Holding

Section 2 of the Cess and Other Taxes on Minerals (Validation) Act, 1992 validly validates the imposition and collection of cesses and taxes on minerals, including retrospective effect, and the Act is constitutionally valid.

Summary

The Supreme Court examined the constitutional validity of the Cess and Other Taxes on Minerals (Validation) Act, 1992, which sought to validate state levies on minerals that had been struck down by earlier judgments. The Court held that Section 2 of the Act validly creates and retrospectively validates the levy and collection of cesses and taxes on minerals, even where the levies were previously declared ultra‑vires by the states. It rejected the contention that the Act was a temporary statute, that it discriminated by imposing different rates in different states, or that it could not override earlier Supreme Court decisions. The Court also affirmed Parliament’s power to legislate on the subject under Entry 54 of List I and to apply different rates where justified by historical context. Consequently, the appeals and writ petitions challenging the Act were dismissed.

Issues considered

The constitutional competence of Parliament to enact a validation statute for state mineral taxes under Entry 54 of List I
Whether Section 2 of the Validation Act creates a levy retrospectively and validates both past and future collection
Whether the Act’s differential rates across states violate Article 14
Whether the Validation Act is a temporary statute limited to 4 April 1991
Whether the Act can overturn earlier Supreme Court judgments on state mineral taxes
Whether the Act only validates taxes already collected or also authorises collection of outstanding amounts

Legislation cited

Cess and Other Taxes on Minerals (Validation) Act, 1992s. 1, s. 2, s. 3
Constitution of Indias. Article 265, s. Articles 245, s. Articles 246, s. Schedule VII List I Entry 54, s. Schedule VII List I Entry 97, s. Schedule VII List II Entry 23, s. Schedule VII List II Entry 50
General Clauses Act, 1897s. 6
Mines and Minerals (Regulation & Development) Act, 1957s. 2, s. 9
Sugarcane Cess (Validation) Act, 1961s. 3

Subjects

validation statutemineral taxationretrospective legislationparliamentary competenceArticle 14 discriminationtemporary statuteseparation of powersconstitutional lawmines and minerals regulation

Judgment

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

JULY 26, 1996

B [B.P. JEEVAN REDDY AND SUHAS C. SEN, JJ.]

Mines & Minerals:

Mines and Minerals (Regulation & Development) Act, 1957-Sections
C 2 and 9-Scope-He/d, Section 2 of the MMRD Act totally and not merely
panly denudes tile States of the power to levy any tax oil the milleral..-Hence,
before enacting the Cess and other taxes oil Minerals (Validation) Act, 1992
no funher declaration of denudation of the States' power was necessmy-Con-
stitution of India, Schedule VII, List I Entry 54.

D Cess and Other Taxes on Mineral (Validation) Act, 1992-Section 2( I),
(2), (3) read with Schedule-Validity of-State laws imposillg cess or other
taxes Oil minerals found to be beyond the competence of the State Legisla-
ture-Provisions of Section 2 validating such State laws, held, not beyond the
legislative competence of Parliament-Provision in Sectioll 2(1) validating the
E State laws from the date on which they were enacted by the State Legislature
concerned, held, l!Ot bad for retrospectivity-Stalllte /aw-Validating
statute-...:Statute validating a tax retrospectivel.,,-Validity-Taxation-Taxing
statue;-Retrospective validatioll of a valid taxing statute-Constitutioll of
India, Anicle 265.

F Section 2(1), Schedule and Preamble-Scope of Section 2(1j-Statute
law-Validating statute-Language of, whetlzer confmm to any set or standard
fonnul_.-Held, there was no set or standard fonnula to which all Validation
Acts should confonn-Sugarcane Cess (Validation) Act, 1961, Section 3.

Sectioll 2 and Preambl<-Scope of-Held, Section 2 not only validated
G the taxes and cesses already recovered but also en1poivered to collect the
unrecovered taxes and cesses--Afere absence of a clause or words con·espond-
ing to Section 3(J)(c) of the Sugarcane Cess (Validation) Act, cannot justify
a different conclusion.

H Section 2 and the Schedul~Taxes and cesses on milleral levied ill
92
P.KANNADASAN v. STATE 93

different States at different rateS"-Levy of the same by Section 2 of the Act by A
Parliament-Held, neither discriminatory nor ultra vires Entry 54 of List I of
Schedule VII nor beyond Parliament's power nor bamd by Mines and
Minerals (Regulation & Development)Act, l957-Geographical discrimina-
tion-Justification f01-Mines and Minerals (Regulation & Developmellt) Act,
l957 Section 9.
B
Sections 1(3) & 2( /)-Statute law-Temporary Act-W710t iS"-Held, a
tempormy Act is one which expires on the expiry of the specified period-In
absence of the mention of such a peiiod, merely because the levies created
by Section 2( I) of the Act were to remain in force 011/y up to the date specified
therein (4-4-1991 ), the said Act cannot be said to be a temporary one. C
Section 2(1) and (3 )-Recovery machinery-Survival of, after 4-4-
1991-Notwithstanding the cessation of the levy created by Section 2(I) w.e.f
4-4-1991, the recovery 111achinery, held, continues to re1nain in existence.

Section 2(1) and the Schedule-Object-By virtue of the deeming D
clause in Section 2( I), held, the relevant provisions of the state enactments
must be deemed to have been enacted by the respective State Legislature and
to have remained in force up to 4-4-1991.

Constitution of India :
E
Articles 245, 246 and 265 read with Schedule VII List I Entries 54 &

-
97 & List II Entries 23 and SO-Statute law-Validating statute-Constitution-
al law-Separation of powers.

Schedule VII List-I Entry 54-Before enacting the Cess and Other
Taxes on Mineral (Validation) Act, 1992 no further declaration of denudation
F
of the States' power was necessary.

Articles 245, 265 & Schedule VII List I Entry 54-fCess/tax levied by an
act enacted under Entry Stf-Pwpose of such cess/tax, held, need not be
regulation of mines and mineral development. G
Interpretation of Statutes:

Subsidiary ntle of interpretati01r-Conjunctive or disjunctive-Deeming
provision-Statute la\1>-Legislation by incorporatioir-ln the context of Cess
and Other Taxes on Mineral (Validation) Act, 1992. H
94 SUPREME COURT REPORTS (1996] SUPP. 4S.C.R.

A Wards and Phrases : "Imposition and ca/lectia11"-Meaning of-In the
context of Cess and Other Taxes 011 Mineral (Validation) Act, 1992.

"Checks and balances"-ln the context of separation of powe1-Con·
stitutian of India.

B
Section 115 of the Tamil Nadu Panchayat Act, 1958 levied in every
Panchayat Development Block a local cess @ U.45 paise on every rupee of
land revenue payable to the State Government. The validity of the leyy was
challenged in the High Court and the same was dismissed holding that
being a tax on land, it was within the legislative competence of the State
c following the decision of H.R.S. Mwthy v. Collector of Chittor*. The writ
appeal was also dismissed by the High Court. This matter was brought to
this Court (India Cemeilt v. State of Tamil Nadu **) wherein it was held
that H.R.S. Murthy was wrongly decided. Following the decision of th"
India Cement a three-Judge Bench of this Court declared identical levies
D imposed by other States (01issa Cement Ltd. v. State of Olissa***) as
incompetent and void. These decisions not only barred the States fron1
collecting the said cess, but <1uite a few of them were obliged to refund
substantial amounts which had already been collected. Parliament then
came to their rescue and promulgated the Cess and Other Taxes on
Mineral (Validation) Ordinance, 1992 which was replaced by the Act which
E contained only three sections.

In these appeals, it was contended by the appellants that (i) by the
impugned Act Parliament had sought to overturn the decisions of this
Court and the High Courts; (ii) the tax so levied could be operative only
p from the date of enactment of the Act of Parliament; (iii) there could not
be a leyy wholly and exclusively retrospective; (iv) that the leyy under the
Cess and Other Taxes on Mineral (Validation) Act, 1991 being in addition
to the levy under Section 9 of the MMRD Act, could have been effected
only by making a fresh declaration in terms of Entry 54 of List I of Sch.
VII of the Constitution and that in the absence of such a declaration the
G leyy under the Validation Act was incompetent; (v) the leyy under the Ces.s ..
and other Taxes on Mineral (Validation) Act, 1922, being related only 1o
Entry 54 and not Entry 97 of List I of Sch. VII of the Constitution, should
be for regulating the mines or minerals development and the absence of
any material to show that the leyy of the impugned cess/lax was for the
H said purpose, the leyy was bad.
P. KANNADASAN v. STATE 95

Dismissing the appeal, this Court A

HELD : 1. The State enactment mentioned in the Schedule to the

-. impugned enactment viz Cess and Other Taxes on Mineral (Validation)
Act, 1992, did contain provisions creating the levy. These are the very same
provisions n·hich are enacted by Parliament. Section 2(1) of the Cess and
Other Taxes on Mineral (Validation) Act, 1992 says that the said
B
provisions must be deenied to have been enacted and must be deen1ed
always to have been enacted by Parliament. In such a situation, it is idle
to contend that Section 2(1) did not create the levy or the impost. It did.
T11~re is no <1ualitative difference bel\veen Section 3 of the Sugarcane Case
(Validation) Act and Section 2 of the impugned Act. The relevant words C
are the same, viz., "shall be deemed to have been .......... " (119-H; 1211-A-B]

Klishna Chandra Gangopadhayaya v. Union of India, [1975] Supp.
SCR 151, relied on.

- Diamond Sugar Mills Ltd. v. State of U.P., (1961] 3 SCR 243 and
Baijnath Kedia v. State of Bihar, [1969] 3 SCC 838 = (1970] 2 SCR 100,
referred to.

2. There is no set or standard formula to which all Valid~ttion Acts
D

should conform. Parliament is not bound to adopt identical language every E
time it enacts a Validation Act. It is open to it to e1nploy such language as
it chooses. All the Court should see is whether the language employed
achieves the purpose which Parliament set out to achieve. The language
employed in Section 2 of the impugned enactment, does achieve the pur-
pose. (122-B-C]
F
Klislllla Chandra Gangopad!zayaya v. Union of India, (1975] 2 SCC
302 = [1975] Supp SCR 151, relied on.

3. Section 2 of the impugned Act enacts the relevant provisions of
the enactments mentioned in the Schedule with retrospective effect. The G
prov1srnns so enacted do create the levy. Indeed, unless the levy is
validated, recoveries already made cannot be validated. It is for this reason
that the Preamble to the Act says that it is Act "to validate the imposition
and collection of cesses and certain other taxes on minerals under certain
state la\\'s". Once the provisions, which create the levy, are deemed to have
been enacted by Parliament, the levy is very much there with retrospective H
96 SUPREME COURT REPORTS (1996f SUPP. 4 S.C.R.

A effect. Once there is a valid levy, not only the taxes already collected need
not be refunded but the taxes and cesses which have not already been
collected can also be collected. Merely because sub-section (2) inter a/'ia
11
states that cesses or other taxes on n1inerals realised under any such laws
shall be deemed to have been validly..... realised ...... as ff this section had
been in force at all n1aterial times \\'hen such ........ cesses or taxes \Vere
B realised", it does not means that the taxes which were levied but not
collected cannot be collected. The said words in sub-section (2) are not
words of limitation; they are words of validation of put in by way of
abundant caution in view of the judgments and orders of the courts. On
the language of Section 2 which enacts with retrospective effect, !he
C relevant provisions levying cesses and taxes on minerals and also validate
the rules and notifications issued thereunder, it cannot be said that the
levy is validated only for the limited purpose of saving the taxes already
collected, i.e., to stay the refund of taxes already collected. The absence of
a clause or words corresponding to clause (c) in Section 3(1) of the
D
Sugarcane Cess (Validation) Act does not make any difference. The said
clause mer~ly sets out the consequence flowing from the validation con-
tained in the main limb of Section 3(1), by way of abundant cautioni. It
cannot be treated as a substantive provision. The meaning of the words
..
"imposition and collection", occurring in the Preamble, cannot be cut down
by reading them conjunctively. On the contrary, ·the said words indicate
E the intention to validate the imposition as well as collection. 'Collection'
does not mean what is already collected alone. It means future collection
as well. Neither the Preamble nor Section 2 says that what is already
collected alone is validated. [122-F-H; 123-A-C; 124-A-C]]

F 4. Parliament is competent to enact a law applicable only to a part
of the country or to some States in the country, as the case may be. It is
not necessary that every law made by Parliament must necessarily apply
to the entire country as such. Not only this, Parliament is equally entitled
to prescribe different rates of tax in different States if such different rates
are called for in given circumstances. However, \\-'here Parliament im1>oses
G different rates of a tax in different State, it must satisfy the Court that
such distinction does not amount to discrimination and that it is
reasonable in the circumstances and has a purpose behind it. The histori-
cal background of the impugned Act clearly shows the reason behind such
ditferent rates. The challenge in India Ce111e11t* and On·ssa Cen1e11t*** w·as
H not to different rates being levied by different State Legislatures but to the
P.KANNADASAN v. STATE 97

very legislative competence or the State Legislatures to impose the said A
levy. When Parliament is re-enacting those very provisions, it could not
but adopt those very rates. It is really not a case where Parliamentary
enactment is creating a distinct or different treatment. .Distinction and
different treatment was already there over several decades; each State was
prescribing its O\'n rate on the same mineral; nobody ever questioned it
B
as discriminatory; indeed it could not be so questioned; the decisions of
the courts had declared the levy by the State Legislature as competent;
Parliament has intervened and by enacting the impugned law in exercise
of its undoubted power, validated the levy and all that flows from it. In
such circumstance, there was no other way except to do what has actually ·
been done. Therefore, the exercise cannot be f'aulted on the ground of C
violation of Article 14 of the Constitution. (124-D-E; 125-£-G; 126-A-C]

State of Madras v. N.K. Nataraja Mudaliar, [968] 3 SCR 829, relied
on.

- **India Cement Ltd. v. State of Tamil Nadu, [1989] Supp l SCR 692;
***01issa Cement Ltd. v. State of 01issa, [1991] 2 SCR 105; R.V. Barger,
(1908) 6 CLR 41; Sanjeev Coke Manufactwing Company v. Bharat Coking
Ltd., [1983] 1 SCC 147, referred to.
D

5. That the MMRD Act sought to bring out uniformity in taxes and
E
royalties throughout the country does not mean that Parliament cannot
create an excep\ion to the rule it has created by itself. Uniformity in the
rates of tax is an objective ·set out by Parliament in the MMRD Act. It is
not precondition to a law made by Parliament under Entry 54 in List I nor
it is a limitation upon ParliaWent's power. If Parliament has enunciated
the principle, it can also create an exception thereto in appropriate cir- F·
cumstances or to meet an exigency. This is precisely what has been dune
in the instant case. The impugned enactment is both an addition_ and an
exception to Section 9 of the MMRD Act. [126-C-D]

6. The decisions of this Court in India Cement and 01issa Cement
are premised upon the assumption that by virtue of the said declaration, G
the States are totally denuded of the power to levy any ta~es on minerals.
It is for this reason that the State enactments were _declared incompetent
in so far as they purported to levy taxes/cesses on minerals. The denuda-
tion of the State is not partial. It is total. They cannot levy any tax or cess
on minerals so long as the declaration in Section 2 stands. Once the H
98 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A denudation is total, there is no occasion or necessity for any further
declaration of denudation or, for that matter for declarations of denuda-
tion. [127-B-C]

7. What is levied under the impugned enactment is a tax/cess and not
a fee. Even in the matter of fees, it is not necessary that the element of q11id
B pro quo shouid be established in each and every case, for it is well settled
that fees can be both regulatory and compensatory and that in the case of
regulatory fees, the element of qllid pro quo is totally irrelevant. Taxes are
raised for augmenting the general revenues of the State and not for any
particular purpose - much less for rendering a particular service. (127-F-G]
c C01poratio11 of Calc11tta v. Libe1ty Cinema, [1965] 2 SCR 477, relied
on.

8. The impugned Act was indeed enacted and published in April 1992
and Section 1(3) says that the Act shall be deemed to have come into force
D on 15.2.1992. It is, therefore, meaningless to say it has expired or ceased
to have any effect on the 4th day of April, 1991. There are no words
anywhere in the impugned Act indicating that it expires on the expiry of a
particular period or on a particular date. Merely because the cesses and
taxes imposed by it are made effective up to a particular date (4-4-1991),
it does not mean that the statute itself expires on that date. The duration
E
of the levy created by the Act and the life of the Act are two different things;
the!' are not nec~ssarily coextensive. Hence, the said Act cannot be
described as a temporary statute. (128-B-C; H; 129-A]

Maganti Sltbramanyam v State of Andhra Pradesh, [1969] 2 SCC 96;
F Madurai Dist1ict Central Cooperative Bank Ltd. v. Third ITO, (1976] 1 SCR
135, relied on.

9. The object and purpose of the impugned Act is self evident. Since
it is declared by this Court and other High Courts that the State Legisla-
tures are not competent to levy cesses and taxes on minerals by virtue of
G the decla~ation contained in Section 2 of the MMRD Act (made in terms ~
•
of Entry.54 in List I), Parliament stepped in and enacted the relevant
provisions of the State enactments (mentioned in the Schedule) with
retrospective effect from the date of the levy under each of the said
enactments. The power of Parliament to levy such taxes cannot really be
H disputed. If the States have no power to levy such cesses or taxes, it follows
P. KANNADASAN v. STATE 99

that Parliament does have such power. By virtue of the deeming clause A
contained in sub-section (l) of section 2, the relevant provisions of the State
enactment must be deemed to have been enacted on the date they were
enacted by the respective State Legislatures and they must be deemed to
have remained in force u:i to the 4th day of April, 1991. The device a~opted
by Parliament is a well known one. It must be called legislation by incor- B
poration. The effect is as if all the relevant provision of the Schedule Acts
are individually and specifically enacted by Parliament; all those
provisions must be read into Section 2(1). The necessary and logical
conse(1uence flowing therefrom is the creation of levy of all cesses and
taxes, levied by State enactments, by Parliament itself. [106-D-H]
c
10.1 The Constitution of India recognises and incorporates the
doctrine of separation of 1un.vers between the three organs of the State, viz;
the Legislature, the Executive and the Judiciary. Even though the Constitu-
tion has adopted the Parliamentary form of Government where the divid-
ing line between the legislature and the executive becomes thin, the theory D
of separation of powers is still valid. The government postulated by the
Constitution of India is a federal form of government. The subjects in
respect of which the Union and the States can make laws are separately
set out in List I and List II of the Seventh Schedule to the Constitution
respectively. The Constitution has invested the Supreme Court and High
Courts with the power to invalidate laws made by Parliament and the State E
Legislatures transgressing the Constitutional limitations. Where an Act

- made by a State Legislature is invalidated by the courts on the ground that
the State Legislature was not competent to enact it, the State Legislature
cannot enact a law declaring that the judgment of the court shall not
operate; it cannot overrule or annul the decision of the court. But this does p
not mean that the other legislature which is competent to enact that law
cannot enact that law. Similarly, it is open to a legislature tu alter the basis
of the judgment. The new law or the amended law so made can be
challenged on other grounds but not on the ground that it seeks to
inefTectuate or circumvent the decision of court. This is what is meant by
"checks and balances" inherent in a system of government incorporating G
the concept of separation of powers. [111-E-H; 112-A-B]

10.2. The decisions of this Court in India Cenzent and Orissa Cement
clearly meant that the power to levy cess/tax on minerals vested exclusively
with Parliament. Since the Supreme Court is the final arbiter on the H
100 SUPREME COURT REPORTS [1996] SUPP. 4S.C.R.

A interpretation of the Constitution, everybody is bound by the declairation
of law. In the circumstances, Parliament stepped in and enacted the
impugned law, avowedly to bail the States out of the predicament. The
impugned enactment makes this objective clear beyond any ~oubt. At the
same time Parliament does not purport to clothe the State Legislatures
with the powers which they do not possess. Parliament had already
B
deprived the State Legislatures of the power to levy tax on minerals by
making the declaration contained in Section 2 of the MMRD Act '" far
back as 1957. The said declaration remains intact which means that the
States have no power to levy any tax or cess on minerals so long :~s the
said declaration remains in force. Parliament, therefore, adopted the only
C legislative course open to it in the circumstances. It created thos" very
levies with retrospective effect by enacting the impugned law. Parliament,
being empowered to make a law with retrospective effect, is entitled to
make the law effective for such anterior period as it thinks appropriate.
In cannot be said that uniess the levy created with retrospective effect is
D also kept alive on the date the law is enacted by Parliament, such a levy
would be incompetent. This would a1nount to evolving a principle unknown
to law and would also a1nount to creating a fetter on Parliament for which
there is no basis in principle. (112-F-H; 113-A; D-E]

**India Cement Ltd. v. State of Tamil Nadu, (1989] Supp 1 SCIR 692;
E 01issa Cement Ltd. v. State of 01issa, [1991] 2 SCR lll5, explained.

*H.R.S. Mwthy v. Collector of Chittoor, (1964] 6 SCR 666; Indira
Ne/1111 Gandhi v. Raj Narain, (1976] 2 SCR 347; Roi Ramakiishna v. State
of Bihar, (1964] 1 SCR 897; Jaora Sugar Mills (P) Ltd. v. State of M.P.,
[1966] 1 SCR 523 and L/C v. DJ. Bahadu, (1981] 1 SCC 315 = (1981]
F SCC (L & S) 111, referred to.

Madan Mohan Pathak v. Union of India, (1978] 3 SCR 334, distin-
guished.

Comoiin Match Industlies (P) Ltd. v. State of Tamil Nadu, JT (1996)
G
5 SC 167, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9847 of
1996 Etc. Etc.

H From the Judgment and Order dated 27.6.94 of the Madras High
P. KANNADASAN v. STATE [B.P. JEEV AN REDDY, J.] 101

Court in W.P. No. 14178 of 1989. A
M. Chandrasekharan, Additional Solicitor General, A.K. Ganguli,
K.N. Shkula, T. Thiagarajan, K. Parasaran, V.A. Bobde, Dr. A.M. Singhvi,
P.S. Nair, B. Sen, Guiab Gupta, G.L. Sanghi, R.N. Sachthey, Sr. Advs. V.
Ramasubramaniam, V. Krishnamurthy, (Manish Mishra) for Fox Manda!
& Co., V.A. Subba Rao, A.D.N. Rao, Arvind Kumar Sharma, T. Harish B
Kumar, Krishnamurthi Swami, K.K. Mani, Nikhil Nayyar, T.V.S.N. Chari,
B.B. Singh, Mahabir Singh, Praveen Kumar, Suman J. Khaitan, Shahid
Rizvi, T.G.N. Nair, Satish K. Agnihotri, Ashok Mathur, Anip Sachthey,
C.D. Singh, M. Munshi, B.B. Singh, Abbay Sapore, Vivek Gambir, Nccraj
Sharma, Ajit Kumar Sinha, P.R. Seetharaman for the appearing parties. c
The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Leave granted in the Special Leave Peti-
tions.
D
The appellants-writ petitioners are challenging the validity of the
Cess and Other Taxes on Minerals (Validation) Act, 1992 (being Act 16
of 1992) enacted by Parliament. The High Courts have repelled the attack.
It is renewed here.

FACTUAL CONSPECTUS: E

Section 115 of the Tamil Nadu Panchayats Act, 1958 levied in every
Panchayat Development Block a local cess @ 0.45P on every rupee of land
- revenue payable to the Government in respect of any land for every fasli.
The explanation to the section defined "land revenue" to include inter alia F
royalty and lease amount payable in respect of the land. The validity of the
levy was challenged in the Madras High Court. A learned Single Judge
dismissed the writ petition holding that being a tax on land, it is within the
legislative competence of the State Legislature. The learned Judge followed
the decision of this Court in H.R.S. Munhy v. Collector of Chittom·, [1964]
S.C.R. 666. A writ appeal against the decision of the learned Single Judge G
was dismissed, again following the decision in H.R.S. Mwthy. The matter
was brought lo this Court. It was heard ultimately by a seven-Judge Bench
(India Cement Limited v. State of Tamil Nadu, [1989] Suppl. l S.C.R. 692
which held, the said levy to be outside the legislative competence of the
Tamil Nadu Legislature. This Court held that (1) the levy cannot be H
102 SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A sustained under and with reference to Entry 49 of List-II of the Seventh
Schedule to the Constitution of India as a tax on land; (2) The levy is a
levy on minerals and is relaiable to Entries 23 and 50 of List-II; (3) that
on account of the declaration made by Parliament contained in Section 2
of the Mines and Minerals (Development an<:) Regulation) Act, 1957,
(M.M.R.D. As:t), the State legislatures have been denuded of the power to
B
levy tax on minerals. Regulation of mines and mineral development takes
within its purview the levy of tax on minerals. Section 9 of the M.M.R.D.
·Act, this Court held, provides for levy of royalty/dead rent on minerals.
The State legislatures cannot,. therefore, impose any tax on minerals. H.R.S.
Mlllt/Jy was wrongly decided. Having so declared, this Court, however,
c directed that the said decision shall only have prospective effect. This was
for the reason that the States have been levying and collecting the said c:ess
on the basis of the decision of this Court in H.R.S. Mlllthy. The decision
in India Cement was rendered on 25th October, 1989.

D Following the decision in India Ceme11t, a three-Judge Bench
declared identical levies imposed by the States of Orissa, Bihar and Mad-
hya Pradesh as incompetent and void 01issa Ceme11t Limited v. State of
Olissa, [1991] 2 S.C.R. 105. Having regard lo the fact that decisions of the
High Courts in Orissa, Bihar and Madhya Pradesh (which were the sub-
ject-matter of appeals before this Court) were rendered on different dates,
E the Bench directed that the said decision shall be operafr e prospectively
with effect from the date of the said judgment, i.e., 4th Ar:ril, 1991 in the
case of State of Bihar, with effect from December 22, 191:9 in the case of
Orissa and with effect from March 28, 1989 in the case of Madhya Pradesh.

F The aforesaid decisions of this Court had a serious impact on !he
revenues of several State Governments. Not only were they barred from
collecting the ·said cess, .quite a few of them were obliged to refund
substantial amounts which had already been collected. It is well known that
the State Governments in this country are perpetually strapped for funds.
The decisions made their situation more acute. The ParJiamenl then came
G to their rescue and promulgated The Cess and other Taxes on Minerals
(Validation) Ordinance, 1992 on February 15, 1992. The Ordinance has
been replaced by Act 16 of 1992, published in the Gazette of India on 4th
April, 1992. The Act contains only three sections. Having regard to the
several submissions made with respect to its validity, it is appropriate to
·H read all the three sections including the schedule appended thereto :
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 103

"An Act to validate the imposition and collection of cesses and A
certain other taxeson minerals under certain State laws.

Be it enacted by Parliament in the Forty-third Year of the
Republic of India as follows :
'
Prefatmy Note- Statement of Objects and Reasons. - Certain State B
Acts imposing cesses or other taxes on minerals had been struck
down by Courts including the Supreme Court of India in different
cases. As a result of judgments in these cases, State Government
became liable to refund cesses and other taxes collected by them.

- Since refund was likely to have a serious impacl on State revenues
of the concerned State governments and having regard to the fact c
thal it is extremely difficult to ensure that the levies collected are
refunded to the large number of end users of minerals who have
actually borne the burden of such levies, the Cess and other Taxes
on Minerals (Validation) Ordinance, 1992 (Ord. 7 of 1992) was
promulgated by the President on the 15th February, 1992, to D
validate collection of such levies by State Governments up to the
4th day of April, 1991.

2. The Bill seeks to replace the aforesaid Ordinance.

I. Sho1t title, extelll and commencement. - (1) This Act may be E
called the Cess and Other Taxes on Minerals (Validation) Act,
1992.

(2) It extends to the whole of India.
-- (3) It shall be deemed to have come into force on the 15th day of
February, 1992.
F

2. Validation of cerlain State laws and actions taken and things done
thereunder. - (1) The Laws specified in the Schedule to this Act
shall be, and shall be deemed always to have been, as valid as if
the provisions contained therein relating to cesses or other taxes G
on minerals had been enacted by Parliament and such provisions
shall be deemed to have remained in force up to the 4th day of
April, 1991.

(2) Notwithstanding any judgment, decree or order of any
court, all actions taken, things done, rules n1ade, notifications H
104 SUPREME COURT REPORTS 11~96] SUPP. 4S.C.R.

A issued or purported to have been taken, done, made or issued and
cesses or other taxes on minerals realised under any such laws shall
be deemed to have been validly taken, .done, made, issued or
realised, as the case may be, as if this section had been in force at
all material times when such actions were taken, things were done,
rules ~ere made, notifications \Vere issued, or cesses.or other t£1xes
B were realised, and no suit or other proceeding shall be maintained
or· continued in any court for the refund of the cesses or other
taxes realised under any such laws.

(3) For the removal of doubts, it is hereby declared that nothing
, in sub-section (2) shall be construed as preventing any person from
c claiming refond of any cess or tax paid by him in excess of the
amouni due from him under any such laws.

3. Repeal a11d savings. - (1) The Cess and Other taxes on Minerals
(V~lidation) Ordinance, 1992 (Ord. 7 of 1992) is hereby repealed.

D (2) Notwithstanding such repeal, anything done or any action
taken under the said Ordinance shall be deemed to have been done
or taken under the corresponding provisions of this Act.

THE SCHEDULE
E
(See Section 2)

1. The Andhra Pradesh (Mineral Rights) Tax.Act, 1975 (A.P. Act
14 of 1975).

F 2. The Andhra Pradesh (Andhra Area) District Boards Act, 1920.

3. The Andhra Pradesh (Telengana Area) District Boards Act,
1955.

4. The Cess Act, 1880 (Bengal Act 9 of 1880) as applicable in the
G State of Bihar.

5. The Karnataka Zilla Parlshads, Taluk Panchayat Samitis, Man-
da! Panchayat and Nyaya Panchayats Act, 1983 (Karnataka Act 20
of 1985).

H 6. The Karnataka (Mineral Rights) Tali act, 1984 (Karnataka Act
P. KANNADASAN v. STATE [B.P. JEEV AN REDDY,J.J 105

32 of 1984). A
7. The Madhya Pradesh Karadhan Adhiniyam, 1982 (M.P. Act 15
of 1982).

8. The Madhya Pradesh Upkar Adhiniyam, 1982 (M.P. Ace 1 of
1982). B
9. The Maharashtra Zilla Parishads and Panchayat Samitis
(Amendment and Validation) Act, 1981 (Maharashtra Act 46 of
1981). .

10. The Orissa Cess Act, 1962 (Orissa Act II of 1962). c
11. The Tamil Nadu Panchayat Act, 1958 (Tamil Nadu Act XXXV
of 1958).
The Statement of Objects and Reasons appended to the Bill states
that cesses and other taxes on minerals imposed by certain State govern- D
ments were struck down by this Court, on account of which they have
become liable to refund cesses and other taxes collected by them. Since
such refund is likely to have serious impact on the revenues of the con-
cerned State Governments and also because it is extremely difficult to
ensure that the levies collected are refunded to the large number of end
mers of minerals who have actually home the burden of such levies, the E
said Act was being made by Parliament. The Preamble to the Act states
that it was an Act "to validate the imposition and co//ection of cesses and
11
certain other taxes on minerals under certain State laws The Act is •

deemed to have come into force on February 15, 1992, the date on which
the Ordinance 7 of 1992 was promulgated by the President. Section 2 which
contains three sub-sections is the main provi.<.;ion in the Act. Sub-section F
(1) says that the provisions contained in the laws specified in the Schedule
to the Act relating to cesses and other taxes on minerals, shall be and shall
be deemed always to have been as valid as if the provisions contained
therein had been enacted by Parliament and that such provisions shall be
deemed to have remained in force upto the 4th day of April, 1991. G
Sub-section (2) elaborates and elucidates the content of sub-section (1).
Having regard to the decisions of this Court and the High Courts on the
question of validity of cesses and taxes on minerals imposed by the States,
the sub-section opens "1th a non-obstante clause "notwithstanding any
judgment, decree or order of any court". The sub-section then provides
three things. It firstly says that "all actions taken, things done, rules made, · H
106 SUPREME COURT REPORTS (1996) SUPP. 4 S.C.R.

A notifications issued or purported to have been taken, done, made or
issued ...... shall be deemed to have been validly taken done, ·made or
issued ........ as the case may be, as if this section had been in force at all
material times when such actions were taken, things were done, rules were
made and notifications were issued". Secondly, it says that "cesses and other
taxes on minerals realised under any such laws shall be deemed to have
B been validly....... realised ...... as if this section had been in force at all
material times when such ........ cesses or other taxes were realised". The
third thing provided by the sub-section is the declaration that "no suit or
other proceeding shall be maintained or continued in any court for the
refund of the cesses or other taxes realised under any such laws". Sub-sec·
c tion (3) is clarificatory in nature. It starts with the words "for the removal
of doubts" and declares that nothing in sub-section (2) shall be construed

D
as preventing any person from claiming refund of any cess or tax paid by
him in excess of the amount due from him under any of the laws mentioned
in the Schedule. It is a case of stating the obvious by way of abundant
caution.

The object and purpose of the Validation Act is self-evident. Since
'
it was declared by this Court (and other High Courts) that the State
legislatures were not competent to levy cesses and taxes on minerals by
virtue of the declaration contained in Section 2 of the M.M.R.D. Act (made
in terms of Entry 54 in List-I of the Seventh Schedule to the Constitution),
E the Parliament stepped in and enacted the relevant provisions of the State
enactments (mentioned in the Schedule) with retrospective effect from the
date of the levy under each of the said enactments. The power of the
Parliament to levy such taxes cannot really be disputed. If the States have
no power to levy such cesses or taxes, it follow that Parliament does have
F such power. By virtue of the deeming clause contained in sub-section (1)
of Section 2, the relevant provisions of the State enactments must be
deemed to have been enacted on the date they were enacted by the
respective State Legislatures and they must be deemed to have remained
in force upto the 4th day of April, 1991. The device adopted by Parliament
G is a well-known one. It may be called legislation by incorporation. The
effect is an if all the relevant provisions of the Scheduled Acts are in-
dividually and specifically enacted by Parliament; all those provisions must
be read into Section 2(1). The necessary and logical consequence flowing
therefrom is the creation of levy of all the cesses and taxes, levied by the
respective State enactments, by Parliament itself. The provisions so enacted
H are, however, declared to be in force upto the 4th day of April, 1991.
P. KANNADASAN v. STATE(B.P.JEEVAN REDDY,J.) 107

CONTENTIONS·OF THE PARTIES: A
S/Sri K. Parasaran, G.L. Sanghi, A.K. Ganguli, B. Sen, V.A. Bobde,
Abhishek Singhvi, Rohinton F. Nariman and Ajit Kumar Sinha urged the
following contentions in support of their attack upon the validity of the Act:

1. The impugned Act is a clear case of the Parliament seeking to B
over- turn the decisions rendered by this Court and the High Courts in
exercise of their constitutional power and are, therefore, incompetent and
ineffective.

· 2. The language in Section 2 does not achieve the purpose set out in
the Preamble. The Parliament must first make a law creating the levy
c
before it can create a fiction that the law must be deemed to have been
made on an anterior date, i.e., before giving it retrospective effect. The
Parliament cannot relegate even the law-making function to the realm of
fiction. Jn other words, without making a law, the Parliament cannot
declare that the law shall be deemed to have been made by it on an anterior D
date. Section 2 does not bring into existence any levy/imposition. The

... language employed in Section 2 is wholly inadequate for the purpose. The
section is a mere exercise in futility .

3. Even if it is held by this Court for any reason that Section 2 has E
indeed created the levy, the creation of the said levy is for the limited
purpose of enabling the State Governments to retain what they have
already collected. Section 2 doses not empower the Parliament or its
agencies to collect taXes which were not collected on or before the 4th day
of April, 1991.. In other words, after 4th day of April, 1991, any tax or cess
levied under the Act (Which means the Scheduled enactments) remaining F
uncollected/unrealised cannot be collected or realised. The idea was to
close the chapter on 4th day of April, 1991: whatever is collected shall not
be refunded and whatever is not collected shall not be collected thereafter.

4. The effect of Section 2 is that cesses and taxes on minerals arc
levied in different States at different rates. This is because the rate of G
tax/cess in each of the concerned States was different. A Parliamentary
enactment cannot levy the same tax/cess at different rates in different
States of the country. It would be discriminatory and violative of Article l4
of the Constitution. No justification has been put forward by the Union of
India in support of such discriminatory treatment. This discriminatory levy H
108 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A is antithetical to the basic object underlying M.M.R.D. Act, viz., levy of
uniform royalties/taxes. Indeed, the Act does not extend to the entire
country but only to certain States in the country.

5. The declaration made by Parliament in Section 2 of the M.M.R.D.
·Act is not an absolute and unlimited one. Tbe denudation of the State
B legislatures is only to the extent provided in the said Act. Section 9 is one
of the provisions of M.M.R.D. Act defining lhe extent of denudation. The
impugned levy created by Section 2 of the impugned Act is in addition to
the levy under Section 9. In other words, the extent of denudation has been
enhanced by the impugned levy. If so, such levy/denudation could have
C been effected· only by making a fresh declaration in terms of Entry 54 of
List-I of the Seventh Schedule to the Constitution. No such declaration
has been made by Parliament and, therefore, the levy is incompetent and
ineffective.

6. The levy in question can be related only to Entry 54 of List-I. It
D cannot be related to Entry 97 of List-I. It so, the levy of cess/tax should be
for the purposes of regulating the mines or mineral development. Absolute-
ly no material is placed before the Court to show that the levy of the
impugned cess/tax is for the said purpose.

E 7. The impugned enactment is a temporary statute. Its effect is only
upto 4th day of April, 1991. On that date, the. purpose of the Act comes
to an end. Thereafter, it is a dead-letter. Since Section 6 of the General
Clauses Act does not apply in the case of a temporary statute, no action
can he taken and no recoveries can be made after 4th day of April, 1991.
Indeed, the relevant provisions of the enactments mentioned in the
F Schedule to the Act are enacted and kept alive only upto 4th day of ApriL,
1991 which means that even the provisions relating to recovery also cease
to have any force after the said date. Since the recovery machinery is not
available and is not in existence after the said date, no recoveries can be
made after the said date. Thb sequence of events, the statement of objects
G and reasons and the language in sub-section (2) of Section 2 all bear out
the fact that the Act was intended merely to save the collections already
made and not t6 enable the Union of India or its agencies to recover the
taxes or cesses not realised or recovered on or before 4th day of April,
1991. It is significant to note that the impubmed Act does not contain any
provision corresponding tp any of the clauses in Section 6 of the General
H Clauses Act.
P. KANNADASAN v. STATE (B.P. JEEVAN REDDY,J.] 109

Sri Chandrasekharan, learned Additional Solicitor General, Sri . A
Guiab C. Gupta and Sri K. N. Shukla, appearing for the Governments of
Tamil Nadu, Madhya Pradesh and the Government of India respectively
disputed the correctness of the several contentions urged on behalf of
appellants-petitioners and submitted that Section 2 of the impugned enact-
ment is perfectly adequate and effective to create the levy (by Parliament)
of cesses and taxes which were earlier imposed by the State enactments B
but which enactments were declared to be incompetent by this Court and
the High Courts. They submitted that Parliament was competent to and
did create a new levy with retrospective effect but limited its operation upto
4th day of April, 1991. The learned counsel submitted that the impugned
enactment is not and cannot be described as a temporary statute. The
impugned Act has not expired. It is very much alive and continues to be c
on the statute book. Merely because the levy created thereunder is con-
fined to a particular period, it does not mean earlier that the Act has
expired or that it is a temporary statute. Learned counsel also submitted
that the different rates of levy created by Section 2 cannot be described as
discriminatory. Having regard to the context in which the impugned Act D
came to be enacted - historical factors - it could not have been otherwise.
Levy of a tax at different rates in different States of the country is not an
unknown feature. Such a practice already exists. The Parliament is com-
petent to enact a law applicable only to a part of the country. Classification
on the grounds of geographical division is a well-known and well-accepted
one. It is also not necessary, they submitted, that there should be a fresh E
declaration in terms of Entry 54 of List-I whenever the rate of tax or royalty
is enhanced or any of the provisions of the M.M.~.D. Act' are amended.
The impugned enactment is in the nature of an ·addition or a provisio to
the M.M.R.D. Act. The States have already been denuded of the power to
levy any tax or cess on minerals. There is no fresh denudation now. The
Parliament is only adding to the tax which it has already imposed and that F
too for a limited period. Learned counsel submitted that identical
provisions have already been upheld by this Court and that there is no
reason to take a different view.

THE RELEVANT PROVISIONS OF THE CONSTITUTION
AND THE M.M.R.D. ACT.: G

For a proper appreciation of the questions arising herein, it is
necessary to notice certain relevant provisions of the Constitution and the
M.M.R.D. Act. Entries 23 and 50 of List-II of the Seventh Schedule to the
Constitution read thus : H
110 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R ..

A 23. Regulation of mines and mineral development subject to the
provisions of List I with respect to regulation and development
under the control of the Union.

50. Taxes on mineral rights subject lo any limitations imposed by
Parliament by laws relating to mineral development."
B
These entries which empower the States to make laws with respect
to regulation of mines and mineral development and to levy taxes on
mineral rights are, however, subject to the provisions of List-I with respect
to regulation and development ;mder the control of the Union. Entry 54
of List-I empowers the Union to make laws regulating the mines and
c mineral development to the extent such regulation and development under
the control of Union is declared by Parliament by law to be expedient in
the public interest. Entry 54 of List-I reads :
•
"54. Regulation of mines and mineral development to the extent
D to which such regulation and development under the control of
Union is declared by Parliament by law to be expedient in the
public interest."

Entry 97 of List-I may also be set out :

E "97. Any other matter not enumerated in List II or List Ill including
any tax not mentioned in either of those Lists."

The Parliament enacted the Mines and Minerals (Regulation and
Development) Act, 1957, Section 2 whereof contains the declaration in
terms of Entry 54 of List-I. It reads :
F
"2. Declaration as to expediency of Union Control :- It is hereby
declared that it is expedient in the public interest that the Union
should take under its control the regulation of mines and the
development of minerals to the extent hereinafter provided."
G The Act regulates the prospecting and mining operations, prescribes
the royalties payable in respect of mining leases, provides for deve.lopment
of minerals and certain other miscellaneous and incidental provisions.
Section 9 read with second Schedule to the Act prescribes the rates of
royalty payable by the lessees in respect of each mineral. Section 9-A
H provides for payment of dead-rent which is in the nature of a minimum
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.) 111

royalty. We need not refer to the other provisions in the Act for the A
purposes of this case.

PART - II

We may now proceed to deal with the contentions urged by the B
learned counsel for appellants-petitioners, in the order set out hereinabove.

The first submission of the learned counsel for appellants-petitioners
is that by enacting the impugned Act, the Parliament has sought to annul
and invalidate the decisions of this Court in India Cement and 01issa
Cement which it is not competent to do. It is submitted that this Court had c
issued a n1andamus directing certain State Governments to refund the taxes
and cesses collected by them under the invalid laws. Some of the States
had also given undertakings to this Court to refund the taxes/cesses col-
lected in the event of the success of appellants-petitioners. The mandamus
so issued cannot be invalidated by making a law. The undertaking given by D
the State is binding upon it. Strong reliance is placed upon the decisions
of this Court in Madan Mohan Pathak v. Union of India, (1978] 3 S.C.R.
334 and A. V. Nachane v. Union of India, (1982] 2 S.C.R. 246. It is not
possible to agree. It must be remembered that our Constitution recognises and
incorporates the doctrine of separation of powers between the three organs
of the State, viz., Legislature, Executive and the Judiciary. Even though the E
Constitution has adopted the parliamentary form of government where the
dividing line between the Legislature and the Executive becomes thin, the
theory of separations of powers is still valid. Ours is also a federal form of
government. The subjects in respect of which the Union and the States can
make laws are separately set out in List,! and List-II of the Seventh F
Schedule to the Constitution respectively. (List-III is, of course, a concur-
rent list.) The Constitution has invested the Supreme Court and High
Courts with the power to invalidate laws made by Parliament and the State
legislatures transgressing the constitutional limitations. Where an Act made
by a State legislature is invalidated by the Courts on the ground that the G
State legislature was not competent to enact it, the State legislature cannot
enact a law declaring that the judgment of the court shall not operate; it
cannot over-rule or annul the decision of the court. But this does not mean
that the other legislature which is competent to enact that law cannot enact
that law. It can. Similarly, it is open to a legislature to alter the basis of the
Judgment as pointed out by this Court in Shri P1ithvi Cotton Mills v. Broach H
112 SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R..

A Bomugh Municipality, (1970] 1 S.C.R. 388 - all the while adhering to the
CfOnstitutional limitations; in such a case, the decision of the coart becomes
ineffective in the sense that the basis upon which it is rendered, is changed.
The new law or the amended law so made can be challenged on other
grounds but not on the ground that it seeks to incffectuale or circumvent
the decision of the court. This is what is meant by "checks and balances"
B
inherent in a system of government incorporating the concept of separation
of powers. This aspect has been repeatedly cmphasi.sed by this Court in
numerous decisions commencing from Shri P1it/1vi Cotton Mills. Under our
Constitution, neither. wing is superior to the other. Each wing derives its
power and jurisdiction from the Constitution. Each must operate within
c the sphere allotted to it. Trying lo.make one wing superior to other would
be to introduce an imbalance in the system and a negation of the basic
concept of separation of powers inherent in our system of government.
Take this very case. The State legislatures enacted provisions levying
cesses/laxes on minerals. They thought that they were entitled lo do so by
·o virtue of Entry 50 of List-II of the Seventh Schedule and that the enactment
of the M.M.R.D. Act by the Parliament an'd the declaration contained in
Section 2 thereof did not deprive them of the legislative power conferred
by the said entry. A Constitution Bench of this Court in H.R.S. Mwthy,
upheld their stand and affirmed their belief. Several years later, a larger
E Bench of this Court overruled H.R.S. Mwthy in India Cement and ruled
that by virtue of the declaration contained in Section 2 of the M.M.R.D.
Act and the provisions of the said Act, the State legislatures are denuded
of their power to levy any tax on minerals. Entry 50 in List-II became
practically a dead letter. Provisions in several State enactments levying
cess/tax on minerals were accordingly invalidated with effect from different
F dates. The decisions of this Court clearly meant that the power to levy
cess/tax on minerals vested exclusively with the Parliament. Since this Court
is the final arbiter on the interpretation of the Constitution, everybody was
bound by the said declaration of law. In the circumstances, the Parliament
stepped in and enacted the impugned law, avowedly to bail out States of
G the predicament aforementioned; the impugned enactment makes this
objective clear _beyond any doubt. At the same time, it should be noted that
Parliament does not purport to clothe the State legislatures with the power
which they do not possess. The Parliament had already deprived the State
legislatures of the power to levy tax on minerals by making the declaration
H contained in Section 2 of the M.M.R.D. Act as far b"ck as 1957. The said
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 113

declaration remains intact which means that the States have no power to A
levy any tax or cess on minerals so long as the said declaration remains in
force. The Parliament, therefore, adopted the only legislative course open
to it in the circumstances. It created those very levies with retrospective
effect by enacting the impugned law. Section 2(1) says that the relevant
prO\;sions of the enactments mentioned in the Schedule to the Act shall
B
be deemed to have been enacted by Parliament on the date they were
enacted by the respective legislatures and that such provisions shall be
deemed to have remained in force upto 4th day of April, 1991. It is not
suggested that Parliament is not competent to levy a tax or cess with
retrospective effect. It is, however, suggested that the tax so levied must
also be operative and effective on the date the enactment is made. There c
cannot be a levy which is wholly and exclusively retrospective, it is argued.
We see no warrant for reading such a restriction upon the power of the
Parliament. If the Parliament is empowered to make a law with retrospec-
tive effect, it is entitled to make the law effective for such anterior period
as it thinks appropriate. It cannot be said that unless the levy created with D
retrospective effect is also kept alive on the date the law is enacted by
Parliament, such a levy would be incompetent. This would amount to
evolving a principle unknown to law and would also amount to creating a
fetter on Parliament for which there is no basis in principle. We are also
unable to see any substance in the submission that by virtue of the im-
pugned enactment, the Parliament has tried to annul the judgments of this E
Court. On the contrary, the Parliament has accepted the law declared by
this Court and has accordingly enacted the law itself, about whose legisla-
tive competence there can be no serious question.

The decisions in Madan Mohan Pathak and Nachane, we must say, F
have not bearing on this question. Even so, having regard to the strong
reliance placed thereon by Sri G.L. Sanghi, it would be appropriate to deal
with the facts and principle of the said decisions, to illustrate how the said
decisions are wholly irrelevant to the questions concerned herein. First, the
decision in Madan Mohan Pathak.
G
In June 1974, a settlement was arrived at between the Life Insurance
Corporation and its employees relating to the terms and conditions of
service of Class lII and Class IV employees including the bonus payable to
them. Clause 8(ii) provided for payment of annual cash bonus, arrived at
by applying a particular formula. The settlement was valid ~or a period of H
114 SUPREME COURT REPORTS [1996) SUPP. 4 S.C.R.

A four yeas and was to continue until a new settlement was arrived at. After
the coming into force of the Payment of Bonus (Amendment) Act, 1976,
the Central Government decided that the employees of establishments not
covered by the Payment of Bonus Act would not be eligible for payment
of bonus but an ex gratia payment in lieu of bonus would be made to them.
Life Insurance Corporation was one of the establishments to whom the
B
Payment of Bonus Act did not apply. Pursuant to the said decision, the
Government of India advised the Corporation to stop paying bonus in
accordance with clause S(ii) of the aforesaid settlement. The Corporation
stopped the payment whereupon the employees approached the High
Court of Calcutta by way of a v.Tit petition. A learned Single Judge allowed
c the writ petition and issued a mandamus directing the Corporation to pay
bonus in accordance with clause S(ii) of the Settlement. The Corporation
preferred a Letters Patent Appeal against the said decision. While the said
appeal was pending, Parliament enacted the Life Insurance Corporation
(Modification of Settlement) Act, 1976. When the Letters Patent Appeal
D was taken up, the Corporation represented that in view of the said Act
there was no necessity for proceeding with the appeal. The Division Bench
accordingly dismissed the Letters Patent Appeal with the result that the·
mandamus issued by the learned Single Judge continued to be operative
and effective. The employees of the Corporation filed fresh writ petitions
E in this Court challenging the constitutional validity of the Life Insurance
Corporation (Modification of Settlement) Act, 1976 which were allowed.
Three opinions were rendered by the learned Judges. Bhagwati, Krishna
Iyer and Desai, JJ. rendered one opinion, Chandrachud, Fazal Ali and
Singhal, JJ., a separate short opinion and Beg, C.J. another opinion. We
may notice the ratio of each of these three opinions. Bhagwati, J. held that
F
the impugned Act did not refer to and did not purport to supersede or
nullify the settlement between the Corporation and its employees. In the
words of Bhagwati, J ., "unfortunately the judgment of the Calcutta High
Court remains almost unnoticed and the impugned Act was passed in
ignorance of that judgment.. ...... Section 3 of the impugned Act provided
G that the provisions of the settlement insofar as they relate to payment of
annual cash bonus to Class III and Class IV employees shall not have any
force or effect and shall not be deerned to have had any force or effect
from !st April, 1975 .... This right under the judgment was not sought to be
taken away by the impugned Act. The judgment continued to subsist and
H the Life Insurance Corporation was bound to pay annual case bonus ...... ".
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 115

The learned Judge remarked that the Corporation committed a grave error A
in withdrawing the Letters Patent Appeal in view of the impugned enact-
ment. Had they persisted with the appeal and brought the aforesaid Act
to the notice of the Court, the Letters Patent Appeal would certainly have
been allowed. But as a result of the erroneous course adopted by the
Corporation, the learned Judge remarked, the mandamus issued by the B
learned Single Judge remained effective and became final. The learned
Judge, it is relevant to note, cited with approval the law laid down by this
Court in Slui P1ithvi Cotton Mills but distinguished it by pointing out that
the 1976 Act concerned before them (inMadan Mohan Pathak) purported
to merely deny the benefit of settlement to the employees which settlement
was directed to be implemented by means· of a mandamus issued by the C
Calcutta High Court and hence, the principle in Slui P1ithvi Cotton Mills
did not help the Life Insurance Corporation. This is what the learned Judge
said:

"It is difficult to see who this decision given in the context of a D
validating statute can be of any help to the Life Insurance Cor-
poration. Here, the judgment given by the Calcutta High Court,
which is relied upon by the petitioners, is not a mere declaratory
judgment holding an impost or tax to be invalid, so that a validation
statute can remove the defect pointed out by the judgment amend-
ing the law with retrospective effect and validate such impost or E
tax."

The learned Judge then proceeded to examine the validity of enact-
ment on the footing that it did take away the benefit of bonus vesting in
the employees of the Corporation by virtue of clause S(ii) to the Settlement F
and held it to be violative of Article 31(2) of the Constitution. He declared
it void on that ground. Chandrachud, Fazal Ali and Singhal, JJ. delivered
a two-line order agreeing with the opinion of Bhagwati, J. that the im-
pugned enactment was violative of Article 31(2) and saying further that
they do not think it necessary to express any opinion on the effect of the G
judgment of the Calcutta High Court aforementioned. Beg, C.J. observed,
in the first instance, that though Section 11(2) of the Life Insurance
Corporation Act empowered the Central Government to alter the condi-
tions of service of the employees, the Central Government did not choose
to resort to that provision but instead Parliament chose to enact the Act
impugned therein, depriving the employees of their bonus. The impugned H
116 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A Act took away the benefit conferred by the mandamus issued by the
Calcutta High Court upon the employees. This amounts to exercise of
judicial power by Parliament, which has been held to be bad in Indira
Neluu Gandhi v. Raj Narain, [1976] 2 S.C.R. 347. The learned Chief
Justice then held the impugned enactment to be violative of Article 19(1)(1)
of the Constitution and not saved by Article 19(6).
B
While appreciating the ratio of the said opinions, it is necessary to
bear in mind that it was not a case where the High Court either struck
down a statutory provision nor was it a case \Vhere a statutory provision
was interpreted in a particular manner or directed to be implemented. It
C was also not a case where the statutory provision, on which the judgment
was based, was amended or altered to remove/rectify the defect.

Now of the seven learned Judges, only Beg, C.J. put forward as one
of the grounds for allowing the writ petition, the theory that the mandamus

D
issued by the learned Single Judge of the Calcutta High Court having
become final could not be nullified by Parliament. No other learned Judge
adopted that reasoning. As pointed out hereinabove, three learned Judges
for whom Bha[,>wati, J. spoke, held that the settlement remained untouched
.
by the impugned Act and, therefore, settlement continued to be an force,
and that if the Act is taken as nullifying the settlement, the Act is bad being
E violative of Article 31(2). Three other learned Judges, Chandrachud, Faza\
Ali and Singhal, JJ. agreed with Bhagwati, J. only to the extent that the Act
was violative of Article 31(2).

The observations of Bhagwati, J. extracted hereinabove - upon which
Sri Sanghi places strong reliance - indeed emphasise the fact that the 1976
F Act was passed in ignorance of the mandamus issued by High Court and
that the Act did not touch the decision of the High Court in any manner.
These observations cannot be read to support the contention that where a
mandamus issued is premised on the footing that State legislatures have no
legislative power to impose the disputed levy, the Parliament (which is
G undoubtedly competent to impose the said levies) cannot make a law
imposing the said levies. As pointed out earlier, the majority ju:lgment of
Bhagwati, J. did indeed affirm the statement of law in Slui Piithvi Cotton
Mills, which we may quote here only with a view to emphasise the principle.
Hidayatullah, C.J., speaking for the Constitution Bench held :

H "When a legislature sets out to validate a tax declared by a court
P.KANNADASAN v.STATE[B.P.JEEYANREDDY,J.] 117

to be illegally collected under an ineffective or invalid law, the A
cause for ineffectiveness or invalidity must be removed before
validation can be said to take place effectively. The most important
condition is that the legislature must possess the power to impose
the tax, for if it does no~ the action must ever remain ineffective
and illegal. Granted legislative competence it is not sufficient to B
declare merely that the decision of the court shall not bind, for
that is tantamount to reversing the decision in exercise of judicial
power which the legislature does not possess or exercise. A Court',
decision must always bind unless the conditions on which it is based
are so fundamentally altered that the decL,ion could not have been
given in the altered circumstances. 11 c
The mandamus issued by this Court was against the States and not
against the Union or the Parliament. This Court did not say that Parliament
had no power to impose the said levies. We are also of the opinion that
the decision in Madan Mohan Pathak must be read and understood in the
particular facts of that case and that it would not be reasonable to read
r
that decision as militating against, or as over-turning the series of decisions
of this Court on the subject including Rai Ramakiishna v. State of Bihar,
(1964] 1 S.C.R. 897, Slui P1ithvi Cotton Mills and Joara Sugar Mills v. State
of Madhya Pradesh, [1966] 1 S.C.R. 523.
E
Now, coming to the decision in Nachane,-it is indeed a Sl.quel to the
decisions in Madan Mohan Pathak and Life Insurance C01poration v. D.J.
Bahadur, (1981) 1 S.C.C. 315 and its ratio has to be understood in the light
of the background facts set out in Paras 1 to 5 of the said judgment. Having
regard to the identity of the subject-matter, it was held in Naclwne that the F
decisions in Madan Mohan Pathak and DJ. Bahadur being decisions
between the same parties, their ratio is binding upon them. It cannot be
said that any new principle was enunciated.

We may mention that we have dealt with the decision in Madan
Mohan Pathak at some length because we find that it is being frequently G
relied upon as laying down a principle at variance with Slui P1ithvi Cotton
Mills and the host of decisions affirming it. Jn our opinion, the effort is a
futile one, as demonstrated hereinabove. Another decision rendered by one
of us, Suhas C. Sen, J. sitting with N.P. Singh, J. has also understood the
decision in Madan Mohan Pathak in precisely the same manner. (See H
118 SUPREME COURT REPORTS (1996] SUPP. 4 :S.C.R.

A Como1i11 Match Jndusllies (P) Limited v. State of Tamil Nadu, J.T. {1996)
5 S.C. 167. We respectfully agree with all that has been said in the said
judgment with respect to the decisions in Madan Moha11 Pathak and
Nacliane. It is needless to re-produce those observations over again here.

We must also say that the fact-situation and the ratio of Madan
B Mohan Pathak and Nachane is totally at variance with the fact-situation in
the case before us. They are worlds apart in every sense of the term. The
first contention of the appellants is accordingly rejected.

The second contention of the learned counsel for appellants-
petitioners is that Section 2 of the impugned enactment does not achieve
c the purpose set out in the Preamble and th"t the language employed in
Section 2 is not adequate to create any fresh levies. It is submitted that the
Parliament must first create the levy and then give it retrospective effect.
But it cannot relegate both the making of law and giving it retrospective
effect to the realm of fiction, it is argued. The Parliament cannot say that
D it must be deemed to have made a law without actually making it. It is
submitted that in sub-section (1) of Section 2, there are no words saying
· that the Parliament is levying the various taxes/cesses mentioned in the said
sub- section read with the Schedule. By way of contrast, our attention is
invited to the language of Section 3 of the Sugarcane Cess (Validation)
E Act, 1961 which was enacted by Parliament in view of the decision of this
Court in Diamond Sugar Mills Limited v. State of Uttar Pradesh, (1961] 3
S.C.R, 243 and tho decision of the Madhya Pradesh High Court following
it and declaring that the levy of cess on Sugarcane under the provisions of
the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act,
1958 was beyond the legislative competence of the Madhya Pradesh legis-
F lature. Several States had levied similar cesses. To meet the situation
arising from the decisions aforesaid, the Parliament enacted the Sugarcane
Cess (Validation) Act, Section 3 whereof reads :

3. Validation of i111position and collection of cesses under State Acts.
11

G (1) Notwithstanding any judgment, decree or order of any court,
all cesses imposed, assessed or collected or purporting to have
been imposed, assessed or collected under any State Act before
the commencement of this Act shall be deemed to have bee11 validly
imposed, assessed or collected i11 accordance with law, as if the
H provisions of the State Acts and of all notifications, orders, and
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 119

rules issued or made thereunder, in so far as such provisions relate A
to the imposition, assessment and collection of such cess had been
included in and formed part of this section and this section had
been in force at all material times when such cess was imposed,
assessed or collected; and accordingly, -

(a) no suit or other proceeding shall be maintained or con- B
tinued in any court for the refund of any cess paid under any State
act;

(b) no court shall enforce a decree or order directing the refund
of any cess paid under any State Act; and C

(c) any cess imposed or assessed under any State Act before
the commencement of this Act but not collected before such
commencement may be recovered (after assessment of the cess,
where necessary) in the manner provided under that Act.
D
(2) For the removal of doubts it is hereby declared that nothing
in sub-section (1) shall be construed as preventing any person-

(a) from questioning in accordance with the provisions of any
State Act and rules made thereunder the assessment of any cess
for any period; or E
(b) from claiming refund of any cess paid by him in excess of
the amount due from him under any State Act and the rules made
thereunder."

(Emphasis added) F
The validity of Suga.rcane Cess (Validation) Act was questioned in
this Court in Joara Sugar Mills Private Limited but was upheld. The con-
tention of the learned cou11,el for appellants- petitioners is that if the
Parliament wanted to impose the levies, which levies were earlier impose G
by State enactments but declared incompetent, the Parliament must impose
the levy as has been done by it in Section 3 of the Sugarcane Cess
(Validation) Act, 1961. Section 2(1), it is contended, does not impose the
levies and, therefore, there is no levy and there is no imposition. It is not
possible to agree with this contention either. The State enactments men-
tioned in the Schedule to the impugned enactment did contain provisions H
120 SUPREME COURT REPORTS [19%] SUPP. 4 S.C.R.

A creating the levy. It is the very same provisions which are enacted by
Parliament now. Section 2(1) says that the said provisions must be deemed
to have been enacted and must be deemed always to have been enacted by
Parliament. In such a situation, it is idle to contend that Section 2(1) does
not create the levy or the impost. It does. We are also unable to find any
qualitative difference between Section 3 of the Sugarcane Cess (Valida-
B tion) Act and Section 2 of the impugned Act. The relevant words are the
same, viz., "shall be deemed to have been ....... ". With necessary adaptations,
both the provisions are quite alike. We need not, however dilate upon this
contention of appellants-petitioners for the reason that an identical
provision enacted to meet an identical situation has already been upheld
c by this Court in IVishnachandra Gangopadhayaya v. Union of India, [1975]
Suppl. S.C.R. 151. In Baijnath Kedia v. State of Bihar, [1970] 2 S.C.R. 100,
this Court had declared the second proviso to Section 10(2) of the Bihar
Land Rofor_ms Act, 1950 unconstitutional on the ground that Bihar legis-
lature had.1\b legislative competence to enact it and that Parliament alone
D w1~ competent to legislate in that behalf. It was also held that Rule 20(2)
framed by the Bihar Government as delegate of the Parliament under
section 15 of the M.M.R.D. Act was unconstitutional since the rule-making
power conferred by Section 15 did not contemplate alteration of terms of
leases already in existence before the Act was passed. In view of the
judgment of this Court in Baijnath Kedia, the Parliament enacted the
E Validation Act in the year 1969. The Preamble to the said Act stated that
it was 11 an act to validate certain provisions contained in the Bihar Land
Reforms Act, 1950, and the Bihar Minor Mineral Concession Rules, 1964,
and action taken and things done in connection therewith." Section 2 of the
said Act read thus :
F "2. Validation of ce1tain Bihar State laws and action taken and tlu'ngs
done connected therein.

(1) The laws specified in the Schedule shall be and shall be deemed
always to have been as valid as if the provisions contained therein
G had been enacted by Parliament.

(2) Notwithstanding any judgment, decree or order of any court,
all actions taken, things done, rules made, notifications issued or
purported to have been taken, done, made or issued and rents or
H royalties realised under any such laws shall be deemed to have
P.KANNADASAN v.STATE[B.P.JEEYANREDDY,J.] 121

been validly taken, done, made, issued or realised, as the case may A
be, as if this section had been in force at all material times when
such action were taken, things were done, rules were made,
notification were issued, or rents or royalties were realised, and
no suit or other proceedings shall be maintained or continued in
any court for the refund of rents or royalties realised under any
B
such laws. 11

(3) For the removal of doubts, it is hereby declared that nothing
in sub-section (2) shall be construed as preventing any person from
claiming refund of any rents or royalties paid by him in excess of
the amount due from him under any such laws." C

It was contended before this Court that language of Section 2 is not
sufficient to bring about a levy. It was "contended that "no liability to levy
rent or royalty can be created retroactively without t><o clear stages or
steps: firstiy, a law must be enacted creating the liability; next, such D
provisions should be made retrospective. This two-stage procedure is
absent in the statute under attack and therefore the purpose, whatever it
be, has misfired". It may be noticed that this is precisely the contention
urged before u.s now. The said contention was, however, n.~jected by this
Court. It observed: "the Bihar Legislature is not legislating into validity, by
a deeming provision, what has been declared ultra vires by the Court. It is E
Parliament, whose competency to legislate on the topic in question is
beyond doubt, that is enacting the 'deeming' provisions". The Court held
further that the language oi Section 2 is clear and unmistakable and that
• by enacting the said provision the "Parliament desired to validate
retrospectively what the Bihar legislation had ineffectually attempted. It has F
used works plain enough to implement its object and therefore the validat-
ing Act as well as the consequential levy are good". A perusal of Section 2
of the impugned enactment and Section 2 of the 1969 Validation Act
considered in Kds/111aclw11dra Gangopadlzyaya would show that Section 2
of the impugned enactment is a faithful re-production and repetiti0n of
Section 2 of the 1969 Validation Act, word to word. The only additional G
words are in Section 2(1), viz., "and such provisions shall be deemed to
have remained in force upto the 4th day of April, 1991".

Sri Parasaran contended that these additional words in Section 2(1)
do make a qualitative difference and distinguish the present case from the H
122 3UPREME COURT REPORTS 11996] SUPP. 4 S.C.R.

A one considered in Krishnachandra Gangopadhyaya. We cannot agree. The
said words merely limit the levy upto 4th day of April, 1991 and in no
manner detract from the content and effect of the preceding words
employed in sub-section (1) of Section 2.

So far as reliance upon the language employed in Section 3 of the
B Sugarcane Cess (Validation) Act is concerned, all that we need to say is,
there is no set or standard formula to which all Validation Acts should
conform. The Parliament is not bound to adopt identical language every
time it enacts a Validation Act. It is open to it to employ such language as
it chooses. All that the· court should see is whether the language employed
c achieves the purpose which the Parliament set out to achieve. The language
employed in Section 2 of the impugned enactment, we are satisfied, does
achieve the purpose and we are fully fortified, in our opinion, by the
decision in Krishnachandra Gan([opad/zayaya. The second contention too
accordingly fails.
D
The third contention which has been urged by every counsel appear-
ing for appellants-petitioners with great vehemence is this; the impugned
Act is designed to and provides only for validating the taxes and cesses
already recovered under the relevant provisions of the enactment men-
tioned in the Schedule. The impugned Act does not, however, empower or
E authorise the Parliament or its agencies to recover taxes and cesses which
are payable under the said provisions but have not been recovered on or
before 4th day of April, 1991. The Statement of Objects and Reasons and
the language in sub-section (2) of Section 2 are relied upon in support of
this contention. It is also pointed out that Section 2 does not contain a
•
F clause or words corresponding to clause (c) in sub-section (1) of Section
3 of the Sugarcane Cess (Validation) Act, 1961, referred to hereinbefore.
It is not possible to accede to this contention either. Section 2 enacts the
relevant provisions of the enactments mentioned in the Schedule with
retrospective effect. The provisions so enacted do create the levy. Indeed,
unless the levy is validated, recoveries already made cannot be validated.
G It is for this reason that the Preamble to the Act says that it is an Act "to •
validate the imposition and collection of cesses and certain other taxes on
minerals under certain State laws 11 • Once the provisions, whiL.h create the
levy, are deemed to have been enacted by Parliament, the levy is very much
there with retrospective effect. Once there is a valid levy, not only the taxes
H already collected need not be refunded but the taxes and cesses which have
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 123

not already been collected can also be collected. It is impossible to see any A
distinction in principle between both. Merely because sub-section (2) i11ter
alia states that "cesses or other taxes on minerals realised under any such
laws shall be deemed to have been validly .... realised ..... as if this section
had been in force at all material times when such ....... cesses or other taxes
were realised", it does not mean that the taxes which were levied but not B
collected cannot be collected. The said words in sub-section (2) are not
words of limitation; they are words of validation and put in by way of
abundant caution in view of the judgments and orders of the Courts. On
the language of Section 2 which enacts with retrospective effect, the
relevant provisions levying cesses and taxes on minerals and also validates
the rules and notifications issued thereunder, we find it impossible to say
c
that the levy is validated only for the limited purpose of saving the taxes
already collected, i.e., to stay the refund of taxes already collected. Indeed,
if the sections were so construed, it would lead to discriminatory conse-
quences. Take two persons 'A' and 'B'. Both are equally liable to pay the
cess on minerals levied by, say the Madras legislature. One pays the tax D
according to law and the other does not. If the argument of appellants-
petitioners is to be accepted, the man who paid will be worse off than the
person who did not pay because no tax can now he collected from the
person who did not pay. No such unreasonable intention can be attributed
to Parliament. It would not be reasonable to assume that the Parliament E
intended such di.,criminatory treatment between two similarly placed per-
sons and for no reason. Some of the counsel for appellants-petitioners
sought to argue that the above situation cannot be described as dis-
criminatory. According to them, there is a reasonable classification be-
tween the person who does not pay, comes to the court and succeeds in
his challenge and the person who docs not come to the court but quietly
F
pays the tax and sits at home. This illustration proceeds on the assumption
that only a person not paying the tax comes to the court. That may not
always be true. A person may pay the tax demanded and then come to
court challenging the demand and collection. There may also be a situation,
where tax is collected from him, even before he comes to court. It is also G
possible that in given case, stay is not granted by the court and he is
obliged to pay. There may also be a situation where both 'A' and 'B' in the
above illustration may not come to court. We are, therefore, of the clear
opinion that once the levy is created or validated, as the ca5e may be, no
distinction can be drawn between the person who has paid and the person H
124 SUPREME COURT REPORTS (1996) SUPP. 4 S.C.R.

A who has not paid. We are also unable to find any words in Section 2 or
anywhere else in the impugned enactment limiting the levy only to the
extent of the taxes/cesses already collected on or before 4th day of April,
1991. Nor are we satisfied that absence of a clause or words corresponding
to clause (c) in Section 3(1) of the Sugarcane Cess (Validation) Act makes
any difference. The said clause merely sets out the consequence flowing
B
from the validation contained in the main limb of Section 3(1), by way of
abundant caution. It cannot be treated as a substantive provision. Sri K.
Parasaran then submitted that the words "imposition and collection" in the
preamble do evidence the intention to confine the imposition to amounts
already collected. It is not possible to agree. By reading them conjunctively,
c their meaning cannot be cut down. On the contrary, the said words indicate
the intention to validate the imposition as well as collection. "Collection"
does not mean what is already collected alone. It means future collection
as well. Neither the Preamble nor Section 2 say that what is already
collected alone is validated. This Contention too accordingly fails.
D
The fourth contention of the learned counsel for appellantf.-
petitioners is unsustainable in law and is misconceived. The Parliament is
competent to enact a law applicable only to a part of the country or to
some States in the country, as the case may be. It is not necessary that every
law made by. Parliament must necessarily apply to the entire country as
E such. Not only this, the Parliament is equally entitled to prescribe different
rates of tax in different States if such different rates are called for in the
given circumstances. This is not unknown to law. Take, for instance,
sub-section (2A) of Section 8 of the Central Sales Tax Act. Sub-sections
(1) and (2) of the said Act levy tax at uniform rates throughout the country.
F But sub-section (2A) brings about a distinction between State and State. It
says that notwithstand;ng the provisions in Section 6(1)(A) or Section 8(1)
or Section 8(2)(b), so much turn-over of a dealer as pertains to goods, the
sale or purchase of which is under the Sales tax law of the appropriate
State, exempt from tax generally or subject to tax generally at a rate which
iS'lower than four percent, Central Sales tax shall also be charged on such
G turn-over either at the nil rate or at such lower rate, as the case may be.
This provision clearly recognises and gives effect to different rates of tax
in different States of the country on identical transaction of sale. In State
of Madras v. N.K. Nataraj Mudaliar, [1968] 3 S.C.R. 829, this difference in
rates of tax between different States was challenged as discriminatory and
H hence, violative of Articles 301, 302, 303 and 304 of the Constitution of
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 125

India. The challenge was repelled by a Constitution Bench of this Court. A
It was held that the said provision does not bring about any discrimination
between one State and another within the meaning of Article 303. This
Court quoted with approval the observations of the Australian High Court
in King v. Barger (1908) 6 C.L.R. 41 with respect to the meaning of the
expression "discrimination between States or part of States" used in Section B
51 of the Australian Constitution:

".......... the pervading idea is the preference of locality merely
because it is locality, and because it is a particular part of a
particular State. It does not include a differentiation based on
other considerations, which are dependent on natural or business C
circumstances, and may operate with more or less force in different
localities; and there is nothing, in my opinion, to prevent the
Australian Parliament, charged with the welfare of the people as
a whole, from doing what every State in the Commonwealth has
power to do for its own citizens, that is to say, from basing its D
taxation meai;;ures on considerations of fairness and justice, always
observing the constitution injunction not to prefer States or parts
of States."

At the same time, we must say that where Parliament imposes E
different rates of tax in different States, it* is under an obligation to justify
the same. It must satisfy the court that such a distinction does not amount
to discrimination and that it is reasonable in the circumstances and has a
purpose behind it. Now, let us see whether there is any justification for
imposing different rates in different States in the present case. We think
there is. If one only remembers the background and the context in which F
the impugned enactment was made by Parliament, the reason behind such
different rates would immediately become clear. Each State had imposed
its own rate. The challenge in India Cement and Orissa Cement was not to
different rates being levied by different State legislatures l:>ut to the very
legislative competence of the State legislatures to impose the said levy. G
When the Parliament is re-enacting those very provisions, it could not but
adopt those very rates. This is the historical justification, if we can describe
I-Jere the expression ''it" is used in the n1anner of speaking figuratively. The Parliament
never explains or defend any of its acts before this Court. (See Sanjeev Coke Manufac-
turing Company v. Bhorat Coking Ltd., (1983) AIR SC 239 at Para 26). The C'.'.lJ!anation
obviously has to con1e fron1 the Union of India. H
126 SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A it that way. It is really not a case where the Parliamentary enactment is
creating the distinction or different treatment. Distinction and different
treatment was already there over several decades; each State was prescrib-
ing its own rate on the same mineral; nobody ever questioned it as
discriminatory; indeed it could not be so questioned; the decisions of the
courts had declared the levy by the State legislatures as competent; the
B Parliament has intervened and by enacting the impugned law in exercise
of its undoubted power, validated the levy and all that flows from it. In
such circumstances, there was no other way except to do what has actually
been done. The question is one of power and legality of the exercise and
not its desirability - apart from the fact that the test of desirability may vary
c from person to person. In ou; opinion, the exercise cannot be faulted on
the ground of violation of Article 14 of the Constitution.

It is then ·argued that the very idea behind enacting the M.M.R.D.
Act was to bring about uniformity in taxes and royalties throughout the
D country. True it is. But does that mean that Parliament cannot create an
exception to the rule it itself has created. Uniformity in the rates of tax is
an objective set out by Parliament in the M.M.R.D. Act. It is not a
pre-condition to a law made by Parliament under Entry 54 in List-I nor is
it a limitation upon Parliament's power. If the Parliament has enunciated
the principle, it can also create an exception thereto in appropriate cir-
E cumstances or lo meet an exigency. This is precisely what has been done
in the instant case. The impugned enactment is both an addition and an
exception to Section 9 of the M.M.R.D. Act.

•
17ie fifth contention of the learned counsel for appellants-petitioners
F is equally misconceived. The Parliament has already denuded the State
legislatures of their power to levy tax on minerals inhering in them by
making the declaration contained in Section 2 of the M.M.R.D. Act. Sri
Sanghi argued that the denudation is not absolute but only to the extent
provided in the M.M.R.D. Act. Section 9, learned counsel submitted, is
one of the facets of the extent of denudation. Section 9, it is submitted, sets
G out the rates of royalty levied and also states that such rates of royalty can
be revised only once in three years. If Section 9 is sought to be amended,
whether directly or indirectly, the learned counsel says, a fresh declaration
in terms of Entry 54 of List-I is called for. This contention assumed that
notwithstanding the declaration contained in Section 2 of the M.M.R.D.
H Act, the States still retain the power to levy taxes upon minerals over and
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 127

above those prescribed by the M.M.R.D. Act and that a fresh declaration A
is called for whenever such subsisting power of the State is sought to be
further encroached upon. This supposition, however, flies in the face of the
decisions of this Court in India Cement and 01issa Cement. The said
decisions are premised upon the assumption that by virtue of the said
declaration, the States are totally denuded of the power to levy any taxes
B
on minerals. It is for this reason that the State enactments were declared
incompetent insofar as they purported to levy taxes/cesses on minerals. The
denudation of the States is not partial. It is total. They cannot levy any tax
or cess on minerals so long as the declaration in Section 2 stands. Once
the denudation is total, there is no occasion or necessity for any further
declaration of denudation or, for that matter, for repeated declarations of c
denudation. Indeed, if Sri Sanghi's arguments were to be accepted, a fresh
declaration would be required every time the Parliament increases the rate
of royalties. No such requirement can be deduced from the relevant
constitutional provisions as interpreted by this Court. This contention also
accordingly fails. D
77ie sb.1h contention of the learned counsel for appellants-petitioners
is premised upon the supposition that the Parliament is bound to utilise
the taxes realised under the impugned Act only for the purpose of regula-
tion of mines and mineral development. It is on this supposition, it is
argued, that inasmuch as the Union has not established that the impugned E
levy is required for the purpose of the said regulation and development,
the imposition. is incompetent. In our opinion, the very supposition is
misplaced. What is levied under the impugned enactment is a tax/cess and
not a fee. Even in the matter of fees, it is not necessary that element of
quid pro quu should be established in each and every case, for it is well-
F
settled that fees can be both regulatory and compensatory and that in the
case of regulatory fees, the element of quid pro quo is totally irrelevant.
(See Corporation of Calcutta v. Liberty Cinema, A.I.R. (1965) S.C. 1107).
Taxes are raised for augmenting the general revenues of the State and not
for any particular purpose - much less for rendering a particular service.
G
We may now deal with the last contention urged by appellants-
petitioners. It has several facets. We may first deal with the submission that
the impugned act is a temporary statute and that it has come to an end
with the 4th day of April, 1991. Since Section 6 of the General Clauses Act
does not apply to a temporary statute and also because the impugned act H
128 SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A does not contain a saving clause in terms of said Section 6, it is argued, no
proceedings for recovery of unrecovered taxes/cesses can be taken after
the 4th day of April, 1991. In our opinion, the submission is totally miscon-
ceived. A temporary statute is one which expires on the expiry of the
specified period. The impugned act was indeed enacted an<l published in
April, 1992 and Section 1(3) says that the Act shall be deemed to have
B
come into force on February 15. 1992. It is, therefore, meaningless lo say
that it has expired or it ceased to have any effect on the 4th day of April,
1991. There are no words anywhere in the impugned Act indicating that
it expires on the expiry of a particular period or on a particular date.
Merely because the cesses and taxes imposed by it are made effective upto
c a particular date (4th April, 1 991), it does not mean that the statute itself
expires on the date. We may in this connection refer to the decision of this
Court in Maganti Subrahmanyam (dead) by L. Rs. v. 17te State of Andhra
Pradesh, [1969] 2 S.C.C. 96. The Madras legislature had enacted the
Madras Estate Communal, Forest and Private Lands (Prohibition of
D Alienation) Act, 1947 with a view to prohibit the alienation of Communal,
Forest and Private Lands in the estates in the Province of Madras. The
Preamble to the Act stated that it was enacted to prevent alienation of the
several lands in the estates in the Province of Madras pending enactment
of legislation for acquiring the interests of land holders in such estates and
introducing Ryotwari Settlement therein. In 1948, the Madras legislature
E enacted the Madras Estates (Abolition and Conversion into Ryotwari) Aci:
providing for acquisition of the rights of land holders in permanently
settled estates. It was contended before this Court that in view of the
statement in the Preamble to the 1947 Act, the said Act must be deemed
to have come to an end with the enactment of the 1948 Act. On this basis,
it was contended that the 1947 Act must be deemed to be a temporary
F
statute. The contention was roundly rejected by this Court observing that
since no fixed duration of the Act was specified, it cannot be called a
temporary statute. Indeed, the decision of this Court in Madurai Distt.
Central Cooperative Bank Ltd. v. 17zird Income-Tax Officer, Madurai, [1976]
1 S.C.R. 135 indicates that even the Finance Acts which are passed every
G year, are not transitional or temporary enactments.

It is also necessary to say that merely because the levy created by an
enactment is limited to a particular period, the Act itself cannot be said to
be a temporary statute. The duration of the levy created by the ·Act and
H the life of the Act are t?>"o different things; they are not necessarily
•
P.KANNADASAN v.STATE[B.P.JEEVANREDDY,J.] 129

co-extensive. We, therefore, reject the argument that merely because the A
levies created by Section 2(1) of the impugned Act are to remain in force
only upto 4th April, 1991, the impugned Act itself can be described as a
temporary statute. The Act very much continues i11 force even today and
will remain in force till the Parliament chooses to repeal it. In the cir-
cumstances, the argument regarding the inapplicability of Section 6 of B
General Clauses Act or the alleged absence of a saving clause in terms of
Section 6 are misplaced.

The next facet of this contention is that inasmuch as the provisions
validated under the impugned Act not only pertain to levy but also to
collection and recovery and because all those provisions cease to have C
effect on and with the 4th day of April, 1991, it must be held that there is
no machinery in existence after April 4, 1991, for realising and collecting
the uncollected/unrealised taxes/cesses. There is no levy and there is no
machinery to realise the levy after April 4, 1991, it is contended. This
argument is urged in support of the contention that the Act merely pur- D
ports to validate the recoveries already made but does not empower or
authorise realisation/recovery of taxes/cesses not already collected. This
submission ignores the crucial circumstance that the levy is created by the
impugned Act and that the impugned Act continues in force. Sub-section
(3) of Section 2 is a firm indication that notwithstanding the cessation of
levy after the 4th day of April, 1991, the machinery created to recover and E
refund the said cesses/taxes is kept alive. Sub-section (3) of Section 2 reads:

"(3) For the removal of doubts, it is hereby declared that nothing
in sub-section (2) shall be construed as preventing any person from
claiming refund of any cess or tax paid by him in excess of the F
amount due from him under any such laws."

Take a case where excessive collection is made sometime before
April 4, 1991. What is the remedy of the person concerned. If the
appellants' argument were to be accepted, the person would be helpless; G
there would be no machinery to examine his claim. But then what does
sub-section (3) mean and signify? It must, therefore, be helci that not-
withstanding the cessation of levy created by Section 2(1) with April 4,
1991, the machinery requisite for realising and refunding the taxes/cesses
yet to be collected or wrongly collected, as the case may be, is kept alive.
It cannot also be suggested with any reasonableness that the said machinery H
130 SUPREME qmRT REPORTS [1996] SUPP. 4 S.C.R.

A is kept alive only for the purposes of refunding the excessively collected
taxes but not for collecting/recovering the uncollected/unrecovered taxes
and cesses. The last contention of the appellants-petitioners aim fails
accordingly.

Sri G.L. Sanghi addressed a separate argument specific to the
B petitioners from the State of Madhya Pradesh. It is submitted that, in the
first instance, cess on minerals was levied by the Madhya Pradesh Karad-
han Adhiniyam, 1982 (being M.P. Act 15 of 1982). The levy was declared
incompetent and void by the Courts, whereupon, it is stated, the Madhya
Pradesh Legislature amended in 1987, the Madhya Pradesh Upkar Ad-
C hiniyam, 1981, levying the same cess. Even this levy was invalidated by the
Courts, it is submitted. Sri Sanghi's apprehension is that the impugned
parliamentary enactment validates the relevant provisions of both the 1982
Madhya Pradesh Act as well as the 1981 Madhya Pradesh Act (as amended
in 1987), with the result that appellants-petitioners may be called upon to
pay the cess on minerals twice over i.e., under both the 1982 Act as well
D as under the 1981 Act (as amended in 1987) simultaneously. We see no
basis for such an apprehension. Be that as it may, Sri Guiab C. Gupta,
learned counsel appearing for the State of Madhya Pradesh, stated dearly
that no such double levy will take place and that there would be only one
levy of cess on minerals in any given year or any given quantity removed.
E The said statement should allay any apprehensions on the part of appel-
lants-petitioners from Madhya Pradesh.

For the above reasons, the appeals and writ petitions are dismissed
with costs. Advocate's fee quantified at Rs. 2,500 in each appeal and writ
petition.
F
No orders are necessary in Interlocutory Applications.

R.S. Appeals and petitions dismisses.