Full Judgment Text
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PETITIONER:
H. R. S. MURTHY
Vs.
RESPONDENT:
COLLECTOR OF CHITTOOR AND ANOTHER
DATE OF JUDGMENT:
04/02/1964
BENCH:
AYYANGAR, N. RAJAGOPALA
BENCH:
AYYANGAR, N. RAJAGOPALA
GAJENDRAGADKAR, P.B. (CJ)
WANCHOO, K.N.
GUPTA, K.C. DAS
SHAH, J.C.
CITATION:
1965 AIR 177 1964 SCR (6) 666
CITATOR INFO :
R 1970 SC 169 (8)
R 1982 SC 697 (26)
RF 1986 SC1323 (36)
O 1990 SC 85 (4,9,28,29,35)
C 1991 SC1676 (11,14,16,24,27,29,31,64,65)
ACT:
Mining Lease-Notice of demand for payment of land cess-
Validity-Land cess, if recoverable as an arrear of land
revenue-It a tax on mineral rights-Expression "Royalty",
meaning of-If includes royalty payable under a mining lease-
Madras District Boards Act (Mad. Act No.XIV of 1920),
ss. 78 and 79-Mines and Minerals (Regulation and
Development) Act, (LIII of 1948), and Act LXVII of 1957,
Entry 49 of the State List.
HEADNOTE:
Under the terms of a mining lease the lessee worked the
mines and won iron ore in a tract of land in a village in
Chittor district and bound himself to pay a dead rent if he
used the leased land for the extraction of iron ore, to pay
a royalty on iron ore if it were used for extraction of iron
and in addition to pay a surface rent in respect of the
surface area occupied or used. The lessee working the mines
extracted ore and marketed it. After separation from Madras
in 1953, the District of Chittoor became part of the Andhra
State. In 1955 a demand was made for the payment of. land
cess under ss. 78 and 79 of the Madras District Boards Act
and including in the computation of the ,annual rent value",
the amounts payable to Government in each year under the
mining lease both as surface rent and royalty. On challenge
to the validity of this notice by the lessee, the High Court
quashed the notices.
(1) [1958] S.C.R. 1355.
667
After this decision the lessee died. On March 10, 1955, two
notices were issued to the appellant demanding payment of
cess for the years 1952-54 and 1955-57 respectively and
threatening coercive proceedings, for their recovery in the
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event of non-compliance. Impugning the validity of the
earlier notices of demand, the appellant filed a writ
petition in the High Court and a similar petition
challenging the validity of the notice of demand for the
later period. Pending these petitions a further notice of
demand for payment of cess for the years 1958-59 was served
on the appellant in August 29, 1960 and to obtain a similar
relief in respect of this notice and the proceedings for
recovery thereof, the appellant filed a writ petition in
this Court and contended: (1) that the expression "royalty"
under s. 79(1) does not signify royalty as commonly
understood but is confined to the rent payable for the
beneficial use of the surface of the land; (2) assuming that
royalty in the sense mentioned in point No. 1 is within ss.
78 and 79, of the Act, the provision imposing the land cess
quad royalty under the mining leases must be held to be
repealed by the Central Acts of 1948 and 1957; (3) is the
land cess demanded by the impugned notices dated March 10,
1958 and August 29, 1960 recoverable as an arrears of land
revenue under the law? (4) s. 221 of the Act which made the
provision for the recovery of sums due as taxes had, by
reason of the changes effected in the rules, ceased to be
applicable to the recovery of land cess under s. 78.
Held:(i) Where the land is held on lease, as in the
present case, the lease amount is specifically ref0erred to
in s. 79 of the Act as one of the components for the
computation of the annual rent value. It is therefore
obvious that ’royalty’ which follows the expression ’lease
amount’ is something other than the return to the lessor or
licenser for the useof the land surface and represents
as it normally connotes the paymentmade for the
materials or minerals won from the land.
(ii) There is no connection between the regulation and
development of mines and minerals dealt with in the Central
Acts and the levy and collection of land cess under ss. 78
and 79 of the Act. There is therefore, nothing in common
between the Act and the Central Acts of 1948 and 1957 so as
to require any detailed examination of the enactments for
discovering whether there is any overlapping.
Hingir Rampur Coal Co. v. State of Orissa, [1961] 2 S.C.R.
537 and State of Orissa v. M. A. Tullock, A.I.R. 1964 S.C.
1284, distinguished.
(iii) In the context of ss. 78 and 79 of the Act and the
scheme ofthose provisions it is clear that the land cess is
in truth a ’tax on lands’ within the entry 49 of the State
List.
Where the land is held under lease it is the lease amount
that forms the basis. Where land is held under a mining
lease, that which the occupier is willing to pay is
accordingly treated as the "annual rent value" of the
property; such rent value would, therefore, necessarily
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include not merely the surface rent but the dead rent, as
well as the royalty payable by the licensee, lessee or
occupier for the user of the property.
(iv) The cess under s. 78 would be "a cess lawfully imposed
upon land" under s. 52 of the Madras Revenue Recovery Act
and would therefore be covered by its terms. The legality
of the procedure, which the respondents proposed to adopt
for the recovery of the sums could not, therefore, be
successfully challenged.
JUDGMENT:
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CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 316-A and
316-B of 1962.
Appeals by special leave and by certificate from judgment
and order dated March 25, 1960, of the Andhra Pradesh High
Court in Writ Petitions Nos. 534 and 535 of 1958.
AND
Writ Petition No. 302 of 1960.
petition under Art. 32 of the Constitution of India for the
enforcement of Fundamental Rights.
P. Ram Reddy, for the appellant (in C.A. No. 316A and 316B
of 1962) and the petitioner (in petition No. 302 of 1960).
T. V. R. Tatachari and B. R. G. K. Achar, for the
respondents (in both the appeals and the petition).
February 4, 1964. The Judgment of the Court was delivered
by
J. AYYANGAR J.-The two Civil Appeals and the Petition
under Art. 32 of the Constitution which have been heard
’together raise a common point regarding the validity of
notices of demand for the payment of land cess under the
Madras District Boards Act (Madras Act XIV of 1920) which
for shortness we shall call the Act, and the legality of the
procedure for the recovery of the amount of the said cess.
The impugned notices made a demand also for education cess
but as this cess is merely a proportion of the landed, and
as the validity of that demand stands or falls with that of
the land-cess, it is sufficient if we refer to and consider
the challenge to the demand of land-cess
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alone, as that will determine the validity of the entire sum
demanded.
The appellant’s father obtained a mining lease from the
Government of Madras dated September 15, 1953 under which he
was permitted to work and win iron ore in a tract of land in
a village in Chittoor district. The terms upon which the
lessee was to work the mines are not very relevant but what
is material is that under this instrument the lessee bound
himself to pay a dead rent of Rs. 1,140/2 per year if he
used the leased land for the extraction of iron ore and a
higher amount if used for other purposes. Besides, he also
bound himself to pay a royalty of 8 annas per ton of iron
ore if the ore were used for extraction of iron and if the
iron ore was used for any other purpose such as for sale in
specie, at Re. 1 /- per ton. In addition, the lease also
stipulated for the payment of surface rent at Rs. 1-8-3 per
acre per annum in respect of the surface area occupied or
used. The lessee worked the mines, extracted ore and
marketed it.
To raise finances for carrying on the local administration
in the District Boards, several taxes are leviable. Among
them section 78 of the Act imposes a land-cess on lands in
the district in these terms :
"78. The land-cess shall be levied on the
annual rent value of all occupied lands on
whatever tenure held and shall consist of a
tax of two annas in the rupee of the annual
rent value of all such lands in the district."
The "annual rent value" on the basis of which the land-cess
to be levied was to be computed in the manner laid down in
s. 79 and this section ran :
"79. The annual rent value shall, for the
purposes of section 78, be calculated in the
following manner
(i) In the case of lands held direct from
Government on ryotwari tenure or on lease or
licence, the assessment, lease amount, royalty
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or other sum payable to Government for the
lands,
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together with any water-rate which may be
payable for their irrigation, shall be taken
to be the annual rent value.
(ii) In the case of inam lands or lands held
wholly or partially free from assessment, the
full assessment which such lands would bear if
they were not inam, together with any water-
rate which may be payable for their
irrigation, shall be taken to be the annual
rent value; and such full assessment and
water-rate shall be determined by the district
collector under the general orders of the
Board of Revenue.
(iii)In the case of lands held on any other
tenure, the annual rent payable to the
landholder, sublandholder or any other
intermediate landholder holding on an under-
tenure created, continued or recognized by a
landholder or sub-landholder, as the case may
be, by his tenants, together with any water-
rate which may be payable for their
irrigation, shall be taken to be the annual
rent value; and where such lands are occupied
by the owner himself or by any person holding
the same from him free of rent or at a
favorable rent, the annual rent value shall be
calculated according to the rates of rent
usually paid by occupancy riot for ryoti lands
in the neighborhood with similar advantages,
together with any water-rate which may be
payable for the irrigation of the l
ands so
occupied.
(iv) In the case of lands, the assessment of
rent of which is paid in kind, the annual rent
value shall be calculated according to the
rates of rent established or paid for
neighboring lands of a similar description and
quality, together with any water-rate which
may be payable for the irrigation of the lands
first mentioned, or if such method of
calculation is, in the opinion of the Board of
Revenue, impracticable in any
671
particular case, according to any method which
the Board of Revenue may approve for that case
:
Provided that, where any landholder or sub-
landholder has obtained under the provisions
of sections 30(iii) and 33 of the Madras
Estates Land Act, 1908, a decree empowering
him to increase his rent in consequence of any
additional payment by way of water-rate made
by him to Government, the annual rent value
shall be the balance remaining after deducting
such increase of rent up to the amount of the
waterrate from the sum ascertained as
aforesaid."
When the State of Andhra was separated from Madras in
October, 1953 the district of Chittoor became part of the
State of Andhra. In 1955 a demand was made upon the father
of the appellant for the payment of land cess calculated in
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accordance with the provisions of ss. 76 and 79 of the Act
and including in the computation of the " annual rent
value". the amounts payable to Government in each year under
the mining lease both as surface rent and royalty. The
validity of this notice was objected to on grounds which are
no longer material and the objections being upheld. the
notices were quashed on writ petitions filed to the High
Court, Andhra Pradesh by the appellant’s father.
After the decision by the High Court in his favour the
appellant’s father died. On March 10, 1958 two notices were
issued to the appellant demanding the payment of the sums
specified therein as being the messes for the years 1952 to
1954 and 1955 to 1957 respectively and threatening coercive
proceedings for their recovery in the event of the demand
not being complied with. Impugning the validity of the
notices of demand for the earlier triennial, the appellant
filed writ petition 534 of 1958 in the High Court of Andhra
Pradesh and a similar petition No. 535 of 1958 challenging
the validity of the notice of demand for the later period.
While these petitions were pending before the High Court a
further notice of demand claiming the pay-
672
ment of cess for the years 1958 and 1959 was served on the
appellant in August 1960 and to obtain a similar relief in
respect of this notice and the proceedings for the recovery
thereof, the appellant has filed writ petition 302 of 1960
in this Court. To complete the narrative it is only
necessary to mention that both the writ petitions 534 and
535 of 1958 were dismissed by the High Court and when the
appellant sought to obtain certificates of fitness the
learned Judges granted a certificate in respect of their
judgment in writ petition 535 of 1958 on the ground that the
value of the claim made against the appellant was over Rs.
20,000, but refused a similar certificate in writ petition
534 of 1958 where the amount demanded was less than that
figure-it was Rs. 15,000 and odd. The appellant thereupon
moved this court for special leave in respect of the
dismissal of his writ petition 534 of 1958 and the same
having been granted all these three matters have been heard
together.
The matter in controversy in the appeal is very limited and
the point involved very narrow. Mr. Ram Reddylearned
counsel for the appellant raised three points in support of
the appeal : (1) What is the meaning of the expression
’royalty’ in s. 79(1) of the Art? Does it include the
royalty payable under a mining lease on the ore won by the
lessee, (2) Assuming that royalty in the sense mentioned in
point No. 1 is within ss. 78 and 79, of the Act the
provision imposing the land cess quoad royalty under mining
leases must be held to be repealed by the Mines. & Minerals
(Regulation & Development) Act, 1948 (Central Act Llll of
1948) or in any event, by the Mines & Minerals (Regulation &
Development) Act, 1957 (Central Act LXVII of 1957). so that
after the date when these Central enactments came into force
the land cess that could be levied under s. 78 must be
exclusive of royalty under a mining lease. (3) Is the land
cess which, was demanded by the impugned notices dated March
10, 1958 and August 29, 1960 recoverable as an arrear of
land revenue under the law?
We shall examine these submissions in that order. The first
contention that the expression ’royalty’ under s. 79(1) does
not signify royalty as commonly understood but is
673
confined to the rent payable for the beneficial use of the
surface of the land, scarcely deserves serious
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consideration. Where the land is held on lease, as in the
present case, the lease amount is specifically referred to
in s. 79 of the Act as one of the components for the
computation of the annual rent value. It is therefore.
obvious that "royalty" which follows the expression "lease
amount" is something other than the return to the lessor or
licenser for, the use of the land surface and represents as
it normally connotes the payment made for the materials or
minerals won from the land. The argument is therefore
without substance and is rejected.
The second point has not, in our opinion, more merit The
entirety of the argument on this head is based on two
decisions of this Court in which this Court had to consider
the continued operation of the Orissa mining areas (Deve-
lopment Fund) Act, (Act XXVII of 1952) The Hingir Rampur
Coal Co. Ltd. and Others v. The State of Orissa and
Others(1) and State of Orissa v. M. A. Tullock & Co.(1). As
a matter of fact it might be mentioned that the present
appellant intervened in State of Orissa v. M. A. Tullock &
Co. and there was a direction by this Court that the present
appeals and petition might be heard after the judgment was
pronounced in the Orissa appeals. We are, however, clearly
of the opinion that neither of the two decisions, the later
one really following the earlier in respect of the matter
now relevant, really help the appellant in these appeals.
In Hingir-Rampur Coal Co.’s case(1) the decision rendered an
writ petitions filed in this court under Art. 32 of the
Constitution challenging the validity of the Orissa Mining
Areas (Development Fund) Act. A cess had been levied under
that enactment and it was the validity of the imposition of
the cess that was the subject of debate in the petition.
One of the points urged in support of the petition was that
on the enactment of the Minoan & Minerals (Regulation and
Development) Act, 1948 (Central Act LIII of 1948) the Orissa
Act stood repealed and the cess leviable under its
provisions was not thereafter capable of
(2) A.I.R. 1964 S.C. 1284.
(1) [1961] 2 S.C.R. 537.
134-159 SC-43
674
being enforced, with the result that the demand for the
cess. could not be sustained. This Court on a detailed
comparison of the provisions of the Orissa Act and the
Central Act of 1948 came to the conclusion that the Central
Act covered the same field as the Orissa enactment. An
examination of the scheme of the Orissa Act disclosed that
it had been passed for the purpose of the development of
’mining areas’ in the State and this was affected by
constituting "mining areas" and making provision for the
development of such areas by improving communications by the
construction of roads, by providing means of transport,
supply of water, electricity and other amenities for
sanitation as also for the education of the labour force to
attract workmen to these ,mining areas’. The cess which was
there impugned was levied and collected for meeting the cost
of this development of the "mining areas". An examination
of the Central enactment which was also passed to provide
for the conservation of minerals was held to cover the same
field as the Orissa Act. The Orissa State enactment had
been passed in pursuance of the legislative power conferred
by Entry 23 of the State List in the 7th Schedule reading :
"Regulation of mines and mineral development
subject to the provisions of List I with
respect to regulation and development under
the control of the Union."
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The provision in List I referred to here is Entry 54 in the
Union List reading :
"Regulation of mines and mineral development
to the extent to which such regulation and
development under the control of the Union is
declared by law made by Parliament to be
expedient in public interest."
It was argued on behalf of the State that the
Central Act of 1948 though it contained a
declaration that the Regulation and
Development of mines and mineral development
was expedient in the public interest, still
such a declaration was not by "Parliament" as
required by Entry No. 54, but by the Dominion
legislature and could not on the terms of item
23 of List II affect the State power of
legislation. This
675
argument was accepted and the State Act was,
therefore, held to be competently enacted, and
to remain unaffected H. by the Central
Legislation. It was the same enactment of the
Orissa legislature that came up for
consideration in State of Orissa v. M. A.
Tullock & Co.(1). By that date however
Parliament had legislated and had enacted
Central Act LXVII of 1957 which contained, if
anything, more comprehensive provisions for
the regulation and development of mines and
minerals throughout the country. The Central
Act also contained a declaration that "it was
expedient in the public interest that the
Union should take under its control the
regulation of mines and the development of
minerals to the extent hereinafter provided."
This Court held that having regard to the
comprehensive provisions contained in the
several sections of the Act which were
examined, "the extent provided" included those
which fell within the scope of the State Act
of Orissa which was, as stated earlier, for
the regulation and development of "mining
areas" within the State. For these reasons it
was held that the Orissa Act must be deemed to
have been implies repealed and rendered
ineffective by the Central Act.
It will be seen that there is no resemblance,
whatever, between the provisions of the Orissa
Act considered in the two decisions and the
provision for the levy of the land cess under
ss. 78 and 79 of the Act with which we are
concerned. Sections 78 and 79 have nothing to
do and are not concerned with the development
of mines and minerals or their regulation.
The proceeds of the land cess are, under 92 of
the Act, to be credited to the District fund,
into which, under the terms of the Finance
Rules in Sch. V to the Act, the land-cess as
well as several other taxes, fees and receipts
are directed to be credited. This fund is to
be used under Ch. VII of the Act with which
s. 112 starts "for everything necessary for or
conducive to the safety, health, convenience
or education of the inhabitants or the
amenities of the local area concerned and
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everything incidental to the administration"
and include in particular the several matters
which are mentioned in those sections. It
will thus be seen that there is no connection
between the regulation
(1) A.I.R. 1964 S.C. 1284.
676
and development of mines and minerals dealt
with in the Central Acts and the levy and
collection of land-cess for which provision is
made by ss. 78 and 79 of the Act. There is
therefore no scope, at all, for the argument
that there is anything in common between the
Act and the Central Acts of 1948 and 1957 so
as to require any detailed examination of
these enactments for discovering whether there
is any over-lapping.
It was next urged that the land-cess was
really a tax on mineral rights falling within
Entry 50 of the State List reading
"Taxes on mineral rights subject to any
limitation imposed by Parliament by law
relating to mineral development"
and that the Central Acts under which also taxes and fees
might be levied brought into play the last portion of this
Entry and that as a result the power to impose this tax was
not available after the Central Acts of 1948 and 1957 came
into force. In this connection Mr. Ram Reddy pointed out
that as the impugned land-cess was payable only in the event
of the mining lessee winning the mineral and so paying the
royalty and not when no minerals were extracted, it was in
effect a tax on the minerals won and therefore on mineral
rights. We are unable to accept this argument. When a
question arises as to the precise head of legislative power
under which a taxing statute has been passed, the subject
for enquiry is what in truth and substance is the nature of
the tax. No doubt, in a sense, but in a very remote sense,
it has relationship to mining as also to the mineral won
from the mine under a contract by which royalty is payable
on the quantity of mineral extracted. But that, does not
stamp it as a tax on either the extraction of the mineral or
on the mineral right. It is unnecessary for the purpose of
this case to examine the question as to what exactly is a
tax on mineral rights seeing that such a tax is not leviable
by Parliament but only by the State and the sole limitation
on the State’s power to levy the tax is that it must not
interfere with a law made by Parliament as regards mineral
development. Our attention was not invited to the provision
of any such law enacted by Parliament. In
677
the context of ss. 78 and 79 and the scheme of those provi-
sions it is clear that the land cess is in truth a "tax on
lands" within Entry 49 of the State List.
Under s. 78 of the Act the cess is levied on occupied land
on whatever tenure held. The basis of the levy is the
"annual rent value" i.e., the value of the beneficial enjoy-
ment of the property. This being the basis of the tax and
disclosing its true nature, s. 79 provides for the manner in
which the "annual rent value" is determined i.e., what is
the amount for which the land could reasonably be let, the
benefit to the lessor representing the ratable value "or the
annual rent value". In the case of ryotwari lands it is the
assessment which is payable to the Government that is taken
as the rental value being the benefit that accrues to the
Government. Where the land is held under lease it is the
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lease amount that forms the basis. Where land is held under
a mining lease, that which the occupier is willing to pay is
accordingly treated as the "annual rent value" of the
property. Such a rent value would, therefore, necessarily
include not merely the surface rent, but the dead rent, as
well as the royalty payable by the licensee, lessee or
occupier for the user of the property. The position then is
that the rent which a tenant might be expected to pay for
the property is, in the case of lease-hold interests,
treated as the statutory "annual rent value". It is
therefore not possible to accept the contention, that the
fact that the lessee or licensee pays a royalty on the
mineral won, which is in excess of what he would pay if his
right over the land extended only to the mere use of the
surface land, places it in a category different from other
types where the lessee uses the surface of the land alone.
In each case the rent which a lessee or licensee actually
pays for the land being the test, it is manifest that the
land-cess is nothing else except a land tax.
Learned counsel pointed out that in the case of inam lands
and other lands dealt with in cls. (ii), (iii) and (iv) of
s. 79 the royalty payable by the lessee or licensee did not
figure in the computation of the annual rent value. That,
however, appears to us to be wholly irrelevant, for
678
what we are concerned with is whether on the terms of sub-
cl. (i) the land cess is not in truth a tax on land.
The last of the points raised relates to the threat on the
part of the Government to recover the impugned demands as an
arrears of land revenue. Learned counsel pointed out that
s. 221 of the Act which made provision for the recovery of su
ms
due as taxes had, by reason of the changes effected in the
rules, ceased to be applicable for the recovery of land cess
under s. 78. The learned Judges of the High Court upheld
this submission and, in our opinion, correctly, but this is
of no assistance to the appellant because of s. 52 of the
Madras Revenue Recovery Act which enacts:
"52. All arrears of revenue other than land-
revenue due to the State Government, all
advances made by the State Government for
cultivation or other purposes connected with
the revenue, and all fees or other dues
payable by any person to or on behalf of the
village servants employed in revenue or police
duties, and all cesses lawfully imposed upon
land and all sums due to the State Government,
including compensation for any loss or damage
sustained by them in consequence of a breach
of contract, may be recovered in the same
manner as arrears of land-revenue under the
provisions of this Act, unless the recovery
thereof shall have been or may hereafter be
otherwise specially provided of for."
It was not disputed that the cess under s. 78 would be "a
cess lawfully imposed upon land" and would therefore be
covered by its terms. The legality of the procedure, which
the respondents proposed to adopt for the recovery of the
sums could not, therefore, be successfully challenged.
The appeals and the writ petition fail and are dismissed
with costs-one hearing fee.
Appeals and petition dismissed.
679
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