constitute the core of a taxing statute B.Shama
Rao v. State (UT of Pondicherry), 1967 SCC OnLine
SC 29]. The distinction between the nature of tax and
measure of tax can be gathered from the decision
of this Court in Sainik Motors, Jodhpur v. State of
Rajasthan, [1961 SCC OnLine SC 15]. In that case,
the petitioners challenged the levy of taxes on
passengers and goods by the State legislature. The
charging section provided that the tax was “in respect
of all passengers carried and goods transported by
motor vehicles at such rate not exceeding one-eight
of the value of the fare or freight.” This Court held
that the tax was on passengers and goods which
could be traced to Entry 56 of List II of the Seventh
Schedule. As regards the measure of the levy, it was
[2026] 8 S.C.R. 141
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
held that the measure was furnished by the amount
of the fare and freight charged.
304. It is a settled position that the measure of tax is
not a true test of the nature of tax [R.R. Engg. Co. v.
Zila Parishad, Bareilly, (1980) 3 SCC 330, para 16]
The standard adopted as a measure of tax may be
a relevant consideration in determining the nature
of tax, but is not conclusive….
308. The discussion above indicates that the nexus
between the measure and levy of tax need not
be “direct and immediate”. The nexus has to be
“reasonable” and must have some relationship with
the nature of levy. The reasonability of the nexus will
largely depend upon the nature of the tax and the
means available with the legislature to design the
measure of the tax. Since the measure of the levy
is a matter of legislative policy and convenience,
[Express Hotels (P) Ltd. v. State of Gujarat, (1989)
3 SCC 677, para 25 the reasonability of the nexus
between the measure and tax has to be determined
by the courts on a case-to-case basis. While doing so,
the Court will bear in mind the fundamental principle
that the legislature possesses a broad discretion in
matters of fiscal levies.”
73. In the leading judgment of the Federal Court in Ralla Ram vs.
Province of East Punjab,5 the Federal Court had to grapple with
the issue whether the prescription of annual value of the property
as the basis for the levy of property tax would make the levy, a tax
on income. Explaining how such a prescription though used in the
Income Tax Act for getting at the income, that alone was not enough
to bar the use of the same for assessing provincial tax, this Court
held as under: -
“Our own conclusion may be summed up very briefly. In
the first place, we have to look into the charging section
of the statute, because as was pointed out in Provincial
5 1948 SCC Online FC 9
142 [2026] 8 S.C.R.
Supreme Court Reports
Treasurer of Alberta v. G.E. Kerr [[1933] A.C. 710.] , “the
identification of the subject-matter of the tax is only to
be found in that section”. The charging section in the
present case is s. 3, which in clear terms levies not a
tax on income but a tax on buildings and lands. It is
true that we must look not to the mere form but to
the substance of the levy, and the tax must be held
to be invalid, if in the guise of a property tax it is
really a tax on income. There is however nothing
in the impugned Act to show that there was any
intention on the part of the Legislature to get at or
tax the income of the owner from the building. It is
true that the annual value was used as the basis,
but it was very different from the annual value
which may be used for getting at the true profits or
income. The annual value, as has been pointed out,
is at best only notional or hypothetical income and
not the actual income. It is only a standard used in
the Income-tax Act for getting at income, but that is
not enough to bar the use of the same standard for
assessing a Provincial tax. If a tax is to be levied
on property, it will not be irrational to correlate it to
the value of the property and to make some kind of
annual value the basis of the tax without intending
to tax income.”
This Paragraph clearly highlights the nature and measure of the tax
and how the two should not be mixed up.
74. In Union of India & Ors. vs. Bombay Tyre International Ltd. and
Others,6 explaining how Section 3 of the then prevailing Central
Excise and Salt Act provided for the levy of duty of excise on goods
produced or manufactured in India and how Section 4 prescribed
the measure by which the charge is to be levied, this Court followed
Ralla Rama (supra) and explained how while the measure of levy
may indicate the nature of tax but it does not necessarily determine
it. This Court further referred to the Constitution Bench judgment in
6 (1984) 1 SCC 467
[2026] 8 S.C.R. 143
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
M/s R.R. Engineering Co. vs. Zila Parishad, Bareilly and Another,7
which explained the relationship between the measure of levy and
the nature of levy. This Court referred to the following paragraph
from R.R. Engineering Co. (supra).
“It may be, and is often so, that the tax on circumstances
and property is levied on the basis of income which the
assessee receives from his profession, trade, calling
or property. That is, however, not conclusive on the
nature of the tax. It is only as a matter of convenience
that income is adopted as a yardstick or measure for
assessing the tax. As pointed out in Re a Reference
under Government of Ireland Act [1936 AC 352] , the
measure of the tax is not a true test of the nature of
the tax. Therefore, while determining the nature of a
tax, though the standard on which the tax is levied
may be a relevant consideration, it is not a conclusive
consideration....”
75. Further, in para 14 of Bombay Tyre International Ltd. (supra),
this Court held : -
“14. ……It is apparent, therefore, that when enacting a
measure to serve as a standard for assessing the levy
the Legislature need not contour it along lines which
spell out the character of the levy itself. Viewed from
this standpoint, it is not possible to accept the contention
that because the levy of excise is a levy on goods
manufactured or produced the value of an excisable
article must be limited to the manufacturing cost plus
the manufacturing profit. We are of opinion that a
broader based standard of reference may be adopted
for the purpose of determining the measure of the
levy. Any standard which maintains a nexus with the
essential character of the levy can be regarded as a
valid basis for assessing the measure of the levy. In
our opinion, the original Section 4 and the new Section
4 of the Central Excises and Salt Act satisfy this test.”
7 (1980) 3 SCC 330
144 [2026] 8 S.C.R.
Supreme Court Reports
It will be clear from the above paragraph that for determining
the measure of levy, sometimes a broad-based standard can be
adopted.
76. Further, in Bombay Tyre International Ltd. (supra), this Court
followed the earlier judgment in Hingir-Rampur Coal Co., Ltd. and
Others vs. State of Orissa and Others,8. Hingir-Rampur (supra)
held that the mere fact that the levy imposed by the impugned Act
therein has adopted the method of determining the rate of levy by
reference to minerals produced by the mines would not by itself
make the levy a duty of excise.
77. The above precedents have been set out only to explain the distinction
between the measure of levy and the nature of levy. Though there
is no dispute with regard to the legislative competence and the
entire argument has only been on the provisions being violative of
Articles 14 and 19(1)(g), this conceptual distinction is essential while
considering the argument that the sale value could not have been
so defined as to encompass within it the payments made towards
Royalty, DMF and NMET. The argument on Articles 14 and 19(1)(g)
and the aspect of manifest arbitrariness have been independently
considered hereinbelow.
78. It must be remembered that as held in Mineral Area Development
Authority (supra), the measure of any levy is a matter of legislative
policy. Convenience and the reasonability of the nexus between the
measure and tax, no doubt, has to be determined on a case-to-case
basis. Mineral Area Development Authority (supra) also reiterated
that it was a fundamental principle that legislature possessed a
broad discretion in matters of fiscal levy.
MEASURE OF LEVY – AS AN ANTIDOTE TO CHECK EVASION : -
79. Yet another principle that will have a bearing is that granted
legislative competence, the legislature and the subordinate Rule
making authority is also authorized to enact measures to prevent
evasion of tax. In Sardar Baldev Singh (supra), Section 23A
of the Income Tax Act, 1923, came up for consideration. The
said Section required that on an order being made under it, the
8 [1961] 2 SCR 537
[2026] 8 S.C.R. 145
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
undistributed portion of the assessable income of the company after
deductions provided in the Section was to be deemed to have been
distributed as dividend among the shareholders as at the date of
the General Meeting. Considering the constitutionality of the said
Section, this Court held that under Entry 54 of List I of the Seventh
Schedule to the Government of India Act, 1935, a law could be
passed to prevent a person from evading tax payable on his own
income. The following paragraphs of the said judgment repays
study: -
“20. In spite of all this it seems to us that the
legislation was not incompetent. Under Entry 54
a law could of course be passed imposing a tax
on a person on his own income. It is not disputed
that under that entry a law could also be passed to
prevent a person from evading the tax payable on
his own income. As is well-known the legislative
entries have to be read in a very wide manner and
so as to include all subsidiary and ancillary matters.
So Entry 54 should be read not only as authorizing
the imposition of a tax but also as authorizing an
enactment which prevents the tax imposed being
evaded. If it were not to be so read, then the admitted
power to tax a person on his own income might often
be made infructuous by ingenious contrivances.
Experience has shown that attempts to evade the
tax are often made.
21. Now it seems to us that Section 23-A was enacted
for preventing such evasion of tax. The conditions
of its applicability clearly lead to that conclusion.
The first condition is that the company must have
distributed as dividend less than sixty per cent of its
assessable income after deduction of income tax and
super tax payable by it. The taxing authority must
then be satisfied that the payment of a dividend or of
a larger dividend than that declared, would, in view
of losses incurred in earlier years or the smallness of
the profit made, be unreasonable. Lastly, the section
does not apply to a company in which the public are
substantially interested or a subsidiary company
146 [2026] 8 S.C.R.
Supreme Court Reports
of a public company whose shares are held by the
parent company or by the nominees thereof…..
……
When therefore in spite of there being
money reasonably available for the
purpose, it decides not to declare a
dividend it is clear that it does so because
it does not want to take the dividend. Now
it may not want to take the dividend if it
wants to evade payment of tax thereon.
Thus by not declaring the dividend the
persons constituting the group in control,
could evade payment of super tax, which,
of course, is a form of income Tax. They
would be able to evade the super tax
because super tax is payable on the
dividend in the hands of the shareholders
even though it may have been paid by the
company on the profits out of which the
dividend is paid, and because the rate at
which super tax is payable by a company
may be lower than the rate at which
that tax is payable by other assessees.
By providing that in the circumstances
mentioned in it, the available assessable
income of a company would be deemed to
have been distributed as dividend and be
taxable in the hands of the shareholders
as income received by them, the section
would prevent the members of such a
group from evading by the exercise of
their controlling power over the company,
payment of tax on income that would have
come to them. That being so, the section
would be within Entry 54.
In conceivable circumstances the section
may work hardship on members of the
public who hold shares in such a company
but that would not take the section outside
[2026] 8 S.C.R. 147
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
the competence of the legislature. It
would still be an enactment preventing
evasion of tax. Considerations of hardship
are irrelevant for deciding questions of
legislative competence.
22. It is further quite clear that in the absence of
a provision like Section 23-A it is possible so to
manipulate the affairs of a company of this kind
as to prevent the undistributed profits from ever
being taxed and experience seems to have shown
that this has often happened. The following passage
from Simon’s Income Tax, 2nd Edn., Vol. 3, p. 341, fully
illustrates the situation:
“Generally speaking, surtax is charged only on
individuals, not on companies or other bodies
corporate. Various devices have been adopted
from time to time to enable the individual to
avoid surtax on his real total income or on
a portion of it, and one method involved the
formation of what is popularly called a ‘one-
man company’. The individual transferred
his assets, in exchange for shares, to a
limited company, specially registered for
the purpose, which thereafter received the
income from the assets concerned. The
individual’s total income for tax purposes
was then limited to the amount of the
dividends distributed to him as practically
the only shareholder, which distribution
was in his own control. The balance of
the income, which was not so distributed,
remained with the company to form, in
effect, a fund of savings accumulated
from income which had not immediately
attracted surtax. Should the individual
wish to avail himself of the use of any part
of these savings he could effect this by
borrowing from the company, any interest
payable by him going to swell the savings
148 [2026] 8 S.C.R.
Supreme Court Reports
fund; and at any time the individual could
acquire the whole balance of the fund in
the character of capital by putting the
company into liquidation.”
The section prevents the evasion of tax
by, among others, the means mentioned
by Simon.
80. What is significant to note is that undistributed dividend was deemed
to be income proportionate in the hands of the shareholders. This
was to prevent devices being employed by companies to not
distribute dividends and thereby prevent income accruing in the
hands of shareholders. A measure in the nature of a legal fiction
passed muster under the Constitution. This Court also noticed that
in Sardar Baldev Singh (supra), the Section may work hardship
on members who hold shares but that would not make the levy
unconstitutional.
81. Similarly, in Balaji vs. ITO,9 this Court upheld the provision which
provided that, in computing the total income of any individual there
shall be included so much of the income of a minor child of such
individual and as arises directly or indirectly from the membership
of the wife in a firm of which her husband is a partner and further,
from the admission of the minor to the benefits of the partnership
in a firm of which individual is a partner.
82. This implied that the individual who was the husband or the father
was taxed for the income of the wife or of the minor child respectively
in the partnership. Upholding the provision, this Court held that this
was a measure to prevent evasion of tax and even though it may be
little hard on a husband or a father in the case of genuine partnership,
it was intended in larger interest to prevent evasion of income tax :-
“5. It is well settled that the entries in the Lists are not
powers but are only fields of legislation, and that widest
import and significance must be given to the language
used by Parliament in the various entries. Sarkar, J.,
speaking for this Court, observed in Sardar Baldev Singh
case [(1960) 40 ITR 605] thus at p. 615:
9 (1961) 43 ITR 393
[2026] 8 S.C.R. 149
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
“So Entry 54 should be read not only as
authorising the imposition of a tax but also
as authorising an enactment which prevents
the tax imposed being evaded. If it were not
to be so read, then the admitted power to tax
a person on his own income might often be
made infructuous by ingenious contrivances.”
This decision holds that the said entry can sustain a law
made to prevent the evasion of tax.
So judged, can it be said that the restrictions imposed,
under the impugned provisions are not reasonable? The
object sought to be achieved was to prevent the prevalent
abuse, namely, evasion of tax by an individual doing
business under a partnership nominally entered with his
wife or minor children. The scope of the provisions is
limited only to a few of the intimate members of a family
who ordinarily are under the protection of the assessee
and are dependants of him. The persons selected by
the provisions, namely, wife and minor children, cannot
also be ordinarily expected to carry on their business
independently with their own funds, when the husband
or the father is alive and when they are under his
protection. Doubtless some of the said partnerships
may be genuine and the wife or minor children may
have contributed capital to the business; but the
provisions do not in any way affect their rights and
even the liability inter se between the husband and
the wife or the minor children, as the case may be,
in respect of the tax paid. It is true that in computing
the total income of an individual for the purpose of
assessment, their income in their capacity as partners
shall be included in the income of the individual; but
the section does not prevent the husband or the father,
as the case may be, from debiting against them in the
partnership accounts that part of the tax referable to
the share or shares of their income. It may be that a
father or a husband may have to pay tax at a higher
rate than ordinarily he would have to pay if the addition
of the wife’s or children’s income to his own brings his
150 [2026] 8 S.C.R.
Supreme Court Reports
total income to a higher slab. But it may not necessarily
be so in a case where the income of the former is not
appreciable; even if it is appreciable, he can debit a part
of the excess payment to his wife and children. In short,
the firm, though registered, would be treated as a distinct
unit of assessment, with the difference that, unlike in
the case of a registered firm, the entire income of the
unit is added to the personal income of the father or the
husband, as the case may be. This mode of taxation
may be a little hard on a husband or a father in the case
of genuine partnership with wife or minor children, but
that is offset, to a large extent, by the beneficient results
that flow therefrom to the public, namely, the prevention
of evasion of income tax, and also by the fact that, by
and large, the additional payment of tax made on the
income of the wife or the minor children will ultimately be
borne by them in the final accounting between them. In
these circumstances, we cannot say that the provisions
of Section 16(3) of the Act impose an unreasonable
restriction on the fundamental rights of the petitioner
under Article 19(1)(f) and (g) of the Constitution.”
83. It is apt to recall that in Navnit Lal C. Javeri vs. K.K. Sen,
Appellate Assistant Commissioner of Income Tax, Bombay,10
while considering the validity of a provision of the Income Tax
Act deeming the loan received by a shareholder as a dividend,
this Court upheld the validity of the provision to set at naught any
subterfuge that companies may adopt by dressing up dividends as
loans to circumvent tax in the hands of the recipient. All that this
Court expected was some rational connection between the items
taxed and the concept of income construed liberally. The following
passage from Navnit Lal C. Javeri (supra) is very relevant: -
“16. The question which now arises is, if the
impugned section treats the loan received by
a shareholder as a dividend paid to him by the
company, has the legislature in enacting the section
exceeded the limits of the legislative field prescribed
10 [1965] 1 SCR 909
[2026] 8 S.C.R. 151
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
by the present Entry 82 in List I? As we have already
noticed, the word “income” in the context must
receive a wide interpretation; how wide it should
be it is unnecessary to consider, because such an
enquiry would be hypothetical. The question must
be decided on the facts of each case. There must no
doubt be some rational connection between the item
taxed and the concept of income liberally construed.
If the legislature realises that the private controlled
companies generally adopt the device of making
advances or giving loans to their shareholders with
the object of evading the payment of tax, it can step
in to meet this mischief, and in that connection, it
has created a fiction by which the amount ostensibly
and nominally advanced to a shareholder as a loan
is treated in reality for tax purposes as the payment
of dividend to him. We have already explained
how a small number of shareholders controlling a
private company adopt this device. Having regard to
the fact that the legislature was aware of such devices,
would it not be competent to the legislature to devise
a fiction for treating the ostensible loan as the receipt
of dividend? In our opinion, it would be difficult to
hold that in making the fiction, the legislature has
travelled beyond the legislative field assigned to it
by Entry 82 in List I.
17. It is, however, urged by Mr. Pathak that while providing
for such a fiction, the legislature should have required
the Income Tax Officer to consider in each case whether
the loan was genuine, or was the result of a device; and
he argues that since no such provision has been made
and a uniform presumption by fiction is sought to be
raised, the legislature has gone beyond its legislative
competence. In support of this argument, Mr. Pathak
has referred to the fact that under Section 108(1) of the
Commonwealth Income Tax Act it is provided that the
amount paid to the shareholder by way of advance or
loan can be taxed if in the opinion of the Commissioner
it represents distributions of income. Such a provision
152 [2026] 8 S.C.R.
Supreme Court Reports
would have made the impugned section valid. Mr. Pathak
argues that omission of Parliament to exclude from the
operation of Section 12(1-B) genuine loans or advances,
and its failure to distinguish between such loans and
advances and loans and advances made as device
shows, that it has acted blindly and must, therefore, be
held to have exceeded its legislative power. We are not
inclined to accept this argument. If the legislature
thinks that the advances or loans are in almost every
case the result of a device, it would be competent to
it to prescribe a fiction and hold that in cases of such
advances or loans, tax should be recovered, from the
shareholder on the basis that he has received the
dividend. Therefore, we are satisfied that the High
Court was right in coming to the conclusion that
the impugned section is not beyond the legislative
competence of the legislature.”
84. In Union of India and Another vs. A. Sanyasi Rao and Others,11 this
Court upheld Section 44-AC read with Section 206-C of the Income
Tax Act, 1961. The said Section provided that for the assessees
mentioned therein a sum equal to the 40 per cent of the amount
paid or payable by the buyer as the purchase price in respect of
such goods shall be deemed to be the profit and gain of the buyer
and was to be taxed under the head of profit and gain of business
and profession. The provision enabled the revenue to estimate the
profits on a presumptive basis. The defense of the Government
was it wanted to get over the problems in assessing income and
recovering tax in case of certain assessees dealing in country liquor,
timber and forest produce. Experience has revealed that a large
number of such persons did not maintain any book of accounts. This
Court, upholding the validity of provision, held as under: -
“15…..The attack against the legislative competence
is without substance. The impugned levy of income
tax is not open to objection. The assumption that
Sections 44-AC and 206-C are charging provisions
is unsustainable. The legislation will fall within
11 (1996) 3 SCC 465
[2026] 8 S.C.R. 153
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
Schedule VII, List 1 Entry 82. The relevant entry
therein (taxes on income other than agricultural income)
should be liberally construed. There were sufficient
materials before Parliament to hold that due to very
many causes, income from certain trades could not be
brought to tax and there was large scale evasion. The
sufficiency of the material in that regard is not open to
scrutiny by court. All that is envisaged in the impugned
statutory provisions is only an estimated (income tax)
“advance tax”; (ii) since it came to light that the income
from certain trades could not be properly brought to
tax, the legislature enacted the instant machinery
provisions. The provisions are reasonable and have
sufficient nexus to the objects that are sought to be
achieved. The statutory provisions were intended to
operate in all trades where the evasion and chances of
evasion were greater than others and due to practical
experience over the years, it was felt that the particular
trades or businesses necessitated speedier provision
for recovery or collection. It is in this perspective only,
trades in particular commodities, wherein evasion was
predominant and called for appropriate machinery to
secure the payment of tax, the legislation was enacted.
In the case of taxation laws, the legislature has
got a wide discretion to pick and choose persons,
objects, districts, etc. for legislating. The power of
the legislature to classify or select certain objects
or persons to which the law will apply is of great
magnitude. The court permits a greater latitude to the
discretion of the legislature. It has been invariably
held by this Court that in tax matters, the State
is allowed to pick and choose districts, objects,
persons, methods and even rates for taxation, if
it does so reasonably. The provisions attacked in
this case are reasonable, as could be seen from
the legislative history on the object and the objects
sought to be achieved.”
21. ...Considered in the light of the practical
difficulties envisaged by the Revenue to locate the
154 [2026] 8 S.C.R.
Supreme Court Reports
persons and to collect the tax due in certain trades,
if the legislature in its wisdom thought that it will
facilitate the collection of the tax due from such
specified traders on a “presumptive basis”, there
is nothing in the said legislative measure to offend
Article 14 of the Constitution. In the light of the legal
principles stated above, we are unable to hold that
Section 44-AC read with Section 206-C is wholly hit
by Article 14 of the Constitution of India.”
APPLICATION OF THE LAW TO THE FACTS: -
85. It is time to apply the above principles to the case at hand. As adverted
to earlier, there is no dispute on the legislative competence of the
Parliament to enact the law and the power to make subordinate
legislation in the Central Government. Under Section 9(2) of the
MMDR Act read with Entry 24 of the Second Schedule, royalty is
levied at 15% of ‘Average Sale Price’ on ad valorem basis. Sale
value is a component of ASP under Rule 42 of the 2016 Rules.
When it is prescribed in the Explanations to Rule 38 of the 2016
Rules and Rule 45(8)(a) of the 2017 Rules, that while computing
the sale value, no deduction from the gross amount shall be made
in respect of Royalty, payments to the DMF and NMET, all that
occurs is that a measure is provided to compute sale value based
on which average sale price will be arrived at. Under Rule 42, the
ex-mine price is used to compute the average sale price of mineral
grade/concentrate and under Rule 42(2)(b), ex-mine price of mineral
grade/concentrate where domestic sale has occurred, is the sale
value of the mineral less the actual expenditure incurred towards
transportation, loading, unloading, rent for the plot at the stocking
yard, charges for sampling and analysis and any other charges
beyond mining lease area, as notified by the Indian Bureau of Mines,
from time to time, divided by the total quantity sold. Under Rule 42(3),
the average sale price of any mineral grade/concentrate in respect
of a month shall be the weighted average of the ex-mine prices of
the non-captive mines, computed in accordance with Rule 42, the
weight being the quantity despatched from the mining lease area
of mineral grade/concentrate, relevant to each ex-mine price. As to
what is sale value, as mentioned in Rule 42(b) would be discernible
from Rule 38, which has already been discussed.
[2026] 8 S.C.R. 155
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
86. It is further to be examined whether the measure has any nexus and
rational connection with the nature of levy. Further, the justification
offered by the Union of India for adopting such a measure also
needs to be examined.
87. The justification offered by the Union of India is that unlike for coal,
where the notified prices, auction prices of Coal India Limited and
Singareni Collieries Company Limited or the import price form the
basis of National Coal Index (NCI), there is no such mechanism
for iron ore.
88. As far as the iron ore is concerned, the ASP is depended on market
forces and is not decided by the Government.
89. The ASP is arrived at based on the data given by the miners
themselves. Detailed instances of manipulation of ASP with regard
to different grades of iron ore have been provided in the form of
an appendix to the additional affidavit. For the period from August,
2022 to January, 2023, the Union of India has contended that since
the successful bidders have quoted their bid price as a percentage
of the ASP as far as premium for mining lease was concerned, in
several quarters, all out efforts have been made to depress the ASP
to keep the premium down. Further, depressing the ASP will also
help in reducing the royalty and payments made towards DMF and
NMET as royalty has a percentage of the average sale price and
the other levies are a percentage of royalty.
90. The Union of India has demonstrated before us by producing
graphs, charts and data that wherever highest ex-mine price was
reported, the quantity despatched was NIL or very less. They also
demonstrated that where the ex-mine price was low, the quantity
despatched was high. It is contended that under the method of
calculation of average sale price, weighted average of ex-mine
price is relevant, and, in that context, despatched quantity is taken
as the weight. They contend that by this jugglery, enormous loss is
caused in royalty payments and in premium payments by beating
down the average sale price. The graphs, charts and data have all
been set out in the earlier part of this judgment.
91. It is the contention that the measure of levy and the decision not to
exclude royalty and payments made towards DMF and NMET was
taken as a regulatory measure to suppress the mischief, to prevent
156 [2026] 8 S.C.R.
Supreme Court Reports
evasion to the extent possible and to advance the remedy, to arrive
at a fair value of the mineral.
92. In this scenario, it cannot be said that the measure adopted is arbitrary
and has no nexus and rational connection with the nature of the levy.
The judgments of this Court in Balaji (supra), Sardar Baldev Singh
(supra), Navnit Lal C. Javeri (supra) and A. Sanyasi Rao (supra),
which have been elaborately discussed hereinabove, fully justify the
measure adopted in the Explanations to Rule 38 of the 2016 Rules
and Rule 45(8)(a) of the 2017 Rules for computation of sale value
which, in turn, is an essential factor in computation of the ASP.
93. In fact, in A. Sanyasi Rao (supra), while upholding the presumptive
tax based on the purchase price, this Court made the following
telling observations: -
“17. …..Having regard to the past difficulties in making a
normal assessment and collection in the case of certain
categories of assessees, for convenience sake, the
legislature has chosen to make appropriate provision
for collection of tax at an anterior stage by adopting the
purchase price as the measure of tax. In our view, this
is permissible and the standard by which the amount
of tax is measured, being the purchase price, will
not in any way alter the nature and basis of levy viz.
that the tax imposed is a tax on income. It cannot
be labelled as a tax on purchase of goods.”
94. We find nothing manifestly arbitrary in the process adopted. There
is nothing capricious or irrational about the measure and it cannot
be said that it has been adopted without any determining principle
nor do we find the measure excessive or disproportionate for it to
be characterized as manifestly arbitrary.
95. We also do not find any violation of Article 14 of the Constitution from
the angle of discrimination. The comparison with coal is completely
unjustified as there is no concept of ASP in coal and that too based
on data given by the miners. Hence, comparing coal and iron ore, in
this context, is akin to comparing apples and oranges which we are
not prepared to do. According to the petitioners, ad valorem cannot
include in the value the levy of royalty, payments made towards DMF
and NMET. We are not able to countenance that submission. As
[2026] 8 S.C.R. 157
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
a means to check evasion, a measure has been prescribed under
which ad valorem will be arrived at to check manipulation and to
strike at evasion, certain factors have been loaded on to the sale
value and we find nothing illegal in the same.
96. Perusal of the factual situation in Balaji (supra), Sardar Baldev
Singh (supra), Navnit Lal C. Javeri (supra) and A. Sanyasi Rao
(supra) clearly establish that certain legitimate measures needed
to check evasion can always be adopted as the measure of levy.
The argument on violation of Article 19(1)(g) also has no merit. In
a classic passage of what broadly a reasonable restriction could
encompass is available in the case of State of Madras vs. V.G.
Row.12, wherein Patanjali Sastri, C.J., speaking for the Court, stated
as under: -
“….The nature of the right alleged to have been infringed,
the underlying purpose of the restrictions imposed, the
extent and urgency of the evil sought to be remedied
thereby, the disproportion of the imposition, the prevailing
conditions at the time, should all enter into the judicial
verdict. In evaluating such elusive factors and forming
their own conception of what is reasonable, in all the
circumstances of a given case, it is inevitable that the
social philosophy and the scale of values of the Judges
participating in the decision should play an important
part, and the limit to their interference with legislative
judgment in such cases can only be dictated by their
sense of responsibility and self-restraint and the sobering
reflection that the Constitution is meant not only for
people of their way of thinking but for all, and that the
majority of the elected representatives of the people
have, in authorising the imposition of the restrictions,
considered them to be reasonable….”
97. The measure of levy, as provided, read with the explanation, is
intended to ensure that, to the extent possible, loss of revenue is
offset. Such loss of revenue occurs due to manipulation of prices.
With the aid of graphs and charts, we have been shown some
instances of clever stratagems being deployed to beat down the
12 [1952] SCR 597
158 [2026] 8 S.C.R.
Supreme Court Reports
ASP. These are much more than mere canaries in the mine, literally
and figuratively. It may be possible that all parties may not resort to
such ingenious contrivances. However, as held in the precedents
set out hereinabove, when a measure of levy is prescribed to check
evasion, individual hardships cannot be determinative. Afterall, the
grundnorm is “Salus populi suprema lex” – regard for the public
welfare is the highest law. Private rights will have to cede to public
interest. A Constitutional Court called upon to pronounce on the
validity of such fiscal measures should be loath to interfere, for
any interference in the absence of legitimate grounds would put
public interest in jeopardy. For the reasons stated above, we do
not consider the measure to be unreasonable or disproportionate.
98. Much was made out of the recommendations of Shri Praveen Kumar
and Dr. Aruna Sharma Committee Reports. Committee Reports are
only recommendatory in nature. If it were not, judicial review will be
a meaningless exercise. In the challenge to the Constitutionality of
the Rules as to demonstrate how the levy is illegal, the petitioners
have not been able to establish unconstitutionality. On the contrary,
the Union has offered proper justification for the measure of levy
adopted and it passes constitutional muster.
99. The scope of the judgment of this Court dated 07.11.2024 in
Writ Petition No. 715 of 2024 is clear in black and white. There
was no pronouncement made on the constitutionality of the levy.
The subsequent order dated 19.05.2025 left every liberty for the
petitioners to challenge the decision of the government.
100. We have thoroughly and in a threadbare manner examined the
contentions assailing the constitutional validity of the Explanations
appended to Rule 38 of the 2016 Rules and Rule 45(8)(a) of the 2017
Rules and we do not find any infirmity in the impugned provisions.
Hence, the judgement dated 07.11.2024 of this Court in Writ Petition
No. 715 of 2024 cannot come to the aid of the petitioners.
101. The further argument that the levy breaches the three years’ cap
under the proviso to Section 9(3) is also fallacious. Here, there is
no revision of the rate of royalty. The injunction for three years is
on the revision only for the rate of royalty.
102. The judgments cited by the petitioners have no relevance on
the controversy in question and do not advance the case of the
petitioners any further.
[2026] 8 S.C.R. 159
Kirloskar Ferrous Industries Ltd. and Anr. v. Union of India & Anr.
CONCLUSION: -
103. For the reasons stated above, we hold that the Explanations to Rule
38 of the 2016 Rules and Rule 45(8)(a) of the 2017 Rules, insofar
as they provide for inclusion of royalty and payments made towards
DMF and NMET in the sale value for computing the average sale
price for determination of royalty, is constitutional and valid. We
hold that the impugned Rules are not violative of Article 14 and
Article 19(1)(g) of the Constitution. We further hold that the impugned
provisions are not ultra vires Section 9 of the MMDR Act.
104. The writ petition is dismissed. No order as to costs.
Result of the case: Writ petition dismissed.
†
Headnotes prepared by: Nidhi Jain
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