Holding

Section 9(3) of the Mines and Minerals (Regulation and Development) Act, 1957 is constitutionally valid; royalty is a tax, and Parliament’s competence under Entry 54 of List I (and Entry 97) precludes the State Legislature from levying a conflicting tax on mineral rights.

Summary

The Supreme Court examined the constitutional validity of Section 9(3) of the Mines and Minerals (Regulation and Development) Act, 1957, which authorises the Central Government to fix, alter or reduce royalty rates on minerals. The appellants argued that royalty is not a tax and that Parliament lacks power under Entry 54 of List I, thereby infringing the State Legislature’s power to levy taxes on mineral rights under Entry 50 of List II, and that the provision violated Articles 268‑270 of the Constitution. Relying on earlier decisions (India Cement, Mahalaxmi Fabric Mills, Orissa Cement, etc.) the Court held that royalty is a tax, that Parliament is competent to enact the provision under Entry 54 (and also Entry 97) of the Union List, and that the State’s taxing power is expressly limited by the central legislation. The doctrine of stare decisis was applied to maintain consistency, and the appeals were dismissed, with the Court modifying the interest award from 18% to 9% simple interest.

Issues considered

The constitutional competence of Parliament to enact Section 9(3) of the Mines and Minerals (Regulation and Development) Act, 1957 under Entry 54 of List I.
Whether royalty on minerals constitutes a tax within the meaning of Article 265 and thus falls under the State’s power under Entry 50 of List II.
Whether Section 9(3) violates Articles 268, 269 and 270 of the Constitution concerning the distribution of revenue.
The applicability of the doctrine of stare decisis to the present batch of appeals.

Legislation cited

Mines and Minerals (Regulation and Development) Act, 1957s. 2, s. 9, s. 9(3)

Subjects

constitutional validityroyaltytaxMines and Minerals Actlegislative competenceUnion ListState ListArticles 268-270stare decisisinterest rate modification

Judgment

A SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES
v.
UNION OF !NOIA AND ORS.

OCTOBER I7, 2000

B [G.B. PATTANAIK AND UMESH C. BANERJEE, JJ.]

Constitutional law :

Mines and Minerals (Regulation and Development) Act, 1957-Section
C 9(3)-Constitutional validity-levy of royalty on minerals-Whether power
of Parliament under Entry 54 of list I to enact such law denudes right of
State legislature to levy tax on mineral rights under Entry 50 of list 11-
Held, it is constitutionally valid and Parliament is competent to enact such
law-Constitution of India-Articles 246, 268, 269 & 270-Seventh Schedule.
D
Precedents-Applicability of the doctrine of stare decisis-Held, the
doctrine is applicable to avoid confusion and uncertainty.

The appellants challenged the constitutional validity of Section 9(3) of
Mines and Minerals (Regulation and Development) Act, 1957 on the ground
E that levy of royalty on minerals is not a tax and the Parliament has no power
under Entry 54 of List I to enact such a law which takes away the right of the
State Legislature to levy tax on mineral rights under Entry 50 of List II of
the Seventh Schedule of the Constitution. Some of the appellants contended
that the matter should be referred to a larger Bench in view of the three-
F Judge Bench decision of this Court in Mahalaxmi Fabric Mills case. The
appellants further contended that Section 9(3) of the Act should be declared
ultra vires as it violates the provisions of Artides 268, 269 and 270 of the
Constitution.

Dismissing the appeals, this Court
G
HELD : (Per Pattanaik, J.)

1. It is not appropriate to refer the appeals for the decision of a larger
Bench. Royalty on minerals is a tax and the power of the State Legislature
under Entry 50 in List II namely tax on minerals vis-a-vis Section 9(3) of the
H
44
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. 45
Mines and Minerals (Regulation and Development) Act, 1957 made by A
Parliament is outside the competence of the State Legislature in view of
Sections 9 and 9(3) of the Act. [56-G-H)

~ India Cement Ltd & Ors. v. State of Tamil Nadu & Ors., 11990) 1 SCC
12; State of Madhya Pradesh v. Mahalaxmi Fabric Mills Ltd & Ors., (1995) B
Supp. 1 SCC 642 and State of UP. & Anr. v. Synthetics and Chemicals Ltd. &
Anr., (1991) 4 SCC 139, relied on.

The Hingir-Rampur Coal Co. Ltd & Ors. v. The State ofOrissa & Ors.,
(1961) 2 SCR 537; State ofOrissa v. MA. Tulloch & Co., (1964) 4 SCR 461;
H.R.S. Murthy v. Collector of Chittoor & Anr., (1964) 6 SCR 666; Orissa C
Cement Ltd. v. State of Orissa & Ors., (1991) Supp. 1 SCC 430 and State of
Orissa & Ors. v. Mahanadi Coalfields Ltd. & Ors., (1995) Supp. 2.SCC 686,
referred to.

B.A. Jayaram & Ors. v. Union of India & Ors., (1984) 1 SCC 168,
distinguished. D

2. Articles 268 to 272 in Part XII of the Constitution deal with the
distribution of revenue between the Union and the States. In Part XII of the
Constitution, Article 265 provides that there cannot be any levy of collection
of tax without authority of law. The expression "authority of law" refers to a E
valid law which means the tax proposed to be levied must be within the
legislative competence of the legislature imposing the tax; and the law must
be validly enacted; the law must not be a colourable use of or a fraud upon the
legislative power to tax; the law must not violate the conditions of fundamental
right as that in Article 19(1)(3) or 19(1)(g); it must not also contravene the
specific provisions of the Constitution which impose limitation on legislative F
power relating to particular matters like Articles 276 to 286 or 301 and the
tax must be authorised by such valid law. The Constitutional prm·isions dealing
with the distribution of revenue between the Union and the States contained
in Articles 268, 269 and 272 depends upon the fact when a particular
legislation is attacked on any one of these grounds and an examination of G
those assertions. The Act of 1957 and its validity has been upheld in the anvil
of Article 265 in as much as it has been held that the tax levied on minerals
under section 9(3) of the Act is by virtue of a valid legislation made by the
Parliament in exercise of its legislative competence under Entry 54 of List l
and no question ofviolation offundamental right arises. 158-E-H)
H
46 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A Per Banerjee; J. (supplementing) :

1.1. It is clear from a plain reading of the Mines and Minerals
(Regulation and Development) Act, 1957 and upon a declaration under section
2 of the Act, the Central Government alone has the power to legislate in regard
to regulation of Mines and Mineral Development. [63-F] ~,
B
~ 1.2. Doctrine of pith and ·substance of the legislation stands accepted
and it requires no dilation that as long as the legislation is within the
permissible limit in its substance, no objection can be entertained as regards
the legislative competency. The field is firmly covered by reason of the
C incorporation of the Act by the Parliament. (65-B]

1.3. The mandate of the Constitution has been expressly laid down and
there is no scope or authority or even jurisdiction for the law courts to read
in between the lines to attribute a further authorisation though not specifically
envisaged and more so by reason of specific incorporation of such a power to
D the State Legislature in terms of Entry 50 of List II in the Seventh Schedule
to the Constitution. (65-F]

1.4. The word 'regulation' in Entry 54 of List I cannot but be said to be
of broad impact encompassing all the facets not only specifically mentioned
in the Entry itself but it is inclusive of its inherent impiications thereto as
E well. The interpretation shall have to be attributed to the words used in the
Constitution having regard to the public good and public interest. It has been
expressly recorded in the Entry itself that the regulation is in public interest.
The regulation has to be interpreted in the context in which it is used and not
de hors the context. There must be regulated development and mineral
development is thus the only criteria. A La1·ger Bench judgment, with an
F express finding that section 9 of the. Act of 1957 is within the legislative
competence of Parliament both under Entry 54 and Entry 97 of the Union List,
has a binding effect. [68-H; 69-A-D]

India Cement Ltd & Ors. v. State of Tamil Nadu & Ors., (1990) 1 SCC
G 12; State of Madhya Pradesh v. Mahalaxmi Fabric Mills Ltd & Ors., (1995]
Supp. l SCC 642 and State of UP. & Anr. v. Synthetics and Chemicals Ltd &
Anr., (1991] 4 SCC 139, relied on.

Orissa Cement Ltd v. State of Orissa & Ors., (1991) Supp. l SCC 430;
Krishna Chandra Gangopadhyaya & Ors. v. The Union of India & Ors.,
H (1975) 2 SCC 302; Chandeswar Prasad Singh & Anr. v. Sub-Divisional Land
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. 47
Reforms Officer, Barrackpore and Ors., AIR (1986) Calcutta 1 and Municipal A
Committee, Malerkotla v. Haji Ismail & Anr., AIR (1967) Punjab 32, referred to.

Corpus Juris Secundum (vol. 76:615), referred to.

2. Distribution of revenue as mandated under the Constitution cannot
possibly be interpreted to whittle down Entry 54 of List I. Entry 54 of List I B
cannot but be read as the authorisation as conferred on to the Central
Government pertaining to regulation of Mines and Minerals Development and
as declared by Parliament by law in public interest. It is in pursuance of this
.. authorisation that the Act of 1957 came into the Statute Book and on the
wake of the Legislation of 1957, Entry SO of List II cannot but be read subject C
to the provisions of the Act of 1957 and when so read, there is an inescapable
conclusion that the field in issue under Entry 50 already stands covered by
Parliamentary legislation of 1957. (70-B-CI

3. Taking recourse to the doctrine of stare decisis would be an
imperative necessity, so as to avoid uncertainty and confusion, since the basic D
feature of law is its certainty and in the event of any departure therefrom the
society would be in utter confusion and the resultant effect of which would be
legal anarchy and judicial indiscipline - a situation which always ought to be
avoided. The Central legislature introduced the legislation in the year 1957
and several hundreds and thousands of cases have already been dealt with on
the basis thereof and the effect of a declaration of a contra law would be totally E
disastrous affecting the very basics of the revenue jurisprudence. It is true
that the doctrine has no statutory sanction but it is a rule of convenience,
expediency, prudence and above all the public policy. It is to be observed in its
observance rather than in its breach to serve the people and sub-serve the
ends of justice. (70-E-Gl
F
Mishri Lal (d) by LRs. v. Dhirendra Nath (d) by LRs. & Ors., (1999) 4
SCC I I and Kattite Valappil Pathumma & Ors. v. Taluk land Board & Ors.,
,.,. 119971 4 SCC 1 I 4, referred to.

Admiralty Commrs. v. Valverda Owners, (1938) Appeal Cases 173at194; G
Button v. Director of Public Prosecution and Swain v. Director of Public
Prosecutions, (1966) Appeal Cases 591, referred to.

4. The direction to pay interest@ 18o/o per annum must be held to be
unreasonable in the contextual facts since the validity of the legislation itself
is in question before this Court. The same is modified to the extent that the H
48 SUPREME COURT REPORTS [2000) SUPP. 4 S.C.R.

A interest would be paid@ 9% per annum. 173-B-q
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7000of1994.

From the Judgment and Order dated 25. 7 .94 of the Gujarat High Court ....._'
in S.C.A. No. 3370 of 1992.
B WITH

C.A. Nos. 7001-02/94,7192/94, 7472, 7389, 7388, 7387, 8166-67, SLP. (C)
No. 21620/94, C.A. Nos. 3117-18/95, 3119/95, 4010, 4071-79/95, 6637/95, 7607,
5133/95, W.P. (C) No. 14861/97.

c WITH

I.As. 5 & 6 in C.A. Nos. 3117-18/95.

R.N. Trivedi, Additional Solicitor General, P. Chidambaram, V.A. Bobde,
Shanti Bhushan, A.K. Chitale, Sudhir Chandra, S.K. Gambhir, K.N. Shukla,
D S.K. Dholakia, B.V. Desai, Siddhartha Choudhury, Ms. Kumud Singh, Ravinder
Narain, Sanjiv Sen, Ranjan Narain, Ms. Pooja, M.L. Lahoty, P.K. Sharma,
Himanshu Shekhar, Niraj Sharma, Amitabh Verma, Mannan, Anupam Verma,
Anil K. Sharma, Awanish Sinha, R.K. Maheshwari, Jana Kalyan Das, T.N.
Singh, S.K. Dwivedi, K.K. Dhawan, D.S. Mehra, S.K. Agnihotri, Adhyaru
Yashank P., Ms. Hemantika Wahi, P.H. Parekh, Amit Dhingra and Rohit Alex
E Advocates with them for the appearing parties.

The Judgments of the Court were delivered by

PATTANAIK, J. These appeals raise a common question of law as to
the Constitutional validity of Section 9(3) of the Mines and Minerals
F (Regulation and Development) Act, 1957 [hereinafter referred to as 'the Act'],
inter a/ia on the ground that the levy of royalty on minerals is not a tax and
the Union Legislature do not have the powers under Entry 54 of List I to enact
such a law which denudes the right of the State Legislature to levy tax on
mineral rights under Entry 50 of List II. A further contention also has been
advanced in some of these appeals that the enactment of the Act, violates
G the provisions of Articles 268, 269 and 270 of the Constitution, and, therefore,
Section 9(3) must be declared to be ultra vires. When the writ petition,
challenging the vires of the provisions of Section 9(3) of the Act was filed
before the Gujarat High Court, a Bench of the Gujarat High Court, dismissed
the same, following the decision of the Supreme Court in the case of India
H Cement Ltd. and Ors. v. State of Tamil Nadu and Ors., (1990] I SCC 12, and
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [PA TTANAIK, J.] 49

following an earlier decision of the said High Court in Special Civil Application A
No. 6226/94. Subsequent to the decision of this Court in India Cement, all the
questions raised in these appeals have been considered by a three Judge
Bench in the case of State of Madhya Pradesh v. Maha/axmi Fabric Mills
Ltd. and Ors., [ 1995] Supp. 1 SCC 642, and this Court in Mahalaxmi 's case,
rejecting the contentions raised by the consumers of minerals, upheld the B
validity of the Act and set aside the order of the High Court. Since .the
judgment of this Court in Mahalaxmi, deals directly on all issues raised in this
batch of appeals, Mr. Chidambaram, the learned senior counsel, submitted
with force that this batch of appeals should be referred to a larger Bench, as
the Bench while disposing of Mahalaxmi 's case, had assumed some legal
position erroneously, to be the law laid down by this Court in India Cement. C
Mr. Shanti Bhushan, the learned senior counsel, appearing for the appellants
in some other appeals, however contended that the Constitutional validity of
Section 9(3) of the Act has not been tested in the anvil of Articles 268, 269
and 270 of the Constitution and, therefore the matter remains wide open for
being re-considered by this Court notwithstanding the three Judge Bench
judgment in Maha/axmi. D

Before dealing with the contentions raised by the learned counsel,
appearing for the appellants, we think it appropriate to briefly notice how this
Court has dealt with the law relating to the Mines and Minerals (Regulation
and Development) Act, 1957 in different cases. The first decision which E
requires to be noticed in this connection is the case in The Hingir-Rampur
Coal Co., Ltd. and Ors. v. The State o/Orissa and Ors., [1961] 2 S.C.R. 537.
In the said case, the competency of the State Legislature to enact Orissa
Mining Areas Development Fund Act, 1952, was under consideration and one
of the contentions in this Court was such a legislation made by the State
Legislature is ultra vires the law made by Parliament under Entry 54 of List F
I. The majority judgment answered the question and held that in the absence
of requisite parliamentary declaration necessary under Entry 54 of List I, the
State Legislature cannot be denuded of its power under Entry 23 of List II
and the competence of the State Legislature under Entry 23 read with Entry
66 of List II was not impaired in any manner. The Court, therefore, upheld the G
validity of the legislation made by the State Legislature. In elaborating the
discussion, this Court had observed that the limitation imposed by the latter
part of Entry 23 of List II is a limitation on the legislative competence of the
State Legislature itself and the test whether a statute passed by the State
Legislature thereunder was ultra vires would be whether the requisite
declaration under Entry 54, List I has been made by Parliament by law covering, H
50 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A the same field or not. Considering the effect of Entries 23 and 66 of List II
and Entry 54 of List I, the Court observed:

"The effect of reading the two Entries together is clear. The jurisdiction ~-

of the State Legislature under Entry 23 is subject to the limitation
imposed by the latter part of the said Entry. If Parliament by its law
B has declared that regulation and development of mines should in
public interest be under the control of the Union, to the extent of such
declaration the jurisdiction of the State Legislature is excluded. In
other words, if a Central Act has been passed which contains a
declaration by Parliament as required by Entry 54, and if the said
c declaration covers the field occupied by the impugned Act, the
impugned Act would be ultra vires, not because of any repugnance
between the two statutes but because the State Legislature had no
jurisdiction to pass the Jaw."

In the case of State ofOrissa v. MA. Tulloch and Co., [1964] 4 S.C.R.
D 461, the question for consideration before this Court was whether the continued
operation of the Orissa Mining Areas Development Fund Act, 1952 and the
continued exigibility of the fees leviable from mine-owners under the said
enactment, is legally an~ constitutionally permissible. The contention raised
was that the Mines and Minerals (Regulation and Development) Act, 1957
E called the Central Act was brought into force from June I, 1953 and the Orissa
Act which had been enacted by virtue of the legislative power conferred by
Entry 23 of the State Legislative List would ceased to be operative, once the
Parliament made a declaration and enacted the law. The High Court of Orissa
had upheld the contention ~n_d ~ame to hold that the Orissa Act should be
deemed to be non~ic~istent as from June I, 1958 for every purpose, with the
F consequence that there was lack of power to enforce ~nd realise the demands
for the payment of the fee at the time when the demand was issued and was
sought to be enforced. After noticing the Entry 23 in List II and Entry 54 i!1
List J, the Court observed that it does not need much argument to realise that
to the extent to which the Union Government had taken under "its control"
G "the regulation and development of minerals" so much was withdrawn from
the ambit of the power of the State Legislature under Entry 23 and legislation
of the State which had rested on the existence of power under that entry
, would to the extent of that "control" be suspended or be rendered ineffective,
for here we have a case not of mere repugnancy between the provisions of
the two enactments but of a. denudation or deprivation of State legislative
H power by the declaration which Parliament is empowered to make and has
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [PA TT A NAIK, .I.] 5 J

made. It would, however, ~e apparent that the States would lose legislative A
competence on'ly 1Q_ the "extent to which regulation and development under
the control of the Union has been declared by Parliament to be expedient in
the Public interest." But having held so, as the liability to pay the fee, which
was the subject of t~tices of demand had accrued prior to June I, 1958,
the date on which the Central Legislation occupied the field , the Court held B

- that those notices were valid and the amount due thereunder would be
recovered notwithstanding the disappearance of the Orissa Act by virtue of
the superior legislation by the Union Parliament. In India Cement Ltd. and
Ors. v. State of Tamil Nadu and Ors., [1990] I S.C.C., 12, the question for
consideration was whether levy of cess on royalty is within the competence
of the State Legislature? In the aforesaid case, under Section 115 of the C
Madras Panchayats Act, as amended by the Madras Act 18 of 1964, the
lessee ofi:nin~als was required to pay local cess @45 paise/rupee, as royalty.
The contenti-0n on behalf of the State, relying upon the observation made by

-- this Court in H.S.R. Murthy's case, [1964] 6 S.C.R., 666, was repelled and it
was held:

- "It seems, therefore, that attention of the Court was not invited
to the provisions of Mines and Minerals (Development and Regulation)
D

Act, 1957 and Section 9 thereof. Section 9(3) of the Act in tenns states
that royalties payable under the Second Schedule of the Act shall not
be enhanced more than once during a period of four years. It is,
therefore, a clear bar on the State legislature taxing royalty so as to E
in effect amend Second Schedule of the Central Act. In the premises,
.> it cannot be right to say that tax on royalty can be a tax on land, and
even if it is a tax, if it falls within Entry 50 will be ultra vires the State
legislative power in view of Section 9(3) of the Central Act."

The Court also rejected the contention on behalf of the State that under Entry F
50 of List II, there is no limitation to the taxing power of the State and held
that in view of express provisions of Section 9(2) of the Mines and Minerals
·(Regulation and Development) Act, 1957, the submission cannot be accepted
and the field is fully covered by the Central Legislation. In paragraph 34 of
the judgment, the Court concluded: G
"We are of the opinion that royalty is a tax, and as such a cess
on royalty being a tax on royalty, is beyond the competence of the
State legislature because Section 9 of the Central Act covers the field
and the State legislature is denuded of its competence under Entry 23
of List II. In any event, we are of the opinion that cess on royalty H
52 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A cannot be sustained under Entry 49 of List II as being a tax on land.
Royalty on mineral rights is not a tax on land but a payment for the
user of Jand."
•
In Orissa Cement Ltd. v. State of Orissa and Ors., [ 1991] Supp. l S.C.C.
430, the levy of cess on royalty, charged for mining lease under Orissa Cess
B Act, came up for consideration. After elaborate discussion of the legislative
entries as well as the history leading to the enactment and considering the
different decisions right up to the decision of the Supreme Court in India
Cement, the Court held in para 39:
-
"To take up Entry 50 first, a perusal of Entry 50 would show that
c the competence of the State legislature with respect thereto is
circumscribed by "any limitations imposed by Parliament by law relating
to mineral development". The MMRD Act, 1957, is - there can be no
doubt about this - a law of Parliament relating to mineral development.
Section 9 of the said Act empowers the Central Government to fix,
D alter, enhance or reduce the rates of royalty payable in respect of
minerals removed from the land or consumed by the lessee. Sub-
section (3) of Section 9 in terms states that the royalties payable
under the Second Schedule to that Act shall not be enhanced more
than once during a period of three years. India Cement has held that
this is a clear bar on the State legislature taxing royalty so as, in effect,
E to amend the Second Schedule to the Central Act and that if the cess
is taken as a tax falling under Entry 50, it will be ultra vires in view
of the provisions of the Central Act."

Considering, the provisions of Entry 23 of List II, the Court observed:

F "But Entry 23, it will be seen, is "subject to the provisions of List ....
I with respect to regulation and development" of mines and minerals
under the control of the Union. Under Entry 54 of List I, regulation
of mines and mineral development is in the field of Parliamentary
legislation "to the extent to which such regulation and development " ....
G under the control of the Union is declared by Parliament by law to be
expedient in the public interest''. Such a declaration is contained in
Section 2 of the MMRD Act, 1957, which has been set out earlier. It,
therefore, follows that any State legislation to the extent it encroaches
on the field covered by the MMRD Act, 1957, will be ultra vires. The
assessees contend, in this case, that the legislation in question is
H beyond the purview of the State legislature by reason of the enactment
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES''· U.0.1. [PATTANAIK, J.) 53

of the MMRD Act. It would appear, prima facie that the contention A
has to be upheld on the basis of the trilogy of decisions referred to
at the outset viz. Hinger-Rampur, Tulloch and Indi; Cement. They
seem to provide a complete answer to this question."

In State of Orissa and Ors. v. Mahanadi Coalfields ltd. and Ors., [ 1995]

- Supp. 2 S.C..C., 686, the validity of the Orissa Rural Employment, Education
and Production Act, 1992 was under challenge and the Orissa High Court had
struck down the Act on the ground that the levy is a tax on minerals and
mineral rights and the subject is fully covered by the Central Legislation by
B

enacting Mines and Minerals (Regulation and Development) Act. This Court
examined the different relevant entries in List I and List II, more particularly, C
Entry 54 of List I and Entry 23 and Entry 50 of List II and came to hold :

"It appears to us that Entry 49 of List II is the general entry which
enables the State Legislature to impose taxes on lands and buildings.
A particular category or specie is taken out of the general entry, and
is provided by Entry 50 of List II. But the tax that can be levied under D
List II Entry 50 is subject to limitations imposed by Parliament by law
relating to regulation of mines and mineral development. Similarly,
under List II Entry 23, though the State Legislature can enact a law
relating to regulation of mines and mineral development, it is subject
to the provisions of List I (Legislation by Parliament) with respect to E
regulation and development under the control of the Union. In other
words, if.the impugned Orissa Act 36 of 1992 falls either under List
>
II Entry 50 or List II Entry 23, it is subject to the law made by
Parliament relating to the regulation of mines and mineral development
(List I Entry 54). A perusal of the Mines and Minerals (Regulation and
Development) Act, 1957 (Central Act 67 of 1957), Section 2, 3(a) and F
3(d), Section 9 and 9-A and Second and Third Schedules to the Act1
quoted in para 3 (supra) will clearly point out that taxation on mineral
and mineral rights, viz. any tax, royalty, fee or rent are provided in the
said Act. In particular, Section 9A provides payment of dead rent as
provided therein by the holder of a mining lease to the State G
Government at the rates specified in the Third Schedule to the Act.
And the proviso thereto states that in cases where the holder of the
mining lease is to pay royalty under Section 9, he shall be liable to
pay either royalty under Section 9 or the dead rent, as provided under
Section 9-A, whichever is greater. Section 9-A enables the Central
·Government to enhance or reduce dead rent by amending the Third H
54 SUPREME COURT REPORTS (2000] SUPP. 4 S.C.R.

A Schedul~. The Second and the Third Schedules provide varying rates
for different minerals including coal. Si.nee exhaustive provisions as
also the Parliamentary declaration, contemplated by List I Entry S4,
have been made in the Mines and Mineral (Regulation and
Development) Act, 1957, regarding all kinds of taxation on minerals
and mineral rights - tax, royalty - fee-dead rent etc., the State
B Legislature is denuded or deprived of the power to enact any law or
to. impose any tax or other levy with reference to List II Entry 23 or
List II Entry 50."
-
It is no doubt true that in all the aforesaid decisions, it is only the
C validity of the Legislation made by State Legislature, which was under challenge
but that will not in any way alter the ratio of the cases, referred to above, in
construing the different legislative entries and the competence of the Union
Legislature as well as the State Legislature. In Mahalaxmi 's case, [ 1995] Supp.
I S.C.C. 642, the validity of the Central legislation was under challenge and
the three Judge Bench upheld the legislative competence of the Union
D Legislature, in enacting Mines and Minerals (Regulation and Development)
Act, I 957, more particularly, Section 9 thereof as well as the power of the
Central Government to enhance or reduce the rate of royalty, payable in
respect of minerals and it was held that the parliamentary legislation under
1957 Act, having occupied the entire field, neither Entry 23 of List II nor Entry
E 50 of the said List, could be attracted. The Court also in addition, came to
hold that the royalty being a tax on mineral including land, labour and capital
employed in extraction of the mineral, it would fall under the residuary Entry
97 of List I.

In view of the aforesaid decisions of this Court, on interpreting the
F different legislative entries, conferring power on the Union Legislature as well
as the State Legislature and the law made by the Parliament in enacting the
Mines and Minerals (Regulation and Development) Act, 1957, we would now
examine the contentions raised by Mr. Chidambaram and Mr. Shanti Bhusan,
appearing for the appellants. According to Mr. Chidambaram, Entry 50 of List
II deals with the power of the State Legislature to levy taxes on mineral rights
G subject to any limitation imposed by Parliament by law relating to mineral
development. Entry 54 of List I is the competence of the Union Legislature
to make law, regulating Mines and Minerals Development to the extent to
which such regulation and development under the control of the Union is
declared by Parliament by law to be expedient in the public interest and the
H Mines and Minerals (Regulation and Development) Act, 1957 has been enacted,
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [PA TTANAIK, J.] 55

which can be referable to the aforesaid Entry 54 in List I. In List II, the A
Regulation of Mines and Minerals Development is provided under Entry 23,
and, therefore, State Legislature would have the power to make law, regulating
Mines and Minerals Development, but it would be subject to the provisions
of List I with respect to Regulation and Development under the.control of the
Union. It cannot be disputed that the Mines and Minerals (Regulation and B
Development) Act, 1957 is a legislation made for the development of mines
and minerals and has been declared by Parliament to be expedient in the
public interest. Mr. Chidambaram contends that the aforesaid Act of 1957
- covers the field, so far as Entry 23 in List II is concerned but does not,
any way affect the competency of the State Legislature in the field covered
in
by Entry 50 of List II and in that view of the matter, the provisions of Section C
9(3) of the Act which purports to denude the power of the State Legislature
from levying tax on mineral rights, must be held to be unconstitutional. Mr.
Chidambaram, also contends that the power of regulation and control, n:ferable
to Entry 54 of List I is separate and distinct from the power of taxation,
referable to Entry 50 of Li>t II and such specific power of the State Legislature D
under Entry 50 of List II, cannot be cut down or fetter in any manner by the
general power of control exercised by Parliament by a legislation on a matter
falling under Entry 54 of List I. In support of this contention, reliance has
been placed on the decision of this Court in the case of State of UP. and Anr.
v. Synthetics and Chemicals Ltd. and Anr., [1991] 4 S.C.C.139. Mr.
Chidambaram, also urged that in a federal system of governance, as in our E
country, the Constitution itself has clearly demarcated the legislative field for
levying tax by the Union and the State and so far as, the Union is concerned,
those entries are Entries 82 to 92 in List I and so far as the State is concerned,
those entries are Entries 45 to 63 in List II of the Seventh Schedule. The field
of levy of tax having been clearly demarcated and limitations and restrictions F

- having also mentioned therein, the Mines and Minerals (Regulation and
Development) Act, 1957, cannot be held to be an Act, authorising levy of tax
on minerals, as the competence of the Union Legislature in the aforesaid
legislation is referable to Entry 54 of List I and by such general enactment,
the distinct taxing power of State on Minerals under Entry 50 of List II of the G
Seventh Schedule, cannot be obliterated and denuded and, therefore, the
provisions of the 1957 Act, purporting to takmg away the power of the State
Legislature must be struck down. Mr. Chidambaram, being conscious of the
Three Judge Bench of this Court in Mahalaxmi, submitted that it would be
only appropriate to refer the matter to a larger Bench. Mr. Chidambaram, also
lastly urged that in Mahalaxmi, the Court was not sure about the legislative H
56 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A competence of the Parliament under Entry 54 of List I, for upholding the
validity of Section 9 of the 1957 Act and that is why, it took recourse to the
residuary power under Entry 97 of List I and in view of the specific taxing
power under Entry 50 of List II, the residuary power of the Parliament under
Entry 97 of Cist I will not over-ride. .
B Mr. Shanti Bhusan, the learned senior counsel for the appellants in
so~e of these appeals, contended that in none of the cases, this Court has
considered the provisions of Articles 268 to 272, contained in Part XII of the
Constitution, and, therefore, the matter requires further examination.

After the conclusion of the arguments on behalf of the appellants, the
C decision of this Court in B.A. Jayaram and Ors. v·. Union of India and Ors.,
[ 1984] l SCC 168, has been brought to the notice, where-under the Court was
construing Entry 57 of List II and Entry 35 of List III and the power of levying
tax on vehicles suitable for use on roads and the Court held that it is the State
Legislature, which has the power to levy taxes on vehicles suitable for use
D on roads, though it may be open to Parliament to lay down the principles on
'.:Vhich taxes may be levied on mechanically propelled vehicles.

Mr. S.K .. Dholakia, the learned senior counsel, appearing for the State ...
of Gujarat as well as the learned counsel, appearing for the Union of India,
on the other hand submitted that Entry 50 of List II itself contains an in-built
E limitation, the same being limitation imposed by the Parliament by law relating
to mineral development. Since MMRD Act is a law made by Parliament,
relating to minerals development, any provision in the aforesaid Act would
over-ride the taxing power of the State on minerals and in this view of the
matter, the MMRD Act, must prevail. It was also contended that this Central
F Legislation has been in the field for more than 45 years and the provisions
thereof have been interpreted by this Court in several cases, as referred to,
both in India Cement and Mahalaxmi, and, therefore, it would be futile to
refer the matter to a larger Bench for reconsideration. According to Mr.
Dholakia, the Three Judge Bench Judgment in Mahalaxmi, covers all the
points urged and, therefore, these appeals should be dismissed.
G Having considered the rival submissions, although, we find the arguments
advanced by Mr. Chidambaram are attractive, but in view of the series of
- _I

decisions, already referred to, we do not think it appropriate to refer these
appeals for the decision of a larger Bench and in our opinion, the contentions
raised have been fully covered by the Three Judge Bench Judgment of this
H Court in Mahalaxmi. Royalty on minerals is a tax, is concluded by the Seven
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [PATTANAIK, J.] 57

Judge Judgment of this Court in India Cement. The power of State Legislature A
under Entry 50 in List II namely tax on minerals vis-a-vis Section 9(3) of the
MMRD Act, 1957 made by Parliament under Entry 54 of List I was also
considered in the case of India Cement and it was held that in any event,
it would be outside the competence of the State Legislature in view of
Sections 9 and 9(3) of the Mines and Minerals (Regulation and Development)
Act, 1957. In fact, the Court in India Cement, did not accept the earlier B
judgment of this Court in H.S.R. Murthy's case, on the ground that in Murthy,
the attention of the Court had not been invited to MMRD Act and Section
9 thereof. In paragraph 30 of the Judgment in India Cement, the Court held:

"It is, therefore, a clear bar on the State legislature taxing royalty C
so as to in effect amend Second Schedule of the Central Act."

In the aforesaid India Cement case, the Court had also further held that
since the control of mines and minerals development were taken over by
Parliament, the impost by the State Legislature either under Entry 49 or 50 of
List II, cannot be upheld. The Court had also held that tax on minerals is D
covered by Section 9 of the Central Act and the entire field is thus covered.
Though, the validity of a State legislation was under consideration, but the
conclusion of this Court was that for levying a tax on minerals under the
MMRD Act, the Central Legislature was fully competent in view of the
declaration made by the Parliament and on the other hand State Legislatures E
have been denuded of its power. I.n Mahalaxmi, however, as already stated,
the validity of the Central Legislation was under challenge, as in the present
case and the Court upheld the provisions of MMRD Act and Section 9 and
9(3) thereof, by holding that by Entry 54 of List I, it was within the legislative
competence of Parliament to make the law in question and neither Entry 23
of List II nor Entry 50 of List II would be attracted. It is no doubt true that F
in the aforesaid case, the Court had also held that Entry 97 of List I will confer
the legislative competence, but not because the Parliament has no competence
under Entry 54 of List I, but that was an additional prop, and, therefore Mr.
Chidambaram is not right in his submission that the Court took recourse to
the residuary power under Entry 97 of List I. In Synthetic Chemicals' case, G
(1991) 4 S.C.C. 139, this Court no doubt had observed that the power of
regulation and control is separate and distinct from power of taxation, but
while considering Entry 50 of List II and comparing with Entry 54 of List II,
this Court had observed that the wide taxing power of the State under Entry
54 of List II and its conditional or restricted taxing power, for example, over
mineral rights, mentioned in Entry 50 of the said List is significantly different. H
58 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A Thus, the Court itself noticed the conditional or restricted taxing power of the
State Legislature under Entry 50, the same being limitations imposed by
Parliament by law, relating to mineral development and the MMRD Act being
a law made by Parliament relating to mineral development, obviously because
of Section 9 in the Central Act, the State Legislature is denuded of its power
and at the same time, the Parliament's competence to have the law made, no
B longer remains in doubt. The aforesaid decision, therefore is of no assistance.
In B.A. Jayaram and Ors. v. Union of India and Ors., [ 1984] I S.C.C., 168, the
two entries, which were for consideration before this Court were Entry 57 of •
List II and Entry 35 of List III. Entry 57 is itself subject to Entry 35 of List
Ill and, therefore, question for consideration was, what was the content and
C extent of power under Entry 35 of List Ill which reads: "Mechanically propelled
vehicles including the principles on which taxes on such vehicles are to be
levied." In construing Entry 35 of List 111, this Court held that it would be
open to Parliament to lay down the principles on which taxes may be levied
on Mechanically propelled vehicles, but Parliament, while enacting the Motor
Vehicles Act, more particularly, Section 63(7) thereof, refrain from indicating
D any such principles, either expressly or by necessary implication and, therefore,
the State's power to tax on such motor vehicles under Entry 57 of List II was
left'im-inhabited. But in the case in hand, the Seven Judge B~nch judgment
in India Cement as well as the other decisions including the three Judge
..
E
Bench Judgment in Mahalaxmi, have already held that the Union Legislature
did have the competence under Entry 54 of List I to enact MMRD Act, 1957
-.
and Section 9 and 9(3) thereof provide for levy of royalty on minerals and,
therefore, we are bound by the same and the aforesaid decisions relied upon
by Mr. Chidambaram will not assist the appellants.

Articles 268 to 272 in Part XII of the Constitution deal with the
F distribution of revenue between the Union and the States. In Part XII of the
Constitution, Article 265 provides that there cannot be any levy of collection
of tax without the authority of law. The expression "authority of law" refers
to a vaJid law which ,means the tax proposed to be levied must be within the
legislative competence of the legislature imposing the tax ; and the law must
G be validly enacted; the law must not be a colourable use of or a fraud upon
the legislative power to tax; the law must not violate the conditions of
fundamental right as that in Article 19(1)(a) or 19(1)(g); it must not also
contravene the specific provisions of the Constitution which impose limitation
on legislative power relating to particular matters like Articles 276 to 286 or
301 and ; the tax must be authorised by such valid law. The constitutional
H provisions dealing with the distribution of revenue between the Union and
SAURASHTRA CEMENT AN.Q.CHEMICAL INDUSTRIES"· U.0.1. [BANERJEE•.I.]. 59

the States contained in Articles 268, 269 and 272 depends upon the fact when A
a particular legislation is attacked on any one of these grounds and an
examination of.those assertions. The legislation in question namely the MMRD
Act and its validity has been upheld as already stated in the anvil of Article
- 265 inasmuch as it has been held that the tax levied on minerals under Section
9(3) of the Act is by virtue of a valid legislation made by the Parliament in
exercise of its legislative competence under Entry 54 of List I and no question B
of violation of fundamental right arises. In one of the judgments, it has been
held that the power cannot be held to be in colourable use of legislative
power. In that view of the matter on the submissions made by Mr. Shanti
Bhushan, we are unable to persuade ourselves to refer these matters for
~ decision of a larger Bench. In the aforesaid premises, these appeals fail and C
are accordingly dismissed. ·

A group of writ petitions had been disposed of by the Gujarat High
Court, dismissing the same, following the judgment of the said High Court
dated 22nd of June, 1994 in Special Civil Application No. 6226 of 1994. While
dismissing the writ applications, though the interim orders stood vacated, the D
Court had not passed any order with regard to payment of interest. But in
Special Civil Application No. 6226/94, while vacating the interim order and
discharging the rule, the Court has specifically ordered for payment of interest
@ 18% per annum. On application for clarification being filed in those group
of writ petitions, where no order witlf regard to payment of interest had b~n E
made, the High Court directed the payment of interest @ I 8% per annum,
which direction had not been made while disposing of the writ petitions.
Those orders of the High Court, clarifying the earlier order directing payment
' of interest @ I 8% per annum, are al!:io subject matter of appeals in some of
these appeals including Civil Appeal No. 3 I 19/95. We have heard the learned
counsel for the parties and in our considered opinion, the direction to pay F
interest@ 18% per annum must be held to be unreasonable. We, therefore,
modify the same and direct that the interest would be paid @ 9% per annum.

Civil Appeal Nos. 7607/95 & 7472/94 and SLP(Civil) No.21620/94:-

~ These Civil Appeals and the Special Leave Petition arise out of judgment G
of the Madhya Pradesh High Court. The High Court had followed the earlier
decision in Mahalaxmi 's case. The said decision in Mahalaxmi, has been
upheld by the Supreme Court in [1995] Supp. I S.C.C.642. Consequently, these
appeals and the special leave petition stand dismissed.

BANERJEE, J. I have had the privilege of going through the judgment H
60 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A of my learned Brother Pattanaik, J. and while recording my concurrence
therewith, I however, wish to state my own reasonings as below :

The decision of this Court in India Cement India Cement ltd & Ors.
v. State of Tamil Nadu & Ors., [1990] 1 SCC 12 apparently set at rest, the
debate involving the true attributes of Entry 54 of List I and Entries 23 and
B. 50 of List II. Mr. Chidambaram appearing in support of the Appeal, however,
contended that the power to regulate and power to tax cannot be identified
as similar to each other. Before, however, delving into the issue a significant
feature in the matter under consideration is worth noticing - admittedly by
reason of the decision of this Court in Mahalaxmi Fabric Mills 's, case (State
C of MP. v. Mahalaxmi Fabric Mills ltd. & Ors., [1995] Supp. 1SCC642, the
issue as canvassed in the Appeal is no longer res integra and it is on this
later count that Mr. Chidambaram rather emphatically contended that the
decision in the case of Mahalaxmi (supra) needs a re-look and a fresh
consideration since the decision of India Cement (supra) as also the decision
of this Court in Orissa Cement Ltd Orissa Cement Ltd v. State of Orissa &
D Ors., [1991] Suppl. 1 SCC 430 have been applied not in accordance with the
true intent and spirit of the decisions but on adaptation of interpretations
alien to ratio decedendi.

Incidentally, these batch of appeals arise out of the conflicting views
b\tween two different Division Benches of the Gujarat High Court. In the
E impugned judgment (Civil Appeal No. 7000of1994), the Gujarat High Court
has held that royalty is a tax on minerals and the Union Government has the
power to impose such a tax. On the other hand in the earlier judgment, the
same High Court in the case of Tata Chemicals v. State of Gujarat sounded r

a contra note and against which the Union Government is in appeal being
F Appeal Nos. 8166 and 8167 of 1999 by reason of the finding that the State
legislature is clearly entitled to impose a tax on mineral rights and it is,
therefore, obvious that the State Legislature has the power to levy taxes on
mineral rights.

Needless to record here that since the stand of the Appellant in C.A.
G No. 7000of1994 and that of the Respondent in Appeal Nos. 8166-67of1994
is identical in nature, we need not delve into the issue twice over and as such
the judgment of ours would cover both the appeals.

It has been the contention of the appellant that the decision of this
Court in India Cement (supra) did not as a matter of fact specifically deal with
H the legislative competence of the Union Government to levy royalty since the
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [BANERJEE, J.] 61

power to levy is vested exclusively with the State Legislature under Entry 50 A
of List II of the Seventh Schedule to the Constitution and rejection of the
appellant's case solely on the basis thereof was wholly unwarranted and the

- same is liable to be set aside.

The interpretations of the entries noted above (Entry 54 of List I, and
Entries 23 and 50 of List II) being the focal point for consideration, the same B
are set out herein below for proper appreciation:

LIST I (Seventh Schedule) LIST II (Seventh Schedule)

Entry 54. Regulation of mines and Entry 23. Regulation of mines and
mineral development to the extent to mineral development subject to the C
which such Regulation and development provisions of List I with respect to
under the control of the Union is regulation and development under
declared by Parliament by law to be the control of the Union.
expedient in the public interest.
Entry 50. Taxes on mineral rights
subject to any limitations imposed D
by Parliament by law relating to
,,..
mineral development.

While interpreting these entries however this Court in India Cement's
case (supra) recorded as below :
E
"16. Courts of law are enjoined to gather the meaning of the
Constitution from the language used and although one should interpret
the words of the Constitution on the same principles of interpretation
as one applies to an ordinary law but these very principles of
interpretation compel one to take into account the nature and scope
of the Act which requires interpretation. It has to be remembered that F
it is a Constitution that requires interpretation. Constitution is the
mechanism under which the laws are to be made and not merely an
Act which declares that the law is to be. See the observations of

- Justice Higgins in the Attorney General for the State of New South
Wales v. Brewery Employees' Union of New South Wales, (1908) 6
CLR469, 611-12.
G

18. Certain rules have been evolved in this regard, and it is well settled
now that the various entries in the three lists are not powers but fields
of legislation. The power to legislate is given by Article 246 and other H
62 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A articles of the Constitution. See the observations of this Court in
Calcutta Gas Co. v. State of West Bengal, (1962) Supp. 3 SCR l : AIR
(1962) SC 1044. The entries in the three lists ofthe Seventh Schedule

B
to the Constitution, are legislative heads or fields of legislation. These
demarcate the area over which appropriate legislature can operate. It
is weil settled that widest amplitude should be given to the language
-
of these entries, but some of these entries in different lists or in the
same list may overlap and sometimes may also appear to be in direct
conflict with each other. Then it is the duty of the court.to find out
its true intent and purpose and to examine a particular legislation in
its pith and substance to determine whether it fits in one or the other
c of the lists. See the observations of this Court in Jf.R. Banthia v.
Union ofIndia, [ 1969] 2 SCC 166 and Union ofIndia v. H.S. Dhillon,
[1971] 2 SCC 779, 792. The lists are designed to define and delimit the
respective areas of respective competence of the Union and the States.
These neither impose any implied restriction on the legislative power
conferred by Article 246 of the Constitution, nor prescribe any duty
D to exercise that legislative power in any particular manner. Hence, the
language of the entries should be given widest scope [DC Ratana
v. Bhuwalka Brothers Ltd., [1955] I SCR 1071=AIR1955 SC 182 to
find t>Ut which of the meaning is fairly capable because these set up
machinery of the government. Each general word should be held to
E extend to all ancillary or subsidiary matters which can fairly and
reasonably be comprehended in it. In ·interpreting an entry it would
not be reasonable to import any limitation by comparing or contrasting
that entry with any other one in the same list. It is in this background
that one has to examine the present controversy."

F A cursory look even at the decision of this Court in India Cement
(supra) depicts that the question before this Court was whether levy of cess
on royalty is within the competence of the State Legislature and the same was
answered by the Court in the manner following.

G
"34. in the aforesaid view of the matter, we are of the opinion that
royalty is a tax, and' as such a cess on royalty being a tax on royalty,
is beyond the competence of the State Legislature because Section 9
-
of the Central Act covers the field and the State Legislature is denuded
of its competence under Entry 23 of List II. In any event, we are of
the opinion that cess on royalty cannot be sustained under Entry 49
of List II as being a tax on land. Royalty on mineral rights is not a
H tax on land but a payment for the user of the land."
SAURASHTRA CEMENT AND CHEMICA.L INDUSTRIES v. U.0.1. [BANERJEE, J.] 63

The royalty admittedly is fixed under the Mines and Minerals Development A
Act 1957 which happens to be a Central Legislation. Legislation of 1957 is to
provide for the regulation of Mines and Development of Minerals under the
control of the Union. Section 2 of the Act of 1957 reads as below :"

"2. Declarations as to expediency of Union Control.-lt is hereby
declared that it is expedient in the public interest that the Union B
should take _under its control the regulation of mines and the
development of minerals to the extent hereinafter provided.

Krishna Iyer, J. in Krishna Chandra Gangopadhyaya & Others v. The
Union of India and Ors., [ 1975] 2 SCC 302 had this to state for proper
conspectus of statutory interpretation : C
"9. We listen largely to the language of the statute but where, as here,
clearing up of marginal obscurity may make interpretation surer if light
from dependable sources were to beam in, the court may seek such
aid. What has been described as the sound system of construction,
excluding all but the language of the text and the dictionary as the D
key, hardly holds the field especially if the enactment has a fiscal or
other mission, its surrounding circumstances speak and its history
unfolds the mischief to be remedied. The Court, in its comity with the
Legislature, strives reasonably to give meaningful life and avoid
cadaveric consequence. We have set out the story of the rebirth, as E
it were, of the law of minor mineral royalty levy to drive home the
propriety of this method of approach. No doubt, there is some
remissness in the drawing up of what professes to be a validating law
and the neglected art of drafting bills is in part the reason for subtle
length of submissions where better skill could have made the sense
of th~ statute luscent and its validity above-board. Informed by a F
realistic idea of shortfalls in legislative drafting and of the social
perspective of the statute but guided primarily by what the Act has
said explicitly or by necessary implication we will examine the meaning
and its impact on Counsel's contention."

On a plain reading of the language of the statute (Section 2: Act of G
1957) and upon a declaration under Section 2, the Central Government
alone has the power to legislate in regard to regulation of Mines and
Mineral Development. The Calcutta High Court in the case of
Chandeswar Prasad Singh and Anr. v. Sub Divisional Land Reforms
Officer, Barrackpore and Ors., AIR (l 986) Calcutta 1) stated that a H
64 SUPREME COURT REPORTS (2000] SUPP. 4 S.C.R.

A person has no right over and in respect of the earth and clay or other
mines and minerals even contained in the sub soil of the land as
tenants therein and as such no right or proprietory right can be spelt
out in favour of such person. ·And it is in this context that definition
of 'Mining Lease' in terms of Section 3(C) of the Act of 1957, ought
to be noticed and which reads that Mining Lease means a lease
B granted for the purpose of undertaking mining operation and includes
a sub-lease granted for such purpose. Needless to record that Section
9 of the Act of 1957 stands interpreted both in the Constitution Bench
judgment in India Cement (supra) and Mahalaxmi (supra) to the effect
that cess on royalty being a tax on royalty, the State legislature stands
c denuded of its power more so by reason of Section 9 of the Act of
1957. The field being occupied, question of empowerment of the State
Government to collect does not arise. For a proper appreciation of the
issue of occupied field, a reference to Section 9 would be very apposite,
Section 9 reads as below:

D "9. Royalties in respect of mining leases -
(l) the holder ofa mining lease granted before the commencement of
this Act shall, notwithstanding anything contained in the instrument ·
of lease or in any law in force at such commencement, pay royalty in
respect of any mineral removed or consumed by him or by his agent,
E
manager, employee, contractor or sub-lessee from the leased area after
such commencement at the rate for the time being specified in the
Second Schedule in respect of that mineral.

(2) The holder of a mining lease granted on or after the commencement
F of this Act shall pay royalty in respect of any mineral removed or
consumed by him o(by his agent, manager, employee, contractor or
sub-Jessee from the leased area at the rate for the time being specified
in the Second Schedule in respect of that mineral.

(2-A) The holder of a mining lease, whether granted before or after the
G commencement of the Mines and Minerals (Regulation and
Development) Amendment Act, 1972 (56 of 1972) shall not be liable
to pay any royalty in respect of any coal consumed by a workman
engaged in a colliery provided that such consumption by the workman
does not exceed one-third of a tonne per month.

H (3) The Central Government may, by notification in the Official Gazette,
SAURASHTRA CEMENT A.ND CHEMICAL INDUSTRIES v. U.0.1. [BANERJEE, J.J 65

amend the Second Schedule so as to enhance or reduce the rate at A
which royalty shall be payable in respect of any mineral with effect
from such date as may be specified in the notification.

Provided that the Central Government shall not enhance the rate of
royalty in respect of any mineral more than once during any period
of three years." B
It is in this perspective that Part IX Chapter I and, in particular, Articles
245 and 246 of the Constitution ought to be noticed and it be noted that in
a long catena of cases, doctrine of pith and substance of the legislation
stands accepted and it requires no dilation that as long as the legislation is
within the permissible limit in its substance, no objection can be entertained C
as regards the legislative competency. The field concerned, in our view,
stands firmly covered by reason of the incorporation of the Mines and
Minerals Development Act, 1957 by the Parliament. The decision in India
Cement (supra) concerning royalty covers squarely and evenly with the
factual matrix of the matter in issue. D
Mr. Chidambaram however, relying upon the wordings of Entry 54 in
List I and Entry 23 of List II contended that regulation of Mines cannot
possibly be interpreted to various legislations of cess or tax or levy. It has
been contended that language itself of Entry 50 of List II categorically rules
out the conferment of power on to the Union Government as regards the E
imposition of taxes on mineral rights since there is no similar and analogous
entry in List I. We have been taken through various Entries of .List I, in
particular, however, from Entries 82 to 96 which speak of tax, duties or fees
and it is on this score Mr. Chidambaram contended that in the event the
founder fathers of our Constitution wanted conferment of power on to the
Parliament to legislate pertaining to the taxes on minerals there was existing F
no embargo io explicitly declaring the same as has been done in the cases
covered under Entries 82 to 96. The mandate of the Constitution has been
expressly laid down and there is no scope or authority or even jurisdiction
for the law courts to read in between the lines to attribute a further authorisation
though not specifically envisaged and more so by reason of specific G
incorporation of su~h a power on to the State legislature in terms of Entry
50 of List II in the Seventh Schedule to the Constitution.

Admittedly an ingenious effort on the part of appellant herein to interpret
the constitutional provision in the manner as above, except however that the
same would render the M.M.R.D. Act of 1957 wholly ultra virus the Constitution H
66 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A and consequently steps taken in terms therewith would be rendered totally
nugatory. Before expressing any opinion in regard thereto, let us however,
also consider the case of Mahalaxmi Fabric Mills (supra) wherein this Court
was concerned with two main questions viz., whether Section (3) of the Mines
and Minerals Act' of 1957 is ultra virus the Constitution and secondly whether
Notification dated l st August, 1991 issued by the Central government under
B Section 9(3) can be termed to be illegal and i'noperative in law. As regards the
first question pertaining to Section 9, this Court stated:

"8. So far as vires of Section 9 are concerned, it must be kept in view
that a Constitution Bench of this Court has held in the case of
c Baijanth Kedia v. State of Bihar, [1969] 3 SCC 838 that the Act is
enacted by Parliament under Entry 54 of the Union List. In this
connection the Constitution Bench speaking through Hidayatullah,
CJ. has made the following observations: [SCC p. 847-48, para D)

"Entry 54 of the Union List speaks both of Regulation of mines and
minerals development and Entry 23 is subject to Entry 54. It is open
D
to Parliament to declare that it is expedient in the public interest that
the control should rest in Central Government. To what extent such
a declaration can go is for Parliament to determine and this must be
commensurate with public interest. Once this declaration is made and
the extent laid down, the subject of legislation to the extent laid down,
E becomes an exclusive subject for legislation by Parliament. Any
legislation by the State after such declaration and trenching upon the
field disclosed in the declaration must necessarily be unconstitutional
because that field is abstracted from the legislative competence of the
State Legislature."
F 9. Once it is held that the entire Act is within the exclusive domain
of legislative power of Parliament under Entry 54 of the Union List it
becomes obvious that Section 9 which is a part and parcel of the same
Act would also fall within Entry 54 which deals with Regulation of
mines and development of minerals and for which a declaration is
already found in Section 2 of the Act to the effect that such Regulation
G
of mines and minerals development under control of the Union is
expedient in public interest. We may now turn to Section 9 which
reads as under:

(Not repeated herein since already noted earlier in this judgment).
H IO. It becomes obvious that Parliament while enacting Section 9
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [BANERJEE, J.) 67

has already laid down the rate of royalty to be charged on A
the removal and consumption of mineral by any lessees of
mining lease~ his agent or manager or sub-lessee, from the
leased area. The rates of royalty are schedule in the Act. So
far as coal in concerned it is by Entry 11 of the Second
Schedule. Separate rates of royalty are prescribed for different B
types of coal. However, Parliament felt that these rates of
royalty may be required to be enhanced or reduced from time
to time due fall of money value with the passage of time or
vice versa. For that very purpose the Central government as
per Section 9(3) is permitted by Parliament to amend the
Second Schedule by notification to be published in the Official C
Gazette from time to time subject to the proviso that the
Central Government shall not enhance mineral and mines
royalty for more that once during the period of three years.
The power conferred upon the Central Government under
Section 9(3) is by way of delegated legislative power.
D
11. In our considered opinion there is no substance in either of
the twin contentions for challenging vires of Section 9(3). So
far as competence to enact Section 9 is concerned, the
question is no longer res integra. It is covered by the
Constitution Bench decision of .this Court in the case India
Cement Ltd v. State of TN., [l 990] l SCC 12. In that decision E
the Constitution Bench speaking through Sabyasachi
Mukherji, J., as he then was, expressly rules that royalty is
a tax and for imposing such royalty the State Legislature will
have no power under Entry 50 of the Second List."
F
Mahalaxmi' s decision also noted the decision of Orissa Cement, [ 1991]
SCC Suppl. l 471 wherein this Court repelled the contentions of the State
Government justifying the levy under Entries 45, 49 and 50 of the List II of
the Seventh Schedule. This Court went on to add however as below:

"39 To take up Entry 50 first, a perusal of Entry 50 would show that G
the competence of the State legislature with respect thereto is
circumscribed by "any limitations imposed by Parliament by law relating
to mineral development". The MMRD Act, 1957, is there can be no
doubt about this - a law of Parliament relating to mineral development.
Section 9 of the said Act empowers the Central Government to fix,
alter, enhance or reduce the rates of royalty payable in respect of H
68 SUPREME COURT REPORTS [2000) SUPP. 4 S.C.R.

A minerals removed from the land or consumed by the lessee. Sub-
section 3 of Section 9 in terms states that the royalities payable under
the Se~ond Schedule to that Act shall not be enhanced more than
once during a period of three years. India Cement has held that this
is a clear bar on State legislature taxing royalty so as, in ·effect, to
amend the Second Schedule to the Central Act and that if the cess

..
B is taken as a tax falling under Entry 50 it will be ultra virus in view
of the provisions of the Central Act."

And it is on this perspective this Court in Mahalaxmi 's case (supra)
stated:
<.
c "13. Once the conclusion is reached that royalty is a tax, the next
question arises whether Entry 50 of the State List can at all be
restored to for imposing such a tax by the State Legislature. Even that
question is fully covered against the writ petitioners by the very same
Constitution Bench judgment of India Cement India Cement ltd v.
State of T.N., [1990] I SCC 12. In para 24 of the report it has been
D
observed while repelling the contention of Mr. Krishnamurthy Iyer for
the_ State of Tamil Nadu that Entry 50 of List II of the Seventh
Schedule can be of any avail, the Constitution Bench noted that Entry
23 of List II deals with regulation of mines and minerals development
subject to the provision of List I with respect to regulation and
E development under the control of the Union and Entry 54 in List I
deals with regulation of mines and minerals under the control of Union
declared by Parliament by law to be expedient in public interest.
Thereafter it was observed that even if minerals are part of the State
List they are treated separately and, therefore, the principle that the
specific excludes the general must be applied."
F
The learned Additional Solicitor General Mr. Trivedi appearing for Union
of India and Mr. Dholakia for the State of Gujarat, submitted in similar vein
though in contra to the appellant's contention that by reason of the express
finding of this Court, question of having a further consideration of the issue
G does not and cannot arise. Mr. Dholakia with his usual lucidity contended
that the word 'regulation' appearing in Entry 54 cannot be given a restricted
meaning neither can be attributed the ordinary common parlance but shall
have to be given a much wider and broader interpretation ·on the total
circumspection of the constitutional mandate having due regard to the intent
expressed under Section 2 of the M,M.R.D. Act of 1957: A broader
H interpretation according to Mr. Dholakia is the only justifiable interpretation
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [BANERJEE, J.] 69

that is possible and thus regulation also includes a power to levy. A
The word 'regulation' as used in Entry 54 cannot but be said to be of
broad impact encompassing all the facets not only specifically mentioned in
.... .-
the Entry itself but it is inclusive of its inherent implications thereto as well.
The interpretation shall have to be attributed to the words used in the
B
.. Constitution having regard to the public good and public interest. As a matter
of fact, it has been expressly recorded in the Entry itself that the regulation
is in public interest. The word 'regulation' thus has to be read in the context
in which it has been used. In Corpus Juris Secundum (vol. 76: 615) the word
'regulation' has been defined as a rule or order prescribed for management
> or governance (see in this context the decision of the Punjab High Court in C
the case of Municipal Committee, Malerkotla v. Haji Ismail and Another,
AIR 1967 Punjab 32). As a matter of the fact the regulation has to be
interpreted in the context in which it is used and not de hors the context.
There must be a regulated development and mineral development is thus the
only criteria. The finding of its Court in Mahalaxmi's (Three Judges' Bench
judgment) case in fact negates the appellant's contention pertaining to Entry D
50 of List II. As noticed above in the event the contention of the appellant
stands accepted this Court is left with no option but to declare the legislation
(M.M.R.D. Act of 1957) as an invalid piece but the Larger Bench,Judgment
stares at us with an express finding that Section 9 of the Act of I 957 is within
the legislative competence of Parliament both under Entry 54 and Entry 97 of E
the Union List. The appellant's contention on this score that it needs a re-
took, however, cannot be sustained. A Larger Bench Judgment has a binding
effect on this score and there is existing a long catena of judicial precedents
on this count.

- On the other count Mr. Shanti Bhushan appearing in C.A. Nos. 8 I 66-
8167/94 upon adaptation of the contentions of Mr. Chidambaram, further
F

..
contended that as a matter of fact, a plain look at Articles 265, 266, 267, 268,
269 and 270 unmistakably depict the intent of the framers of the Constitution
in the matter of taxes and levies collected by the Government of India being
assigned to States and as such question of depriving the State in the matter G
of levying of a fee under Entry 50 of the List II of the Seventh Schedule does
not arise. Mr. Shanti Bhushan contended that the distribution of revenue
between the Union and the State clearly indicate the authorisation of the State
for introduction of such a levy by State legislation. It has further been
contended that this particular issue as regards the constitutional mandate for
distribution of revenue has not been delved into by any of the decisions of H
70 SUPREME COURT REPORTS (2000] SUPP. 4 S.C.R.

A this Court and as such the decisions not having considered the constitutional
mandate cannot be said to be of any significance warranting a follow up
judgment. In any event by reason of absence of consideration of a
constitutional mandate, Mahalaxmi 's case (supra) ought to be re-considered.
We are, however, not impressed with the submission. Distribution of revenue
B as mandated under the Constitution cannot possibly be interpreted to whittle
down Entry 54 of List I. Entry 54 of List I cannot but be read as the
authorisation as conferred on to the Central Government pertaining to
regulation of Mines and Mineral Development and as declared by Parliament
by law in public interest. It is in pursuance of this authorisation that the
M.M.R.D. Act of 1957 came into the Statute Book and on the wake of the
C Legislation of 1957, Entry 50 of List II cannot but be read subject to the
provisions of the Act of 1957 and when so read, there is an inescapable
conclusion that the field in issue under Entry 50 already stands covered by
Parliamentary legislation of 1957.

On the other count Mr. Chidambaram's submission pertammg to
D delegated legislation in taxing statute however, does not call for any detail
discussion since the autftority of the legislature in introducing the Act of 1957
cannot be doubted in any way and in any event is a settled proposition of
law for more than a decade and it is on this score that the doctrine of stare
decisis has its due application in the contextual facts and in this context the
E decision of this Court in Mishri Lat's case Mishri Lal (d) by LRs. v. Dhirendra
Nath (d) by LRs and Others, [1999) 4 SCC 11 seem to be rather apposite. This
Court observed :

11. It is further to be noted that Meharban Singh 's case came to be
decided as early as 1970 and has been followed for last three decades
F in the State of Madhya Pradesh and innumerable number of matters
have been dealt with on the· basis thereof and in the event, a different
view is expressed today, so far as this specific legislation is concerned,
it would unsettle the situation in the State of Madhya Pradesh and
it is on this score also that reliance on the doctrine of 'stare decisis'
may be apposite. While it is true that the doctrine has no statutory
G
sanction and the same is based on a Rule of convenience and
expediency and as also on 'Public Policy' but in our view, the doctrine
should and ought always to be strictly adhered to by the courts of
law to sub-serve the ends of justice.

H 12. This Court in Mukul v. Ms. Manbhari & Ors., [1959) SCR 1099,
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [BANERJEE, J.] 71

explained the scope of the doctrine of stare decisis with reference to A
Halsbury's Laws of England and Corpus Juris Secundum in the manner
following :-

"The principles of 'Stare Decisis' is ttius stated in Halsbl}ry's
Laws of England:
B
"Apart from any question as to the Courts being of co-ordinate
... jurisdiction, a decision which has been followed for a long period of
time, and has been acted upon by persons in the fonnation of contracts
or in the disposition of their property, or in the general conduct of
affairs, or in legal procedure or in other ways, will generally be followed
by courts of higher authority than the court establishing the rule, C
even though the court before whom the matter arises afterwards might
not have given the same decision had the question come before it
originally. But the supreme appellate Court will not shrink from
overruling a decision, or series of decisions, which establish a doctrine
plainly outside the statute and outside the common law, when no title D
and no contract will be shaken, no persons can complain, and no
general course of dealing be altered by the remedy of a mistake."

The same doctrine is thus explained in Corpus Juris Secundum :-

"Under the stare decisis rule, a principle of law which has become E
settled by a series of decisions generally is binding on the courts and
should be followed in similar cases. This rule is based on expediency
and public policy, and, although generally it should be strictly adhered
to by the courts, it is not universally applicable."

13. Be it noted however that Corpus Juris Secundum, adds a rider that F
"previous decisions should not be followed to the extent that grievous
wrong .may result; and, accordingly, the courts ordinarily will not
adhere to a rule or principle established by previous decisions which
they are convinced is erroneous. The rule of stare decisis is not so
imperative or inflexible as to preclude a departure therefrom in any
case, but its application must be determined in each case by the G
discretion of the court, and previous decisions should not be followed
to the extent that error may be perpetuated and grievous wrong may
result.

14. The statement though deserves serious consideration in the event
of. a definite finding as to the perpetration of a grave wrong but that H
72 SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A by itself does not denude the time tested doctrine of Stare Decisis its
efficacy."

The two English decisions Admiralty Commrs. v. Valverda Owners.
(1938) Appeal Cases 173 at 194; Button v. Director of Public Prosecution and
Swain v. Director of Public Prosecutions, ( 1966) Appeal Cases 591 also
B sound a similar note.

Recently Paripooman, J. in Kattite Valappil Pathumma & Ors. v. Taluk
land Board & Ors., [1997] 4 SCC 114 in paragraph 18 observed: -
"We are further of the view, that even if another view is possible, we
c are not inclined to take a different view at this distance of time. ...
Interpretation of the law is not a mere mental exercise. Things which
have been adjudged long ago should be allowed to rest in peace. A
. decision rendered long ago can be overruled only if this Court comes
to the conclusion that it is manifestly wrong or unfair and not merely
on the ground that another interpretation is possible and the court
D may arrive at a different conclusion. We should remember that the law
laid down by the High Court in the above decision has not been
doubted so far. The Act in question is a State enactment. These are
weighty considerations to hold that even if a different view is possible,
if it will have the effect of upsetting or reopening past and closed
E transactions or unsettling titles all over the State, this Court should
be loathe to take a different view. On this ground as well, we are not
inclined to interfere with the judgment under appeal."

On the wake of the aforesaid, we do feel it expedient to record that
taking recourse to the doctrine as above would be an imperative necessity,
F so to avoid uncertainty and confusion, since the basic feature of law is its
certainty and in the event of any departure therefrom the society would be
in utter confusion and the resultant effect of which would be legal anarchy
and judicial indiscipline - a situation which always ought to be avoided. The
central legislature introduced the legislation (MMRD Act) in the year 1957
and several hundreds and thousands of cases have already been dealt with
G on the basis thereof and the effect of a declaration of a contra law would be
totally disastrous affecting the very basics of the revenue jurisprudence. It
is true that the doctrine has no statutory sanction but it is a rule of
convenience, expediency, prudence and above all the public policy. It is to
be observed in its observance rather than in its breach to serve the people
H and sub-serve the ends of justice.
SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES v. U.0.1. [BANERJEE, J.] 73

As regards the other appeals before this Court, of course, we need not A
dilate ourselves to any further extent save what is noticed hereinabove by
reason of the identical situation of facts and law and by reason of adoptation
of the submissions as noted except however on one, to wit, the grievance
pertaining to the award of interest at the rate of 18% at a stage subsequent
to the pronouncement of the judgment. While recording our concurrence to B
the respondent's contention and rejection of the same in support of the
appeal, the issue pertaining to interest seem to be rather harsh. The imposition
of 18% interest with yearly rests cannot in our view find support in the
contextual facts since the validity of tlie legislation itself is in question before
this Court. The payment of interest being in the discretion of the Court, we,
th~refore, do not wish to interfere with the award of interest as such though C
the rate at which it has been awarded needs some modification in the contextual
facts and as such we direct that the rate of interest be 9% simple interest and
not as directed by the High Court.

Save th,e moc.ification of the rate of interest from 18% with yearly rests
to 9% simple ifl'terest, we are not in a position to lend any concurrence to the D
submissions of the appellants in these batch of cases and as such the appeals
fail and stand dismissed save however, the modification pertaining to interest
as directed above. There shall be no order as to costs.
•-,
B.S. Appeals and Petitions disposed of.
E

-