Holding

Royalty on coal is payable at the stage of removal from the leased area; before 25 September 2000 it is on ROM coal at the pit‑head, and after that on processed coal per Rules 648 and 64C, entitling TISCO to a refund for the former period.

Summary

Tata Steel and its subsidiary TISCO operate captive coal mines in Jharkhand. The dispute concerned whether royalty under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 should be levied on raw Run‑of‑Mine (ROM) coal extracted at the pit‑head or on the beneficiated coal removed from the leased area. The Court examined the literal and restrictive interpretations of "removal" and the effect of Rule 648 and Rule 64C inserted in the Mineral Concession Rules, 1960 on 25 September 2000. It held that before that date royalty is payable on ROM coal at the pit‑head (per the Central Coalfields decision), entitling TISCO and Tata Steel to a refund for the period 10 August 1998 to 25 September 2000. After the rules’ insertion, royalty is payable on the processed mineral when it leaves the leased area. The Court ordered TISCO to adjust the refund against future payments and confirmed Tata Steel’s liability to pay royalty post‑September 2000.

Issues considered

Whether royalty on coal is chargeable on raw ROM coal at the pit‑head or on processed coal removed from the leased area.
Whether Rule 648 and Rule 64C of the Mineral Concession Rules, 1960, inserted on 25 September 2000, alter the point of royalty liability.
Whether TISCO is entitled to a refund of royalty paid between 10 August 1998 and 25 September 2000.

Legislation cited

Mineral Concession Rules, 1960s. Rule 648, s. Rule 64C
Mines and Minerals (Development and Regulation) Act, 1957s. 9

Subjects

royaltymines and minerals actmineral concession rulescoalbeneficiationrefundleasepit‑headprocessed coal

Judgment

[2015] 6 S.C.R. 29

TATA STEEL LTD. A
v.
UNION OF INDIA & ORS.
(Civil Appeal Nos. 2938-2939 OF 2015)
B
MARCH 17, 2015
[H. L. DATTU, CJI., MADAN B. LOKUR AND A.
K. SIKRI, JJ.]
Mineral Concession Rules, 1960: rr. 648, 64C - Coal c
- Royalty- Whether royalty is payable on processed coal
that is coal consumed or removed from the boundaries of
the leased area in a beneficiated form or on the raw or
unprocessed or Run-of-Mine (ROM) coal at the pit head- In
the case of SAIL, it was held by Supreme Courton 10.8.1998 D
that royalty is chargeable in accordance with s. 9 of Mines
and Mineral Act on the quantity of coal extracted at the pit
head-After decision in SAIL, Government issued notification
dated 25.9.2000 inserting rr.648 and 64C whereby ROM
minerals after being processed in the leased area were E
chargeable to royalty on processed minerals - Held: In view
of insertion of r. 648 and 64C, the levy of royalty on coal has
now been postponed from the pit head to the stage of removal
of the coal (whether unprocessed or ROM coal or whether
beneficiated coal) - In view of decision in Central Coalfields F
Ltd., TISCO and Tata Steel is entitled to refund of royalty
from 10. 8. 1998 to 25. 9. 2000 - For the period from 25. 9. 2000
onwards, T/SCO is obliged to pay royalty as per r.648 and
r. 64C of the Rules - Mines and Minerals (Development and G
Regulation) Act, 1957 - s. 9 - Coal - Royalty.

Disposing of the appeals, the Court

HELD: 1. A plain reading of Rule 648 of the MCR
clearly suggests that the leased area mentioned therein H
29
30 SUPREME COURT REPORTS [2015) 6 S.C.R.

A has reference to the boundaries of the leased area given
to a lease holder. Sub-rule (1) provides that if the ROM
mineral is processed within the boundaries of that
leased area, then royalty will be chargeable on the
processed mineral removed from the boundaries of the
B leased area. However, if the ROM mineral is removed
without processing from the boundaries of the leased
area then in terms of sub-rule (2) royalty will be
chargeable on the unprocessed ROM mineral. Rule 648
of the MCR is silent about removal of a mineral from the
c mine/pit-head but which is not removed from the
boundaries of the leased area. This is a clear pointer
that royalty is to be paid by the lease holder only on
removal of the mineral from the boundaries of the leased
area. Similarly, Rule 64C of the MCR relates to royalty
0
on tailings or rejects. As far as Tata Steel is concerned,
its computation given in the Convenience Volume
indicates that royalty is paid and payable on middlings
and tailings. Rule 64C of the MCR makes it clear that
E royalty is payable on rejects when they are sold or
consumed after being dumped. There is nothing to
indicate in Rule 648 and Rule 64C of the MCR that coal
has been put on a different pedestal from other minerals
mentioned in the MMDR Act read with the Second
F Schedule thereto. [Paras 77 to 79] [61-F; 62-A-D, F-G, H;
63-A]

2. With effect from 251h September, 2000 when
these rules were inserted in the MCR, royalty is payable
G on all minerals including coal at the stage mentioned in
these rules, that is, on removal of the mineral from the
boundaries of the leased area. For the period prior to
that, the law laid down in Central Coalfields Ltd. will
operate, as far as coal is concerned, from 101h August,
H 1998 when SAIL was decided, though for different
TATA STEEL LTD. v. UNION OF INDIA & ORS. 31

reasons. [Para 80] [63-D-E] A

State of Orissa v. Steel Authority of India Ltd. (1998) 6
SCC 476: 1998 (3) SCR 1074; National Mineral
Development Corporation Ltd. v. State of M.P (or
NMDC).- (2004) 6 sec 281: 2004 (2) Suppl. SCR 1; B
Mis Central Coalfields Ltd. v. State of Jharkhand
decided by Supreme Court in CA 5651 of 2005
dtd.25.7.2006 - relied on.

National Coal Development Corporation Ltd. State of c
Orissa AIR 1976 Orissa 159; National Coal
Development Corporation Ltd. State of Orissa (1998)
6 sec 480 - referred to.

Case Law Reference
D
1998 (3) SCR 1074 relied on. Paras 3, 13 to 15,
60, 61, 63, 67' 69,
72 to 74, 80, 82, 87
2004 (2) Suppl. SCR 1 relied on. Para 57, 64, 68, 69, E
72
AIR 1976 Orissa 159 referred to. Para 12, 87
(1998) 6 SCC 480 referred to. Paras 12, 51
CIVILAPPELLATE JURISDICTION: Civil Appeal Nos. F
2938-2939 of 2015.

From the Judgment and Order dated 12.03.2014 of the
High Court of Jharkhand at Ranchi in W.P. (C) Nos. 1°504 and
1505of2009. G

WITH

Civil Appeal Nos. 307 and 303 of 2004 and 2940-2941 of
2015
H
32 SUPREME COURT REPORTS [2015) 6 S.C.R.

A K. V. Vishwanathan, Anup K., Adeeba Mujahid, Anil
Kumar Jha, R. K. Ojha, Pu nit Dutt Tyagi for the Appellant.

Devashish Bharuka for the Respondents.

The Judgment of the Court was delivered by
B
MADAN B. LOKUR, J. 1. Leave granted.

2. Two sets of appeals are before us. One set of
appeals pertains to the Tata Iron and Steel Company Limited
C (TISCO) and the other set pertains to Tata Steel.

3. In the set of appeals pertaining to TISCO, the first
appeal is Civil Appeal No. 303/2004 filed by TISCO against
the judgment and order dated 23rd July, 2002 passed by the
D Jharkhand High Court. 1 The grievance in this appeal is that
though the application of the law laid down by this court in
State of Orissa v. Steel Authority of India Ltd. 2 (hereafter
SAIL) has been accepted by the High Court, namely, that
royalty is chargeable [in accordance with Section 9 of the
E Mines and Minerals (Development and Regulation) Act, 1957
(the MMDR Act)) on the quantity of coal extracted at the pit-
head, yet the refund of excess royalty paid by TISCO for the
period from 1O'h August, 1998 (the date of the decision in
SAIL) till June 2002 [about Rs.29.34 er.) has been denied.
F TISCO therefore claims entitlement to refund on the excess
royalty paid by it for this period.

4. Civil Appeal No.307/2004 has been filed by the
State of Bihar (Now Jharkhand) against the same judgment
G and order dated 23rd July, 2002. The submission is that after
the decision in SAIL the Government of India issued a
notification dated 251h September, 2000 inserting Rule 648
and Rule 64C in the Mineral Concession Rules, 1960 (hereafter
1
MANU/JH/0590/2002
H 2 (1ssa) 6 sec 476
TATA STEEL LTD. v. UNION OF INDIA & ORS. 33
[MADAN 8. LOKUR, J.]

MCR) and as a result of this, Run-of-Mine (ROM) minerals, A
after being processed in the leased area are exigible to royalty
on the processed mineral. It is contended that these rules were,
unfortunately, not broughtto the notice of the High Court and
that the decision rendered by the High Court accepting the
law laid down in SAIL is incorrect. 8

5. In this context, it must immediately be noted that the
contention of the State of Jharkhand is not that Rule 648 and
Rule 64C of the MCR have retrospective effect. That being
so, the question is whetherTISCO is entitled to refund of the C
excess royalty paid from 1Oth August, 1998 (the date of the
decision in SAIL) to 25th September, 2000 and if so whether
the High Court was right in denying that refund. Also, the
question is whether TISCO is entitled to refund of royalty from
25th September, 2000 till June 2002 and if so, whether the D
High Court was right in denying that refund.

6. The other set of appeals pertaining to Tata Steel
consists of four appeals. These appeals filed by Tata Steel
arise out of S.L.P. (C} Nos.8972-73/2014 and S.L.P. (C} E
Nos.9016-17/2014 and are directed against a common
judgment and order dated 12th March, 2014 passed by the
Jharkhand High Court in W.P. (C} Nos.1504/2009 & 1505/
2009 and W.P. (C) Nos. 2995/2008 & 2999/2008. 3 · The
grievance of Tata Steel is that despite the decision of this F
court in SAIL and the decision dated 23rd July, 2002 of the
Jharkhand High Court, royalty is being charged from Tata
Steel on processed or beneficiated coal and not on extracted .
coal or Run-of-Mine (ROM) coal at the pit-head. It is
submitted that this is despite the affidavit of the Ministry of G
Coal of the Government of India that Rule 648 and Rule
64C of the MCR "may not be particularly applicable on coal
minerals." Tata Steel is also aggrieved by the conclusion of
3 2014 (2) JLJR 702
H
34 SUPREME COURT REPORTS (2015) 6 S.C.R.

A the Jharkhand High Court that Rule 648 and Rule 64C of the
MCR are constitutionally valid.

Appeals filed by Tata Steel

7. The question for our consideration in the set of
8
appeals filed by Tata Steel is whether royalty is chargeable
under Section 9 of the Mines and Minerals (Development
and Regulation) Act, 1957 and the Second Schedule thereto
on raw or unprocessed or Run-of-Mine (ROM) coal at the
c pit-head or is it chargeable on coal after it is processed and
beneficiated in the washeries located within the boundaries
of the leased area. In our opinion, the question of payment
of royalty has arisen in respect of other minerals and this
has been discussed in cases relating to those minerals. On
o an appreciation of the decisions rendered, it must be held
that royalty is payable on the processed or beneficiated coal
only after 25'" September, 2000 and royalty is payable on
unprocessed, raw or ROM coal extracted at the pit-head
only for the period from 1Olh August, 1998 to 25'" September,
E 2000.

Background facts

8. Tata Steel holds several mining leases for coal in
F the State of Jharkhand, in the district of Ramgarh (formerly
Hazaribagh) known as the West Bokaro Colliery and in the
district of Dhanbad known as the Jamadoba and Belatand
group of collieries. The coal mines are captive coal mines.
Tata Steel has an adequate number of washeries in the
G leased area where the raw coal extracted from the mine
(Run-of-Mine coal) is washed to improve its quality and is
then dispatched for use in its steel plant at Jamshedpur for
the production of iron and steel.

9. Initially Tata Steel and TISCO were of the opinion
H
TATA STEEL LTD. v. UNION OF INDIA & ORS. 35
[MADAN B. LOKUR, J.)

that in accordance with the provisions of Section 9 of the Mines A
and Minerals (Regulation and Development) Act, 1957 [now
renamed as the Mines and Minerals (Development and
Regulation) Act, 1957 or the MMDR Act]• they were liable to
pay royalty at the rates mentioned in the Second Schedule
to the MMDR Act on the tonnage of washed coal, that is B
after raw coal or Run-of-Mine (ROM) coal is removed from
the washery post the beneficiation process. In fact a writ
petition was filed by TISCO in the Patna High Court being
CWJC No.1 of 1984 (R) seeking a declaration to this effect.
The State of Bihar (at that time) was of the view that royalty C
was payable at the rate mentioned in the Second Schedule
to the MMDRAct on the tonnage of the extracted coal at the
pit-head and not on the tonnage of the washed or
beneficiated coal. By its judgment and order dated 7111 August,
D
1990 the Patna High Court held that TISCO was liable to
pay royalty on the tonnage of the washed or beneficiated
coal. It was held:

"From the plain reading of section 9(2) of the Act, it is
E
4 With effect from 18th December, 1999
9. Royalties in respect of mining leases. -(1) The holder of a mining lease granted
before the commencement of this Act shall, notwithstanding anything contained in the
instrument of lease or in any law in force at such commencement, pay royalty in respect
of. any mineral removed or consumed by him or by his agent, manager, employee,
contractor or sub-lessee from the leased area after such commencement, at the rate
for the time being specified in the Second Schedule in respect of that mineral. F
(2) The holder of a mining lease granted on or after the commencement of
this Act shall pay royalty in respect of any mineral removed or consumed by him or by
his agent, manager, employee, contractor or sub-lessee from the leased area at the
rate for the time being specified in the Sec
ond Schedule in respect of that mineral.
(2-A) The holder of a mining lease, whether granted before or after the
commencement of the Mines and Minerals (Regulation and Development) Amendment
Act, 1972, shall not be liable to pay any royalty in respect of G
any coal consumed by a workman engaged in a colliery provided that such consumption
by the workman does not exceed one-third of a tonne per month.
(3) The Central Government may, by notification in the Offiei.al Gazette, amend
the Second Schedule so as to enhance or reduce the rate at whlOR 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 royally in H
respect of any mineral more than once during any period of three years.
36 SUPREME COURT REPORTS (2015] 6 S.C.R.

A clear that royalty is payable on the coal removed from
the leased area and so long it is not removed, no royalty
is payable. In view of the factthat coal is removed from
the leased area, only after it is washed, the petitioner
is liable to pay royalty on the weightage of that coal."
B
10. This decision has attained finality and the position
at law in this regard continued till 1998.

11. On 1Olh August, 1998 this court delivered judgment
c in SAIL. The question raised in that case was whether the
Steel Authority of India Ltd. or SAIL was liable to pay royalty
at the rate mentioned in the Second Schedule to the MMDR
Act on the quantity of mineral (limestone and dolomite)
extracted as it is or on the quantity arrived at after these
D minerals have undergone a process of removal of waste
and foreign matter. According to the State of Orissa royalty
was chargeable on the extracted minerals at the rate
mentioned in the Second Schedule to the MMDR Act while
according to SAIL royalty was chargeable at the rate
E mentioned in the Second Schedule to the MMDR Act on the
quantity of minerals obtained after the process of removal
of waste and foreign matter.

12. This court referred to an earlier decision of the
F Orissa High Court relating to the National Coal Deyelopment
Corporation Ltd. 5 In that case, the High Court held that
removal of coal from the seam in the mine and extracting it
through the pit's mouth to the surface would satisfy the
requirement of Section 9 of the MMDR Act to give rise to a
G liability for royalty. The decision of the Orissa High Court
was appealed against but the appeal was dismissed by this
court. 6 Relying upon this decision, it was concluded in SAIL
that the process of removal of waste and foreign matter
amounts to consumption and, therefore, the entire mineral
5 National Coal Development Corporation Ltd. v. State of Orissa, AIR 1976 Orissa 159
6 National Coal Development Corporation Ltd. v. State of Orissa, (1998) 6 SCC 480
TATA STEEL LTD. v. UNION OF INDIA & ORS. 37
[MADAN B. LOKUR, J.]

extracted is exigible to a levy of royalty. By necessary A
implication the decision of the Patna High Court in CWJC No.1
of 1984 (R) filed by TISCO stood reversed.

13. Perhaps as a consequence of the decision in SAIL,
Rule 64B and Rule 64C were inserted in the MCR by a B
notification dated 25th September, 2000. 7

14. Be that as it may, in view of the decision in SAIL,
the stand taken by Tata Steel/TISCO completely changed
and the view now sought to be canvassed was that royalty c
is payable at the rate mentioned in the Second Schedule to
the MMDRAct on the tonnage of unprocessed or ROM coal
at the pit-head and not on processed or beneficiated coal.

15. With regard to the claim of Tata Steel that it was D
liable to pay royalty only on the tonnage of unprocessed or
ROM coal at the pit-head in terms of the decision in SAIL,
the response of the State of Jharkhand was that in view of
Rule 64B and Rule 64C of the MCR, royalty was liable to be
paid at the rate mentioned in the Second Schedule to the E
MMDR Act on the tonnage of beneficiated coal and not on
the tonnage of the raw, extracted or ROM coal at the pit~
head. In other words, not only was there a volte face by Tata
Steel/TISCO but also by the State Government. The High
Court has observed in the impugned judgment dated 12th F
March, 2014 that the reason for the volte face both by Tata
Steel and by the State of Jharkhand was that by the
notifications dated 1st August, 1991 and 14th October, }994
the rate of royalty on the washed or beneficiated coal was
increased. 8 G
7 National Mineral Development Corporation Ltd. v. State of M.P., (2004) 6 SCC 281

paragraph 32 had earlier echoed this view
a By a notification dated 5th May, 1987 the rate of royalty on coking coal Steel Grade I
was fixed at Rs. 7/- per ton and of Washery Grade IV at Rs.5.50 per ton; by a notification
dated 1•August. 1991 the rate of royalty on coking coal Steel Grade I was increased to
Rs.150/- per ton and of coking coal Washery Grade IV to Rs.75/- per ton; by a notification H
dated 14~ October, 1994 the rate of royalty on coking coal Steel Grade I was further
increased to Rs.195/- per ton and of coking coal Washery Grade IV to Rs.95/- per ton.
38 SUPREME COURT REPORTS (2015] 6 S.C.R.

A 16. In any event, this interpretational dispute led to the
filing of a set of writ petitions by Tata Steel in the High Court of
Jharkhand, out of which the present appeals have arisen.

The controversy
B
Quality of coal and stage of chargeability

17. When coal is extracted from a mine, it is referred to
as raw coal or unprocessed coal. Depending upon the use to
which it may be put, which also depends upon its ash content
C and its calorific value, raw coal or unprocessed coal or Run-
of-Mine (ROM) coal can be used as it is.

18. As far as Tata Steel is concerned, it is stated on
page 164 of the Convenience Volume handed over to us by
D learned counsel for Tata Steel that "Most of our raw coal
falls in the (on average) Washery Grade IV." It may be
mentioned that coal of Washery Grade IV has ash content
between 28% and 35%. In the synopsis and lists of dates
filed by Tata Steel in the appeals arising out of S.L.P. (C)
E Nos. 8972-73 of 2014 it is stated as follows:

"The coal, when extracted in its raw form also known
as ROM contains high percentage of ash. Though ROM
is fitfor many purposes, it is not fitfor the steel industry."
F
19. Even the Union of India in its affidavit filed by the
Under Secretary in the Ministry of Coal in W.P. (C) No.1504
of 2009 in the Jharkhand High Court states to the same
effect, namely, that ROM coal can be used as it is. It is stated
G in paragraph 11 thereof as follows:

"Considering the fact that in case of coal, where the
entire ROM can be generally made usable, the
Respondents No. 1 & 2 are of the opinion that rule 648
H and the rule 64C [of the Mineral Concession Rules, 1960]
TATA STEEL LTD. v. UNION OF INDIA & ORS. 39
[MADAN B. LOKUR, J.)

may not be particularly applicable on coal minerals." A

20. Similarly, the State of Jharkhand in its affidavit filed
in the same case has stated in paragraph 79 as follows:

'That with regard to the averments made by the petitioner
B
in Paragraphs 84 and 85 of the instant writ application it
is stated and submitted that it is not necessary that coal
produced from a mine should always be subjected to
processing. There are various coal mines in the country
producing raw coal without any processing ....... " c
21. Therefore, while raw coal or unprocessed coal or
ROM coal extracted by Tata Steel being Washery Grade IV
having ash content between 28% and 35% can be used as
it is for certain purposes, it requires to undergo a process of D
beneficiation to make it suitable for use.in steel making. This
process is undertaken by Tata Steel in its washeries in the
leased areas.

22. The controversy in the present appeals is,
therefore, limited to the question whether royalty is payable E
at the rate mentioned in the Second Schedule to the MMDR
Act on processed coal, that is, coal consumed or removed
from the boundaries of the leased area in a beneficiated
form or on the raw or unprocessed or ROM coal at the pit- F
head.

23. That the controversy is limited to the stage at which
royalty is chargeable on coal is also clear from paragraph
17 of W.P.(C) No.2999 of 2008 filed by Tata Steel in the
High Court wherein it is stated (though ROM coal can be G
used as it is) as follows:-

"17. That the petitioner all along has been utilizing the
entire coal raised from the said West Bokaro Colliery for
H
40 SUPREME COURT REPORTS (2015] 6 S.C.R.

A the purpose of treatment and/or washing thereof as to
reduce the ash percentage thereof with a view to use the
same in its Steel Plant, in as much as in the Steel plant
only coking coal of high grade which containing [contains]
less ash can be used."
B
24. Similarly, in paragraph 31 of the counter affidavit
filed by the Union of India in W.P.(C) No.1504 of 2009 in the
High Court it is stated as follows:-

C "31. That in reply to the statements made in para No.84
of the Writ Petition the Answering Respondent most
humbly and respectfully state that the applicability of
Rule 648 and Rule 64C [of the Mineral Concession
Rules, 1960] is necessary for minerals that need
D processing or beneficiation before being used,
especially metallic minerals. However, [as far as] its
applicability to coal minerals is concerned considering
the fact that in case of coal, where the entire ROM can
be generally made usable the Respondent No. 1 & 2
E are of the opinion that Rule 648 and Rule 64C may not
b~ particularly applicable to coal mineral."

25. It is quite clear from the.above that raw or unprocessed
or ROM coal at the pit-head c;an be used for certain purposes;
F it is also clear that as far as Tata Steel is concerned, Washery
Grade IV coal that it extracts needs to be beneficiated to
make it usable in the steel industry and the controversy is
limited to the issue of payment of royalty - whether it is
payable on raw or unprocessed-or ROM coal at the pit-head
G or it is payable on processed Steel Grade coal.

Coal beneficiation

26. The question that, therefore, arises is what is the
H consequence of beneficiation? Very briefly, the consequence
TATA STEEL LTD. v. UNION OF INDIA & ORS. 41
[MADAN B. LOKUR, J.]

of beneficiation of coal is upgrading or improving its quality A
from the ROM coal. In the Convenience Volume handed
over to us, with reference to beneficiation of coal, it is stated
by Tata Steel as follows: 9

"The crushed raw coal (ROM) has ash percentage B
varying from 22% to 40% and moisture of 3% to 5%.
For use in Blast furnace for steel making, we require
clean coal of uniform quality at low ash %. So,
Beneficiation of ROM raw coal is done to reduce the
ash content to bring up to Steel Grade coal. c
ROM coal of various seams at coal mine is fed in to
the Coal washery (Beneficiation plant) for beneficiation
so that the final clean coal product has ash of below
15% (Steel Grade coal). D
For coal beneficiation, gravity separation methods for
coarser (size 13 mm to 0.5 mm) material and froth
floatation method for finer material (size< 0.5 mm) are
done. E
So, before beneficiation, the raw coal is crushed in to
size below 13 mm at Coal Handling Plant (Crushing
Plant). The coarse material i.e. size from 13 mm to 0.5
mm is treated in dense media cyclone whereas, less
F
than 0.5 mm is treated by froth floatation method. As
beneficiation is a wet process hence, it increases the
moisture percentage of beneficiated coal by around
8% to 15%.

After beneficiation, apart from the clean coal (required G
in Blast furnace for Steel making), we also get Coal
by-products named as, middling (ash 40-45%), Tailings
(ash 40-45%) and Rejects (ash 60-65%).
9
This has not been disputed by the State of Jharkhand H
42 SUPREME COURT REPORTS [2015] 6 S.C.R.

A The product quantity after beneficiation process gets
increased due to wet process by adding moisture into
the output, shown by an example below -

Production (Extraction): The basis figure of production
B of 100 tonnes of ROM coal has been taken.

Therefore, Quantity produced (extracted):= 100 tonnes

Beneficiation: The products are dewatered but still the
surface moisture gets adhered to the product
c generated. The beneficiation is a wet process i.e. raw
coal mass flows through different process in slurry form.
Output is measured on wet process because it is
transported on wet basis (with moisture). Hence the
output is more than the input of raw coal.
D
Beneficiation process results in
Clean Coal;
Middlings;
E Tailings; and
Rejects

Thus 100 tonnes of raw coal will produce approximately
115 tonnes of washed product.
F
Output from collieries (Average Quantities):
Clean coal = 40 tonnes
Middlings = 40 tonnes
Tailings = 25 tonnes
G Rejects = 10 tonnes

Conclusion:
It is quite clear that beneficiation process (dense media
H gravity separation and froth floatation) are a physical
TATA STEEL LTD. v. UNION OF INDIA & ORS. 43
[MADAN B. LOKUR, J.]

separation process to separate higher ash coal and A
lower as~ coal, so no chemical changes are there in
the coal mineral, as there are no chemical reactions
involved during this beneficiation process.

Referring below a flow chart (not relevant] ........ From B
the quantity related table, it is also quite evident that
due to addition of water during wet beneficiation, the •
summation of beneficiated coal product quantity is
higher than fed ROM coal quantity."
c
27. From this, it is quite clear that the beneficiation
process, as far as coal is concerned, has two significant
consequences - the grade of coal improves (from Washery
Grade IV it could improve to Steel Grade I) and the weight of
the coal increases (from 100 tons of raw ROM coal to 105 D
tons [excluding rejects] of beneficiated coal).

28. However, the process of beneficiation for other
minerals does not result in the same consequence. As
mentioned by the Union of India in paragraph 9 of its counter E
affidavit filed in W. P. (C) No. 1504 of 2009 in the High Court,
the beneficiation of copper has different consequences. It is
stated, in this regard as follows:

"It is stated that the mineral extracted during mining in
F
its primary state is called run of mine (ROM), which
may or may not be useable in its primary state
depending on the minerals and its grade. In such a
case where the entire ROM cannot be used generally,
there is a level of processing required to beneficiate G
the ROM to enhance the grade ore and also take out
waste material occurring with the ore. Rule 648 is
specifically applicable in such class of minerals where
only a part of the entire ROM mineral extracted through
mining can be used. For example, in the case of copper H
44 SUPREME COURT REPORTS [2015] 6 S.C.R.

A ore, in which the metal contained in ore is in the range
of 1% to 2% of the ROM the ROM is converted into a
high as 25%, before it is sent out the lease area for
refining and smelting. In such cases, the rule 648 of
MCR provides for royalty to be charged by the State
8 Government on the higher grade of ore that is being
taken out of the lease area, in terms of the royalty rate
prescribed in Second Schedule to the MMDRAct. Rule
648 of MCR does not specify the royalty rates and its
applicability is only to the extent of facilitating levy or
c royalty on the processed ore removed from the lease
area, and not the mineral consumed in the lease area.
Further royalty is required to be paid as per the rates
notified by the Central Government in Second Schedule
to the MMDR Act. Rule 648 of MCR is therefore
D
applicable in case of such minerals which cannot be
used without processing.

Similarly, rule 648 [rule 64C] of the MCR is applicable
on removal of tailings or rejects from leased area for
E dumping and restricts levy on royalty on tailings or
rejects. However, levy of royalty is applicable only in
case such tailings or rejects subsequently used for sale
or consumption. For example, tailing from copper
concentrate are likely to contain silver.
F
However, royalty on silver generally cannot be levied
till silver is extracted from the tailings and sold or
consumed. Rule 64C is therefore applicable on such
cases of minerals, where tailings or rejects generated
G during mining or processing are likely to be dumped
due to its limited use."
29. In other words, the ROM copper ore contains hardly
1% or 2% of copper but after the beneficiation process the
H copper extract from the. ore increases '') about 25%. It is
TATA STEEL LTD. v. UNION OF INDIA & ORS. 45
[MADAN B. LOKUR, J.]

thereafter sent for refining and smelting. In other words, copper A
ore cannot be utilized as it is or in the ROM state - it must
undergo a beneficiation process from the ore and can then be
used.
30. As mentioned in SAIL the consequences of
processing dolomite or limestone has a consequence B
different from that of copper ore, namely, mere removal of
waste and foreign matter. It appears that this process does
not improve the quality of the dolomite or the limestone,
though with the removal of waste and foreign matter, the
weight would decrease somewhat. It may be mentioned that
royalty is charged on dolomite and limestone on a tonnage C
basis.
31. It is in this context that the nature of the mineral
and the stage at which royalty is to be computed become
important. The basis of levy would have to be rational and it
might have different consequences at different stages. D
Computation of royalty
32. As far as the computation of royalty on coal is
concerned, Tata Steel has given details of the methodology
of computation in the Convenience Volume handed over to
us. 1° For the purposes of computing the royalty amount, the E
quantities assumed by Tata Steel are given below.
33. It is said that 100 tons of raw coal post-
beneficiation will produce approximately 115 tons of the
washed products. The break-up of this is as follows:
F
Clean coal = 40 tons
Middlings = 40 tons
Tailings ;::: 25 tons
Rejects = 10 tons
G
34. The computations made by Tata Steel are on the
basis of the above assumptions. The rate of royalty is given in
the Notification dated 141h October, 1994 amending the
Second Schedule to the MMDR Act. For coking coal Steel
10 This has not been disputed by the State of Jharkhand. H
j\6 SUPREME COURT REPORTS [2015] 6 S.C.R.

A Grade I, coking coal Steel Grade II and coking coal Washery
Grade II the rate of royalty is Rs.195/- per ton. For coking coal
Washery Grade IV the rate of royalty is Rs. 95/- per ton.

35. Therefore, for every 100 tons of coking coal Washery
B Grade IV extracted by Tata Steel, the royalty payable on ROM
coal was Rs.9500/- with effect from 141" October, 1994.
However, if the royalty were to be computed on post-
beneficiation coal, the royalty payable by Tata Steel would work
outto:
Product Grade Quantity Royalty Amount
c (tons) rate (in Rs)
(Rs/ton)
;
I

''
, Clean coal Steel Grade I 40 195 7800
D 2800-
Middlings Grade E 40 70

·-- ··-. ·-- .
Tailings Grade D 25 70 1750

E Royalty 105; 12350
payable

~-Since rejects were ungraded and no rate 11\/as prescribed, no
; royalty was payable on rejects.

F 36. Based on the above computation, the difference in
royalty on post-beneficiation coal (as claimed by the State of
Jharkhand) and on ROM coal (as claimed by Tata Steel) is
Rs.2850/- per 100 tons of coal extracted (12350 minus 9500
=2850).
G
37. This position continued till August 2002 when the
Second Schedule to the MMDR Act was amended by a
notification dated 161hAugust, 2002.

H 38. In terms of the notification dated 16th August, 2002
TATA STEEL LTD. v. UNION OF INDIA & ORS. 47
[MADAN B. LOKUR, J.)

the rate of royalty for coking coal Steel Grade I, coking coal A
Steel Grade II and coking coal Washery Grade II was raised to
Rs.250/- per ton. For coking coal Washery Grade IV the rate
of royalty was raised to Rs.115/- per ton.

39. Therefore, for every 100 tons of coking coal Washery B
Grade IV extracted by Tata Steel, the royalty payable on ROM
coal was Rs.11500/- with effect from 161h August, 2002.
However, if the royalty were to be computed on post-
beneficiation coal, the royalty payable by Tata Steel would work
~~

li:'rociuct
I ·
i
-I G"J"ail&-TCiLiaril;1y1- R0Yi111Y_[_Am.oulit i
;
i
(tons) rate
(Rs/ton)
(in Rs) ;
j
c

,--------- - - -- -- --- -·-L --- -·· - - ----- _,
------ '

D
Clean coal Steel Grade I I
40 250 10000
I
--- - - - - - - - --------
85 --- - -34()0 ;
-- -----1- '
Middlings Gracie E 40
:
Tailings Grade D 25 85 2125

' I I E
Royalty i 105 15525
I
payable I'
I
___ , _______ J -- - - - - - - - --·------- ---------- I
~-----

Rejects have not been included in this calculat1on. J
l - - - - - - - - - - - - --- --- --- ·-· - - - -- . ----·---------
F
40. Based on the above computation, the difference in
royalty on post-beneficiation coal (as claimed by the State of
Jharkhand) and on ROM coal (as claimed by Tata Steel) is
Rs.4025/- per 100 tons of coal extracted ( 15525 minus 11500
=4025). G
41. This position continued till August 2007 when the
Second Schedule to the MMDR Act was amended by a
notification dated .1'1August, 2007. Through this notification
the rate of royalty on coal became a combination of a specific
rate and an ad valorem rate, the formula for calculation being H
.
48 SUPREME COURT REPORTS [2015] 6 S.C.R.

A R =a+ bP where 'R' is the royalty in Rs. per ton, 'a' is a fixed
component, 'b' is a variable or ad valorem component and
'P' is the basic pit-head price of ROM coal.
42. The notification provides that for computing royalty
(R) on Steel Grade I coal, a = Rs.180; b = 5% of 'P'; P =
B basic pit-head price of ROM coal as reflected in the invoice.
Similarly, for payment of royalty (R) on Washery Grade IV
coal, a = Rs.90; b = 5% of 'P'; P = basic pit-head price of
ROM coal as reflected in the invoice.

c 43. Tata Steel gives the computation arrived at on the
basis of the above notification in the Convenience Volume
as follows:
"As Tata Steel is not selling ROM, hence we take the
prices notified by CIL [Coal India Limited] for its various
D collieries. For example, we apply the prices notified by
Coal India Ltd for Central Coalfields Ltd. In the Price
Notification No.181dated15.10.2009forCCL, the basic
price for ROM Washery Grade IV is Rs.1120. 11

E
'.
!
'
----·
R'ocb:t
-
' Grade
lQaooty
. Qnjens) J
~rate
(•<bl'! 1~-1Amut
(Aotm) . Qn Rs)

~ ------· -

j Oaancoa ! Steel G'a:le I <Kl i180"5%ct 112J 233 94<Kl

lMddirgs IQacla E <Kl ' 70+5%of 790 116 4400
F Talirgs - - - Qii·o
- i ---- - -- -· - ..
25 ' 70+5%of1000 1al 3Xll
~ifypayaliieJ -·- .. -- 105 ---,

'
- -· _._
-16840
'
'j Rjeds t-ave net baa1 irdu:la:t intnscalo.Jlaion '

G 11 Since Tata steel is not selling ROM coal, the price notified by the Coal India Ltd. for its
various collieries has been taken by Tata Steel as tt\e basic price for ROM Washery
Grade IV as Rs.1120/- In terms of the communication dated 161h October, 2009 issued
by the Central Coalfields Limited, Sales & Marketing Division, Darbhanga House, Ranchi
with reference to Price Notification No.1181 dated 15" October, 2009 the pit-head/basic
price of Run of Mine (ROM) coal for Washeiy Grade IV stood revised from 1020 (in
Rupees per tonne) to 1120. This is the figure taken by Tata Steel in its computations
H given in the Convenience Volume.
TATA STEEL LTD. v. UNION OF INDIA & ORS. 49
[MADAN B. LOKUR, J.)

If we were to pay on RoM: A

Washery Grade IV: 90+5% of 1120 (56) (Rs.146 per ton)=
Rs.14600/-"

44. Based on the above computation, the difference
8
in royalty payable on post-beneficiation coal (as claimed by
the State of Jharkhand) and on ROM coal (as claimed by
Tata Steel) is Rs.2240/-per 100tons of coal extracted (16840
minus 14600 = 2240).

45. We have been given to understand that this Q.
position has undergone changes, but we are not concerned
with them.

46. To summarize the computations, the royalty as
computed by the State and as computed by Tata Steel is as D
follows:
·-··----
Royalty · PeriD<l- ·ron beneliciated (fn ROM 0081 1-Cftterence
- -·-· --

payable in (from coal (per 100 (per 100 Ions) : (per 100
Rs. date) tons) I tons)
I '
E
Royalty I 14.10.1994 ! 123[,() 9fi00 28[,()
payable I
Ii II
Royalty i 16.8.2002 15525 11fi00 i' 4025
payable I i

>-=--- r
'
I

-:;- - j - - - --- --- - ------
F
Royalty j 1.8.2007 16840 146lfcil 2240
payable
I _,'' - --- -
--------- j' _ _ _ --
- ·---

47. As is quite obvious, the difference in royalty
payable would run into huge figures particularly since coal is
mined in millions of tons. G

Discussion

48. Two interpretations have been given to removal of
a mineral from the leased area as postulated in Sections 9(1) H
50 SUPREME COURT REPORTS [2015] 6 S.C.R.

A and 9(2) of the MMDRAct.

49. The first is a literal meaning given by the Patna High
Court in its judgment and order dated 7'h August, 1990. The
High Court gave a literal interpretation to Section 9(2) of the
B MM DR Act and effectively interpreted the removal of a mineral
from the leased area as removal from the boundaries of the
leased area. On this basis, it was concluded that since
beneficiated coal is removed from the leased area, Tata Steel
is liable to pay royalty on the weight of the beneficiated coal.
c
50. The second interpretation is a somewhat restrictive
interpretation given by the Orissa High Court in National Coal
Development Corporation Limited. In that case, it was held
that:
D
"The incidence of royalty under the general tenor of the
scheme [of Section 9 of the MMDRAct] arises when coal
is severed from the seam in its natural state within the
mine and removed outside. Removal [of coal] from the
E seam in the mine and extracting the same through the
pit's mouth to the surface satisfies the requirement of
Section 9 [of the MMDR Act] in order to give rise to
liability for royalty."

F 51. In other words, the Orissa High Court did not
accept the literal meaning of removal from the leased area
occurring in Section 9 of the MMDR Act as removal from the
boundaries of the leased area but gave a restricted
interpretation to removal from the leased area as extraction of
G the coal from the seam in the mine which is in the leased area,
that is, extraction from the pit-head. This restricted interpretation
was accepted by this court in the appeal filed by National Coal
Development Corporation and on that basis this court also
upheld the payment of royalty by the lease holder on coal
H consumed by the workmen of the Corporation prior to the
TATA STEEL LTD. v. UNION OF INDIA & ORS. 51
[MADAN B. LOKUR, J.]

amendment of Section 9 of the MMDRAct in 1972. 12 A

52. Both the interpretations mentioned above relating
to removal from the leased area, literal and restricted, were
given in the context of extraction of coal.
B
53. The controversy regarding the interpretation of
removal of a mineral (not coal) from the leased area again
came up for consideration in a petition filed by SAIL in the
Orissa High Court. This petition concerned itself with the
payment of royalty on dolomite and limestone. While referring c
to Section 9(1) oftne-MMDRActand the lease deed of SAIL,
the Orissa High Court held as follows:-

"A distinction has to be made between removal from
the mine and removal from the leased area. If after the
D
mineral is extracted from the mine, it underg9es some
processing and during processing, a part of the mineral
is wasted and the wastage remains on the leased area
and is not removed therefrom, the lessee cannot be
asked to pay royalty on that portion of the wastage." 13 E
54. In other words, the Orissa High Court took the
literal interpretation given to removal from the leased area
as removal from the boundaries of the leased area, virtually
reiterating the literal interpretation given by the Patna High F
Court in its judgment and order dated 7'.h August, 1990.

55. This court in the appeal filed by SAIL did not get
into the question of removal of the mineral from the
boundaries of the leased area but noted that the extracted
mineral undergoes a process of removal of waste and foreign G
matter before it is removed from the boundaries of the leased
area. The decision of this court on the levy of royalty turned on
12 National Coal Development Corporation Ltd. v. State of Orissa, (1998) 6 SCC 480
13 The decision of the Orissa High Court does not appear to have been reported. H
52 SUPREME COURT REPORTS [2015] 6 S.C.R.

A the consumption of the mineral through that process carried
out by the holder of the mining lease. In that context it was held
in SAIL that since the process of removal of waste and foreign
matter amounts to consumption, the entire extracted mineral
is exigible to royalty. It was held:-
B
"Section 9(1) of the Act also contemplates the levy of
royalty on the mineral consumed by the holder of a
mining lease in the leased area. If that be so, the case
of the appellants that such processing amounts to
C consumption and, therefore, the entire mineral is
exigible to levy of royalty has to be accepted."

56. It is quite clear that SAIL did not consider (and
then reject) the reasoning given by the Orissa High Court
o that royalty is not payable on wastage that remains within
the boundaries of the leased area. This was critically adverted
to in an order dated 25th July, 2006 in C.A. No.5651 of 200514
on the ground, inter alia, that the distinction made by the
Orissa High Court between removal of a mineral from. a mine
E and removal from a leased area has been rejected without
any reason. This is what this court had to say:

"A bare reading of this Court's judgment in Steel
Authority of India's case (supra) indicates that there is
F practically no reason indicated as to why the distinction
made by the High Court was found to be unacceptable.
As was noticed by the High Court in the impugned
judgment in the said case the distinction is certainly of
relevance. As we are unable to subscribe to the view
G expressed in Steel Authority of India's case (supra), we
referthe matter to a larger Bench. Records may be placed
before Hon'ble the Chief Justice of India for necessary
directions."
H 14 Mis Central Coalfields Ltd. v. State of Jharkhand decided by this court
TATA STEEL LTD. v. UNION OF INDIA & ORS. 53
[MADAN B. LOKUR, J.]

57. We may also mention at this stage that SAIL has A
been politely distinguished in National Mineral Development
Corporation Ltd. v. State ofM.P. (or NMDC).- 15

58. In sum and substance this is the issue before us,
namely, whether for the purposes of payment of royalty, B
removal of a mineral as mentioned in Section 9 of the MMDR
Act must be restrictively interpreted as removal or extraction
of the mineral from the mine or the pit-head or a literal
interpretation as removal of the mineral from the boundaries
of the leased area. C

59. In NMDC the question before this court was
whether "slimes" are exigible to royalty, as forming part and
parcel of iron ore.
D
60. The Second Schedule to the MMDRAct provides
rates of royalty and Entry 23 relates to iron ore. Royalty is
payable on lumps, fines and concentrates. In the process
of mining, iron ore is extracted and separated into ore lumps,
fines and waste material which is commonly known as E
"slime", that is the resultant waste material from the wet
screening process undertaken for segregation of lumps and
fines. When the issue of exigibility of "slimes" was raised in
the High Court, 16 it was held that royalty is payable on the
mineral as extracted and removed or consumed from the F
leased area. The High Court also relied upon SAIL to hold
that the entire quantity of ROM iron ore as extracted from
the earth shall be liable to payment of royalty.

61. While disagreeing with the view taken by the High G
Court, it was held by this court that if Section 9 of the MMDR
Act was to be read in isolation, perhaps, the total quantity of
mineral removed from the leased area or consumed in the
process of beneficiating iron ore would have been liable for
15 c2004) s sec 2s1 H
16 The decision of the High Court is reported as AIR 1999 MP 112 •
54 SUPREME COURT REPORTS (2015) 6 S.C.R.

A payment of royalty and that quantity may have included the
quantity of slimes as held in SAIL. But, this court went on to
hold that Section 9 of the MMDR Act cannot be read in isolation
and the Second Schedule to the MM DR Act must be read as
a part and parcel of Section 9 of the said Act. It was also held
B that though the Parliament was fully aware that iron ore would
have to undergo a process which would lead to the emergence
of lumps, fines, concentrates and slimes yet it chose to leave
slimes out of consideration for the payment of royalty. For this
reason, it was held that royalty was not payable on slimes.
c
62. This court also proceeded to consider Rule 64B
and Rule 64C of the MCR and held that in the case of iron ore
the levy of royalty is postponed until the beneficiation process
has been undertaken and it is only then that royalty is capable
D of being quantified on the quantity of lumps, fines and
concentrates.

63. The decision of this court in SAIL was also
distinguished by holding that the removal of waste and foreign
E matter in the processing of dolomite and limestone did not
result in any removal from the leased area but that the run-
of-mine was itself consumed in the processing in the leased
area, thereby making a distinction between removal from
the leased area and consumption within the leased area.
F
64. NMDC has analyzed the scope of Section 9 of
the MM DR Act in conjunction with the Second Schedule to the
MMDR Act. It was held that there is no conflict between the
G two and that Section 9 of the MMDR Act cannot be read in
isolation but that the Second Schedule to the MM DR Act must
be read as a part and parcel of .Section 9 of the MMDR Act.
Paragraphs 23 and 24 of the Report are significant and they
read as follows:
H
TATA STEEL LTD. v. UNION OF INDIA & ORS. 55
[MADAN B. LOKUR, J.)

"23. Section 9 is not the beginning and end of the levy of A
royalty. The royalty has to be quantified for purpose of
levy and that cannot be done unless the provisions of the
Second Schedule are taken into consideration. For the
purpose of levying any charge, not only has the charge to
be authorised by law, it has also to be computed. The B
charging provision and the computation provision may
be found at one place or at two different places depending
on the draftsman's art of drafting and methodology
employed. In the latter case, the charging provision and
the computation provision, though placed in two parts of c
the enactment, shall have to be read together as
constituting one integrated provision. The charging
provision and the computation provision do differ
qualitatively. In case of conflict, the computation provision
D
shall give way to the charging provision. In case of doubt
or ambiguity the computing provision shall be so
interpreted as to act in aid of charging provision. If the
two can be read together homogeneously then both shall
be given effect to, more so, when it is clear from the E
computation provision that it is meant to supplement the
charging provision and is, on its own, a substantive
provision in the sense that but for the computation
provision the charging provision alone would not work.
The computing provision cannot be treated as mere F
surplusage or of no significance; what necessarily flows
therefrom shall also have to be given effect to.

24. Applying the abovestated principle, it is clear that
Section 9 neither prescribes the rate of royalty nor does G
it lay down how the royalty shall be computed. The
rate of royalty and its computation methodology are to
be found in the Second Schedule and therefore the
reading of Section 9 which authorises charging of
royalty cannot be complete unless what is specified in H
56 o'il SUPREME COURT REPORTS [2015) 6 S.C.R.

A the Second Schedule is also read as part and parcel of
Section 9."

65. It is clear therefore that Section 9 of the MMDRAct
has to be read and understood in conjunction with the Second
B Schedule to the MM DR Act. There is a good reason for it, which
is that the scheme of the levy of royalty cannot be straitjacketed
in view of the variety of minerals to which the MMDR Act
applies and forthe extraction of which royalty has to be paid.

c 66. In the case of coal, it has been noted that "Though
ROM [coal) is fit for many purposes, it is not fit for the steel
industry"; "in case of coal ... the entire ROM can be generally
made usable" and "it is not necessary that coal produced
from a mine should always be subjected to processing. There
D are various coal mines in the country producing raw coal
without any processing ....... " This is to say that ROM coal
can generally be used in the raw form without processing
and beneficiation is not at all necessary. However, if the raw
coal is to be utilized for some specialized purposes it would
E need beneficiation.

67. On the other hand, in the case of dolomite or
limestone (subject matter of SAIL) the process described in
paragraph 4 of the Report is undertaken not to upgrade or
F improve the quality of the mineral but to remove waste and
foreign matter. It is not clear whether dolomite or limestone
can be utilized as it is or in the ROM state without removal of
waste and foreign matter. That question was adverted to by
G the Orissa High Court but not considered by this court, hence
the critical reference. As mentioned above, the decision in
SAIL was based not on removal but on consumption of the
mineral. 17 On the basis of the mineral extracted and the
decision rendered by this court, therefore, no similarity can
H be found between SAIL (case of consumption) and National
TATA STEEL LTD. v. UNION OF INDIA & ORS. 57
[MADAN B. LOKUR, J.]

Coal Development Corporation Limited (case of removal) A
although royalty is charged on dolomite and limestone, as in
coal, on a per ton basis.

68. Iron ore (with which NMDC is concerned) falls in
the same generic category for levy of royalty as dolomite, B
limestone and coal namely on a tonnage basis but there is a
crucial difference between iron ore and coal (as also between
dolomite, limestone and iron ore). In the case of iron ore,
beneficiation is necessary before it can be utilized. It has
been observed in NMDC that "in iron ore production the run- C
of-mine (ROM) is in a very crude form.Alot of waste material
called "impurities" accompanies the iron ore. The ore has to
be upgraded. Upgrading the ores is called "beneficiation".
That saves the cost of transportation. Different processes
have been developed by science and technology and D
accepted and adopted in different iron ore projects for the
purpose of beneficiation." 18 It is for this reason, inter alia,
that the levy of royalty on iron ore is postponed, as held in
NMDC, to a post-beneficiation stage.
E
69. In the case of coal, beneficiation is not necessary
since ROM coal can be used as it is straight from the pit-
head. In the case of iron ore, as noticed in NMDC, waste
material is removed from the extracted iron ore and through
the beneficiation process the ore is upgraded. The removal F
17 In National Mineral Development Corpn. Ltd. v. Sta.te of M.P. this court

bserved in paragraph 34 of the Report as follows:
"Both these minerals [dolomite and limestone] were utilised as raw material
by the mining lessees on the leased area itself. The mining lessee claimed that dolomite
and limestone·having been extracted from the mine underwent processing wherein a G
part of the mineral was wasted and the wastage· remained on the leased area and not
removed therefrom. The contention of the lessee was that royalty could not be demanded
on that portion of the wastage which was not removed from the mining area. This
contention was repelled by this Court by reference to Section 9(1) of the Act which
speaks of payment of royalty in respect of any mineral removed or consumed by the
lessee. The Court held that though the impurities part of dolomite and limestone were
not removed from the leased area but that would not make any difference as the run-of-
mine was itself consumed in the processing on the leased area. g H
18 National Mineral Development Corporation Ltd v. State of M.P. paragraph 28.
58 SUPREME COURT REPORTS (2015] 6 S.C.R.

A of waste material obviously reduces the weight of the iron ore
and that is why it saves the cost of transportation as observed
in NMDC. However, in the case of coal apart from the fact that
beneficiation is not necessary, if the lease holder does in fact
beneficiate the coal, the weight of the beneficiated coal is more
8
than the ROM coal as has been noted above. This would,
therefore, increase the cost of transportation which is based
on the weight of the coal. Under the circumstances, removal of
beneficiated coal as against ROM coal might work to the
c disadvantage of the lease holder. For this reason, no similarity
can be found between coal and iron ore or between coal and
dolomite and limestone (apart from the fact that SAIL did not
deal with removal from the leased area but consumption within
the leased area).
D
70. There are therefore, three categories of minerals
dealt with by this court - coal that can be utilized in the raw
or ROM stage straight from the pit-head, iron ore that cannot
be utilized in the raw or ROM stage and needs beneficiation
E and dolomite and limestone about which it is not clear
whether it can be utilized in the raw or ROM stage.

71. On the other hand, there are other minerals such
as copper, gold, lead, zinc and several others where the
F rate and computation of royalty payable are arrived on a
completely different basis. The table below of some sample
minerals taken from the Second Schedule to the MMDRAct
illustrates this position' 9 and it also illustrates that waste or
foreign matter in respect of these minerals is much more
G than someone not in the business of extraction of minerals
could imagine:

72. What follows from this discussion is that though
H 19 This has undergone further changes. These figures have been taken since they
pertain to the period when the dispute arose in the cases referred to.
TATA STEEL LTD. v. UNION OF INDIA & ORS. 59
[MADAN B. LOKUR, J.]
lr--entry ·- -- M-inerai : ·-- Rate as per Rate as per Notification A
Notification of 5th of 17th February, 1992
! i May, 1987
I
:7 Cadmium , Sixteen rupees per Seventy four rupees per

i
1

1
unit percent of unit percent of cadmium
i cadmium metal per metal per ton of ore and
I ; ton of ore and on pro on pro rata basis
'
1
rata basis
i B
12 Copper ore Five rupees per unit Sevente~n rupees per
percent of copper unit percent of copper
metal contained per metal contained per ton
ton of ore and on pro of ore and on pro rata
rata basis basis

Gold i Two rupees per one (a) Eteven rupees per
121 :gram of contained
gold per ton of ore
one gram of contained
gold per ton of ore and on
c
and on pro rate basis pro rata basis(b) by
i product gold ten rupees
per gram
-- - - ·-- -
Lead ore Three r-upees per unit Eight rupees per unit
1. .- p ere en t of contained percent of contained lead
lead metal per ton of metal per ton of ore and
ore and on pro rata on pro rate basis D
basis
I --- 1.SiX- rUpees per Un-if.-
12•- -··-· -ZiriC"-Ore s·1xteen rLIPeeS-per u-Oit - ·-
I percent of zinc metal percent of zinc metal
I
Icontained per ton of contained per ton of ore

l_- --- - ··---
ore and on pro rate
1basis
__ __, ________
------
royalty may have a definite connotation, the rate of royalty, its
--
and on pro rate basis

·---- ·----· E

method of computation and the final levy are different from
mineral to mineral. It is for this reason that this court held in
NMDC that the Second Schedule to the MMDRAct has to be
read as a part and parcel of Section 9 ofthatAct. If the general F
conclusion of SAIL is to be applied across the board without
reference to the Second Schedule to the MMDR Act,
calculation of royalty on copper, gold, lead, zinc and some other
minerals would become impossible.
G
73. It is quite clear that the issue of computation of royalty
on minerals is rather complex and it is best left to the experts
in the field and it cannot be painted with a broad brush as has
been done in SAIL. That decision must be confined to its own
facts with reference to consumption of dolomite and limestone. H
60 SUPREME COURT REPORTS [2015] 6 S.C.R.

A Since the Second Schedule to the MMDR Act must be read
as a part and parcel of Section 9 thereof, the interpretation
given in SAIL possibly cannot apply to the computation of
royalty for every mineral, as discussed above.

B 74. Atthis stage, it is necessary to refer to an unreported
decision of this court. 20 That decision pertains to the removal
of coal in relation to Section 9 of the MM DR Act. Interestingly,
though a reference was made to SAIL this court adopted the
view expressed by the Orissa High Court in National Coal
C Development Corporation Limited which was endorsed by
this court in appeal. The 'reasons' given in SAIL were not even
adverted to. This unreported decision reads as follows:

"The contention put forth in this case is that for the purpose
D of Section 9 of the Mines & Mineral (Regulation &
Development) Act, 1957 the expression 'removal' would
mean that it is not enough to extract the mineral from pit
but should be dispatched out of the leased area. In our
view word 'removal' would mean extracting the mineral
E from the pit's mouth after removal from the seam. This
exact point has been considered by this Court in State
of Orissa and Ors. v. Steel Authority of India Ltd. -
(1998) 6 SCC 476 in which this Court has stated as
follows:
F
"Another Division Bench of the Orissa High Court
in National Coal Development Corpn. case while
considering the question whether the coal
extracted by the workmen for their own domestic
G consumption is exigible to levy of royalty,
accepting the contention of the Revenue held "that
removal from the seam in the mine and extracting
the same through the pit's mouth to the surface
satisfy the requirement of Section 9 in order to
H
°
2 Central Coalfields Ltd. v. State of Jharkhand, CA No.8395 of 2001 decided by three
learned judges on 24m September, 2003
TATA STEEL LTD. v. UNION OF INDIA & ORS. 61
[MADAN 8. LOKUR, J.]

give rise to liability for royalty." This view of the High A
Court found approval by this Court in National Coal
case (C.A. No.807of1976 decided on 5.12.1991)
and this Court held that the lessee in that case was
liable to pay royalty for the coal supplied to its
workmen for consumption." 8

In this view of the matter we find no substance in the
matter. The appeal is dismissed accordingly."

75. In view of the decision of this court in Central c
Coalfields Ltd. the issue is no longer res integra and in so
far as coal is concerned, its "removal from the seam in the
mine and extracting the same through the pit's mouth to the
surface [satisfies] the requirement of Section 9 in order to
give rise to liability for royalty." D

Rule 648 and Rule 64C of the Mineral Concession Rules

76. The complexities of chargeability, computation and
levy of royalty on different minerals have now been simplified,
clarified and standardized with the insertion of Rule 648 and E
Rule 64C of the MCR with effect from 25'" September, 2000. 21

77. A plain reading of Rule 648 of the MCR, with which
we are presently concerned, clearly suggests that the leased
area mentioned therein has reference to the boundaries of F
the leased area given to a lease holder. Sub-rule (1) provides
that if the ROM mineral is processed within the boundaries
21 648. Charging of Royalty in case of minerals subjected to processing: (1)
In case of processing of run-of-mine mineral is carried-out within the leased area, then
royalty shall be chargeable on the processed mineral removed from the leased area. G
(2) In case run-of mine mineral is removed from the leased.area to a process-
ing plant which is located outside the leased area, then, royalty shall be chargeable on
the unprocessed run-of-mine mineral and not on the processed product.

64C. Royalty on tailings or rejects: On removal of tailings or rejects. from
the leased area for dumping and not for sale or consumption, outsjde leased area such
tailings or rejects shall not be liable for payment of royalty:
Provided that in case so dumped tailings or rejects are used for sale or con- H
sumption on any later date after the date of such dumping, then, such tailings or rejects
shall be liable for payment of royalty.
62 SUPREME COURT REPORTS (2015) 6 S.C.R.

A of that leased area, then royalty will be chargeable on the
processed mineral removed from the boundaries of the
leased area. However, ifthe ROM mineral is removed without
processing from the boundaries of the leased area then in
terms of sub-rule (2) royalty will be chargeable on the
8 unprocessed ROM mineral. Rule 648 of the MCR is silent
about removal of a mineral from the mine/pit-head but which
is not removed from the boundaries of the leased area. This
is a clear pointer that royalty is to be paid by the lease holder
only on removal of the mineral from the boundaries of the
C leased area. This simplification and clarification takes care
of some of the different and difficult situations that we have
referred to above, namely, the stage of charging royalty on
coal at the pit-head or post-beneficiation, the stage of
D charging royalty on iron ore at the pit-head or post-
beneficiation, the stage of -charging royalty on dolomite and
limestone at the pit-head o(after the removal of waste and
foreign matter and of course the stage of charging royalty
on other minerals such as copper, gold, lead and zinc
E amongst others.

78. Similarly, Rule 64C of the MCR relates to royalty
on tailings or rejects. As far as Tata Steel is concerned, its
computation given in the Convenience Volume indicates that
F royalty is paid and payable on middlings and tailings. Rule
64C of the MCR makes it clear that royalty is payable on
rejects when they are sold or consumed after being dumped.
This will take care of situations such as that pertaining to
silver, as mentioned in the affidavit of the Union of India.
G 79. There is nothing to indicate in Rule 648 and Rule
64C of the MCR that coal has been put on a different pedestal
from other minerals mentioned in the MMDR Act read with
the Second Schedule thereto. It is, therefore, difficult to
H accept the view canvassed by the Union of India that these
rules "may not be particularly applicable on coal minerals."
TATA STEEL LTD. v. UNION OF INDIA & ORS. 63
[MADAN 8. LOKUR, J.)

That apart, the stand of the Union of India is not definite or A
categorical ("may not be"). In any event, we are not bound
to accept the interpretation given by the Union of India to
Rule 648 and Rule 64C of the MCR as excluding only coal.
On the contrary, in NMDC this court has observed that these
rules are general in nature, applicable to all types of minerals, 8
which includes coal. The expression of opinion by the Union
of India is contrary to the observations of this court.

80. Therefore, on a plain reading of Rule 648 and
Rule 64C of the MCR, we are of the opinion that with effect C
from 25'h September, 2000 when these rules were inserted
in the MCR, royalty is payable on all minerals including coal
at the stage mentioned in these rules, that is, on removal of
the mineral from the boundaries of the leased area. For the
period prior to that, the law laid down in Central Coalfields D
Ltd. will operate, as far as coal is concerneq, from 101h
August, 1998 when SAIL was decided, though for different
reasons.

81. We may mention that learned counsel for Tata E
Steel had reserved his right to challenge the constitutionality
of Rule 648 and Rule 64C of the MCR should his
interpretation of the law be not accepted, namely that royalty
on coal is chargeable on the extracted tonnage at the pit-
head. Since we have not accepted this interpretation post F
the insertion of Rule 648 and Rule 64C in the MCR, we
leave it open to Tata Steel to challenge the constitutionality of
these rules either by reviving these appeals to this limited extent
or by initiating fresh proceedings.
G
Appeals filed by TISCO

82. The issue about refund of excess royalty paid by
TISCO arises only for the period from 1O'h August, 1998 when
this Court delivered its judgment and order in SAIL. H
64 SUPREME COURT REPORTS [2015] 6 S.C.R.

A 83. The claim for refund has been rejected by the High
Court in its judgment and order dated 23"' July, 2002 in the
following words:-

"However, in view of the fact that the State [of Bihar] has
B been reorganized since 15'h November, 2000, now in
place of 'State of Bihar', 'State of Jharkhand' will be
charging royalty, the appellant - TISCO shall not ask
for refund of excess royalty if deposited."

c 84. A perusal of the above indicates that the High
Court really gave no reason for denying the refund of the
excess royalty paid by TISCO. For the reasons given in
respect of Tata Steel keeping in view the decision rendered
in Central Coalfields Ltd., we hold that TISCO is entitled to
o refund of royalty paid from 1O'h August, 1998 to 25 1h
September, 2000. However, this amount need not be
physically refunded but should be adjusted pro rata against
future payments of royalty by TISCO over the next one year.
TISCO is not entitled to refund of royalty paid after 251h
E September, 2000. The royalty paid by TISCO after 25'h
September, 2000 was correctly paid and in accordance with
Rule 648 and Rule 64C of the MCR, which have not been
challenged by TISCO.

F 85. We make it clear that we have not adverted to the
issue of consumption of coal within the boundaries of the
leased premises since that question does not arise in these
appeals.

G 86. No other contention was urged before us.

Conclusion

87. Our conclusions are as follows:-

H (1) The decision rendered in SAIL is confined to its own
TATA STEEL LTD. v. UNION OF INDIA & ORS. 65
[MADAN B. LOKUR, J.)

facts and to the minerals dolomite and limestone. The A
decision does not deal with removal of a mineral from
the leased area but deals with consumption within
the leased area.

(2) The unreported decision of this court in Central B
Coalfields Ltd. approves the law laid down by the
Orissa High Court in National Coal Development
Corporation Ltd. to the effect that removal of coal
from the seam in the mine and extracting it through
the pit-head to the surface satisfies the requirements C
of Section 9 of the MMDR Act in order to give rise to
a liability for royalty. This view was earlier approved
by this court in National Coal Development
Corporation Ltd.
D
(3) In view of the insertion of Rule 64B and Rule 64C on
25th September, 2000 in th~ Mineral Concession
Rules, the levy of royalty on coal has now been
postponed from the pit-head to the stage of removal
of the coal (whether unprocessed or ROM coal or E
whether beneficiated coal).

(4) In view of the decision in Central Coalfields Ltd. the
entitlement of TISCO and Tata Steel to refund of
royalty from 1Olh August, 1998 to 25th September, 2000 F
is recognized. For the period from 25th September,
2000 onwards, TISCO is obliged to pay royalty as per
Rule 64B and Rule 64C of the Mineral Concession
Rules.
G
(5) Tata Steel, like TISCO is liable to pay royalty on coal
with effect from 25th September, 2000 in terms of Rule
64B and Rule 64C of the Mineral Concession Rules.

(6) The constitiJtional validity_ or the vires of Rule 64B and H
66 SUPREME COURT REPORTS [2015) 6 S.C.R.

A Rule 64C of the Mineral Concession Rules has not been
adjudicated upon. It is open to Tata Steel either to revive
these appeals limited to this question or to challenge
the constitutionality and vi res of these rules through a
separate challenge.
B
88. The appeals are disposed of as above. However,
the parties will bear their own costs.

Devika Gujral Appeals disposed of.

c