A.C.C. LIMITED vs UNION OF INDIA
- Court
- Karnataka High Court
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WP No. 25298 of 2024
C/W WP No. 18655 of 2025
WP No. 36850 of 2025
TH
RESERVED ON 19 AUGUST 2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 8 DAY OF SEPTEMBER, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
WRIT PETITION NO. 25298 OF 2024 (GM-MM-S)
C/W
WRIT PETITION NO. 18655 OF 2025 (GM-MM-S)
WRIT PETITION NO. 36850 OF 2025 (GM-MM-S)
IN WP No. 25298/2024
BETWEEN:
1. A.C.C. LIMITED
(A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956)
REPRESENTED BY ITS POWER OF
ATTORNEY HOLDER AND
CHIEF MANUFACTURING OFFICER (SOUTH)
SRI PARAG KUMAR SRIVASTAVA
HAVING ITS REGISTERED OFFICE AT
ADANI CORPORATE HOUSE
SHANTIGRAM, S.G. HIGHWAY
KHODIYAR
AHMEDABAD - 382 421
GUJARAT
ALSO HAVING ITS BUSINESS AT:
WADI CEMENT WORKS
P.O. WADI - 585 225
Digitally signed
by
VEERENDRA
KUMAR K M
Location: High
Court of
Karnataka
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WP No. 25298 of 2024
C/W WP No. 18655 of 2025
WP No. 36850 of 2025
KALABURAGI DISTRICT
KARNATAKA
…PETITIONER
(BY SRI K.N. PHANEENDRA, SENIOR COUNSEL FOR
SMT. VAISHALI HEGDE, ADVOCATE)
AND:
1.
UNION OF INDIA
REPRESENTED BY ITS SECRETARY
MINISTRY OF MINES
DR. RAJENDRA PRASAD ROAD
SHASTRI BHAVAN
NEW DELHI - 110 001
2. STATE OF KARNATAKA
REPRESENTED BY THE SECRETARY
DEPARTMENT OF COMMERCE AND INDUSTRIES
(MSME AND MINES)
ST
1 FLOOR, VIKASA SOUDHA
DR. AMBEDKAR VEEDHI
BENGALURU - 560 001
3. THE DIRECTOR OF MINES AND GEOLOGY
DEPARTMENT OF MINES AND GEOLOGY
TH
KHANIJA BHAVAN, 5 FLOOR
RACE COURSE ROAD, BANGALORE - 560 001
4. THE DEPUTY DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
KHANIJA BHAVAN
CA SITE NO.1, SY. NO.76
ATAL BIHARI VAJPAYEE BADAVANE
KOTHNUR, KALABURAGI - 585 102
…RESPONDENTS
(BY SRI VINAY VENUGOPAL, CGSC FOR R-1 &
SRI REUBEN JACOB, AAG ALONG WITH
SRI K.S. HARISH, GOVERNMENT ADVOCATE FOR R-2 TO R-4)
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WP No. 25298 of 2024
C/W WP No. 18655 of 2025
WP No. 36850 of 2025
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
MANDAMUS OR ANY OTHER APPROPRIATE WRIT OR ORDER OR
DIRECTION, DIRECTING THE RESPONDENTS No.2 TO 4 HEREIN TO
IMMEDIATELY UNBLOCK/ RESTART THE ILMS PORTAL PERTAINING
TO THE MINING LEASE OF THE PETITIONER BEARING
M.L.No.1853/M.L.No.2641 IN COMPLIANCE OF THE DIRECTIONS
ST
ISSUED BY THE 1 RESPONDENT - REVISIONAL AUTHORITY IN
THE ORDER DATED 31.07.2024 PASSED IN FILE No.13/02/2024/RC-I
VIDE ANNEXURE-A AND ETC.
IN WP NO. 18655/2025
BETWEEN:
1. A.C.C. LIMITED
(A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956)
REPRESENTED BY ITS POWER OF
ATTORNEY HOLDER AND
CHIEF MANUFACTURING OFFICER (SOUTH)
SRI PARAG KUMAR SRIVASTAVA
HAVING ITS REGISTERED OFFICE AT
ADANI CORPORATE HOUSE
SHANTIGRAM, S.G. HIGHWAY
KHODIYAR, AHMEDABAD - 382 421
GUJARAT
ALSO HAVING ITS BUSINESS AT:
WADI CEMENT WORKS
P.O. WADI - 585 225
KALABURAGI DISTRICT, KARNATAKA
...PETITIONER
(BY SRI K.N. PHANEENDRA, SENIOR COUNSEL FOR
SMT. VAISHALI HEGDE, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY THE SECRETARY
DEPARTMENT OF COMMERCE AND INDUSTRIES
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C/W WP No. 18655 of 2025
WP No. 36850 of 2025
(MSME AND MINES)
ST
1 FLOOR, VIKASA SOUDHA
DR. AMBEDKAR VEEDHI
BENGALURU - 560 001
2. THE DIRECTOR OF MINES AND GEOLOGY
DEPARTMENT OF MINES AND GEOLOGY
TH
KHANIJA BHAVAN, 5 FLOOR
RACE COURSE ROAD
BANGALORE - 560 001S
3.
THE DEPUTY DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
KHANIJA BHAVAN
CA SITE NO.1, SY. NO.76
ATAL BIHARI VAJPAYEE BADAVANE
KOTHNUR, KALABURAGI - 585 102
4. UNION OF INDIA,
REPRESENTED BY ITS SECRETARY
MINISTRY OF MINES
DR. RAJENDRA PRASAD ROAD
SHASTRI BHAVAN
NEW DELHI - 110 001
...RESPONDENTS
(BY SRI REUBEN JACOB, AAG ALONG WITH
SRI K.S. HARISH, GOVERNMENT ADVOCATE FOR R-1 TO R-3 &
SRI VINAY VENUGOPAL, CGSC FOR R-4)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER
OR DIRECTION, QUASHING THE ORDER/DEMAND NOTICE
DATED 05/06/2025 BEARING NO.DMG-17011/22/2017/2025-26-
ND
C.NO.29259/4703B, PASSED BY THE 2 RESPONDENT -
DIRECTOR OF MINES AND GEOLOGY VIDE ANNEXURE-A AND
ALL FURTHER PROCEEDINGS THERETO AND ETC.
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C/W WP No. 18655 of 2025
WP No. 36850 of 2025
IN WP NO. 36850/2025
BETWEEN:
1. STATE OF KARNATAKA
REPRESENTED BY ITS
PRINCIPAL SECRETARY
DEPARTMENT OF COMMERCE AND
INDUSTRIES (MSME & MINES)
ST
1 FLOOR, VIKASA SOUDHA
BENGALURU - 560 001
2.
THE DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
TH
KHANIJA BHAVAN, 5 FLOOR
RACECOURSE ROAD
BENGALURU - 560 001
3. THE DEPUTY DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
KHANIJA BHAVAN, CA SITE NO.1
SY. NO.76
ATAL BIHARI VAJPAYEE BADAWANE
KOTHANUR, KALABURAGI
...PETITIONERS
(BY SRI REUBEN JACOB, AAG ALONG WITH
SRI K.S. HARISH, GOVERNMENT ADVOCATE)
AND:
1.
MINISTRY OF MINES
GOVERNMENT OF INDIA
REVISIONAL AUTHORITY
RD
3 FLOOR, A-WING, SHASTRI BHAWAN
NEW DELHI - 110 001
REPRESENTED BY ITS
JOINT SECRETARY
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C/W WP No. 18655 of 2025
WP No. 36850 of 2025
2. M/S. ACC LIMITED
A COMPANY REGISTERED UNDER
THE COMPANIES ACT
HAVING ITS REGISTERED OFFICE AT
ADANI CORPORATE HOUSE SHANTIGRAM
S.G. HIGHWAY, KHODIYAR
AHMEDABAD - 382 421
AND BUSINESS AT:
WADI CEMENT WORKS
PO WADI - 585 225
KALABURAGI DISTRICT, KARNATAKA
REPRESENTED BY ITS
S/O AUTHORIZED REPRESENTATIVE
SHRI AMITABH RAJAT
...RESPONDENTS
(BY SRI VINAY VENUGOPAL, CGSC FOR R-1 &
SRI K.N. PHANEENDRA, SENIOR COUNSEL FOR
SMT. VAISHALI HEGDE, ADVOCATE FOR R-2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND
ARTICLE 227 OF CONSTITUTION OF INDIA PRAYING TO ISSUE AN
APPROPRIATE WRIT, ORDER OR DIRECTION IN THE NATURE OF
'CERTIORARI' SETTING ASIDE THE ORDER DATED 09/09/2025
PASSED BY THE RESPONDENT NO.1 REVISIONAL AUTHORITY IN
REVISION APPLICATION NO.13/02/2024/RC-I VIDE ANNEXURE-A
FOR BEING PASSED VIOLATING PRINCIPLES OF NATURAL JUSTICE
AND ARBITRARY IN NATURE AND ETC.
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS, COMING ON FOR PRONOUNCEMENT
THIS DAY, ORDER WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA
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C.A.V. JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
ABLE OF ONTENTS
T C
INTRODUCTION ........................................................................................................8
PREFATORY FACTS ..................................................................................................13
SUBMISSIONS.........................................................................................................27
REASONS & CONCLUSION........................................................................................31
A. Whether mining during the statutorily extended term, without a
Supplementary Lease Deed, attracts Section 21(5) of the MMDR Act........................32
Deemed extension under Section 8A(5) of the MMDR Act ......................................34
Re: Section 105 of the Transfer of Property Act, 1882.............................................38
Re: Rule 24A of the Mineral Concession Rules, 1960...............................................43
Penalty under Section 21(5) for want of a Supplementary Lease Deed is
unsustainable...........................................................................................................45
Re: Statutory clearances ..........................................................................................46
Conditions of the Government Order dated 25.08.2022..........................................46
Re: IBM’s approval of the mining plan.....................................................................50
The Central Government’s view of Section 8A(5).....................................................51
ACC’ s willingness to execute the Supplementary Lease Deed.................................53
Denial of benefit of Section 8A(5) of the MMDR Act – whether justified ................53
B. The State’s challenge to the impugned order - Royalty on a notional basis......58
Re: Alleged violation of the principles of natural justice.........................................58
Whether adoption of a notional conversion factor was justified ............................61
The Revisional Order dated 06.05.2019...................................................................68
The State could not disregard the Revisional Order dated 06.05.2019...................72
The demand notices dated 10.04.2024 and 02.09.2024..........................................74
Absent a credible challenge to actual weighment, notional assessment is not
justified.....................................................................................................................75
CONCLUSION ..........................................................................................................88
*
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INTRODUCTION
1. The Petitioner [hereafter “ ACC ”] has filed the petition, WP
No.25298/2024, inter alia, praying that directions be issued to
Respondent Nos. 2 to 4 – State of Karnataka and Officials of the
Department of Mines & Geology [hereafter “ DMG ”] – to immediately
unblock and re-start the Integrated Lease Management System
[hereafter “ ILMS ”] Portal pertaining to ACC’s mining lease bearing
ML No.1853 / ML No.2641 in compliance with the directions issued
by Respondent No.1 – Union of India, acting through the Revisional
Authority [hereafter “ the Revisional Authority ”] – by the order
dated 31.07.2024. ACC also prays that directions be issued to
Respondent Nos. 2 to 4 to the effect that they cannot insist on
execution of the Supplementary Lease Deed in respect of the
mining lease bearing ML No.2641 as it is statutorily extended by
virtue of Section 8A(5) of the Mines & Minerals (Development &
Regulation) Act, 1957 [hereafter “ MMDR Act ”]. In the alternative,
ACC prays that directions be issued to the State to immediately
execute the Supplementary Lease Deed in ACC’s favour in respect
of the mining lease bearing ML No.2641 for recording the extended
term upto 31.03.2030, in compliance with the Government Order
dated 25.08.2022.
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2. In addition to the above prayers, ACC also seeks directions to
restrain Respondent Nos. 2 to 4 from taking any precipitative action
in respect of arrears of Royalty on the basis of its calculation in
respect of the mining lease bearing ML No. 2641 during the
pendency of the Revision Application bearing RA
No.13/02/2024/RC-I. ACC further seeks a direction that no action be
taken pursuant to the Demand Notice dated 02.09.2024 till the
disposal of the aforesaid Revision Application. These prayers do not
survive as ACC has prevailed in the Revision Application and the
matter has been remanded to the State Government in view of the
findings of the Revisional Authority that the demand, which is based
on notional consumption of limestone, is unsustainable .
3. ACC has filed the petition, WP No.18655/2025, impugning the
Demand Notice dated 05.06.2025 [hereafter “ the impugned
demand notice” ] calling upon ACC to pay penalty under Section
21(5) of the MMDR Act of a sum of ` 482,69,65,137/- (Rupees Four
Hundred Eighty-Two Crores Sixty-Nine Lacs Sixty-Five Thousand
One Hundred & Thirty-Seven only) within the period of 15 days.
The said demand is premised on the basis that ACC has extracted
78,33,415 metric tonnes of limestone, without authority of law. This
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allegation is based on the assertion that notwithstanding the
deemed extension of the term of the mining lease bearing ML
No.2641 till 31.03.2030 by virtue of Section 8A(5) of the MMDR Act,
the mining activities carried on after expiry of the mining lease on
18.02.2023 were unlawful as the Supplementary Lease Deed
extending the term was not executed.
4. The State has filed WP No.36850/2025 impugning an order
dated 09.09.2025 [hereafter “ the impugned order ”]. DMG has
computed arrears of Royalty and interest as on 31.03.2023 at
`
492,51,43,385/- (Rupees Four Hundred and Ninety-Two Crores
Fifty-One Lacs Forty-Three Thousand Three Hundred and Eighty-
Five only) on a notional basis. This was disputed by ACC in revision
proceedings, which culminated in the impugned order. The
Revisional Authority held that the demand of arrears of Royalty and
interest computed on notional consumption of limestone for
manufacture of Clinker in the ratio of 1:1.42 is unjustified.
5. The dispute between the parties has a chequered history,
however, it lies in a narrow compass. There is no dispute that by
virtue of Section 8A(5) of the MMDR Act, ACC’s mining lease
bearing ML No.2641 is deemed to have been extended till
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31.03.2030. Notwithstanding the same, the State contends that the
mining activity carried on by ACC during the period after 18.02.2023
is without authority of law and it has accordingly imposed a penalty
under Section 21(5) of the MMDR Act. The State contends that it
was necessary to execute a Supplementary Lease Deed for
extending the term of the mining lease, failing which no mining
activity was permissible. Consequently, ACC is liable to pay penalty
under Section 21(5) of the MMDR Act. ACC contends to the
contrary and submits that the execution of Supplementary Lease
Deed is not necessary as the term of the lease was deemed to be
extended by operation of law. It claims that by virtue of the
provisions of Section 8A(5) of the MMDR Act, the term of the mining
lease stood extended till 31.03.2030.
6. Notwithstanding its aforesaid stand, ACC has no reservations
in executing the Supplementary Lease Deed, as required. However,
the State Government’s offer of execution of the Supplementary
Lease Deed is not unconditional as the same requires that the
outstanding demand of Royalty – which is a subject matter of a
long-standing dispute between the parties – be paid as a pre-
condition for executing the Supplementary Lease Deed. The State
contends that the lease is not deemed to be extended as ACC has
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not complied with the condition of payment of Royalty.
7. The dispute regarding the payment of Royalty, essentially,
stems from DMG/State insisting that Royalty be paid on notional
consumption of limestone assessed on the basis of production of
clinker. ACC disputes the same and claims that the Royalty is
payable on actual dispatch or consumption and there are no
grounds for assessing the consumption on a normative basis.
8. Thus, the questions that fall for consideration of this Court
are:
(a) Whether ACC’s mining activity after
18.02.2023, during the period as extended by
virtue of Section 8A(5) of the MMDR Act, would
amount to raising minerals without authority of
law? In other words, whether the Supplementary
Lease Deed is essential for the validity of the
mining during the period it stands extended by
virtue of Section 8A(5) of the MMDR Act?
(b) Whether, in the given facts, non-payment of
the demanded arrears of Royalty would amount to
non-compliance with the conditions of the lease?
(c) Whether the impugned order dated
09.09.2025 passed by the Revisional Authority is
sustainable?
9. At the outset, Mr. Reuben Jacob, the learned Additional
Advocate General fairly stated that the central dispute is in respect
of the State’s demand for Royalty on a notional basis. He fairly
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stated that if the State does not prevail in its claim that in the given
facts ACC is liable to pay Royalty on a notional basis as determined,
the other disputes would dissolve. This is because the execution of
the Supplementary Lease Deed for extending the term is held up for
non-clearance of arrears.
10. As is apparent from the above, the controversies in the
present petitions are connected and therefore, the present petitions
were heard together.
PREFATORY FACTS
11. ACC is engaged in the manufacture of cement and has
manufacturing units in various parts of the country, including the
State of Karnataka. Limestone is a primary raw material for the
manufacture of cement and is classified as a major mineral for use
in the cement industry. Shale is also used in the manufacture of
cement and is classified as a minor mineral. ACC was granted a
mining lease [ML No.1853] for 562.32 hectares of land situated at
Ingalgi and Ravoor villages of Chittapur Taluk, Kalaburagi District
for the extraction of limestone on 19.02.1963. Subsequently, the
mineral clay was discovered during the mining operations and was
included in the mining lease [MC 802] on 19.02.1968.
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12. The initial term of the mining lease bearing ML No.1853
expired on 18.02.1983, and it was renewed for a further period of 20
years with effect from 19.02.1983 for the extraction of limestone
without clay, over an extent of 471.03 hectares. In the course of
mining, shale, which is also utilised for the manufacture of cement
as an additive, was included as one of the minerals, and a mining
lease [ML No.1949] was executed on 19.07.1984. The term of the
said lease was co-terminus with ML No.1853. ML No.1853 was
further renewed on 28.06.2010 for a period of 20 years with effect
from 19.02.2003 [ML No.2641], and it remained valid until
18.02.2023.
13. ACC extracted limestone and shale for captive consumption.
ACC filed its returns and paid Royalty based on the declared
consumption. However, during the course of the mining activities, an
issue arose regarding the assessment of Royalty. It is the State’s
case that, in and around 1995-96, the Deputy Director, DMG
inspected the mining leases of cement companies in Kalaburagi
district and found that ACC and other companies had not installed
weighbridges or beltometers to weigh the minerals extracted from
the mine. It is contended on behalf of the State that, in the aforesaid
backdrop, DMG found a mismatch between the quantity of
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limestone claimed to have been mined and the production of clinker.
It is stated that this issue is the subject matter of contention between
the parties.
14. On 31.03.2012, a meeting was held between Government
officials, under the chairmanship of the Secretary to the Government
of Karnataka, Commerce and Industries Department, and the
representatives of certain cement-producing companies for
resolving the issue of assessment of Royalty. The representatives of
ACC did not attend the said meeting. During the said proceedings,
a Study Report conducted by the National Council for Cement and
Building Materials [hereafter “ NCCB ”] was placed with regard to the
notional consumption of limestone. The reports of DMG for the
years 2000 and 2010 were also placed. After deliberation of the
issues, it was decided that Royalty should be calculated as per
actual production and weighment of limestone.
15. Notwithstanding the aforesaid decision, the Deputy Director,
DMG continued to issue demand notices on the basis of normative
consumption. On 24.11.2018, the Deputy Director, DMG issued a
demand notice directing ACC to pay a sum of 215,61,22,220/-
(Rupees Two Hundred and Fifteen Crores Sixty-One Lacs Twenty-
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Two Thousand Two Hundred and Twenty Only) as arrears along
with interest at the rate of 24% per annum.
1
16. Aggrieved by the said order, ACC filed a Revision Petition
under Section 30 of the MMDR Act read with Rule 36 of the Mineral
(Other than Atomic and Hydro Carbons Energy Minerals)
Concession Rules, 2016. The Revisional Authority allowed the
Revision Petition by an order dated 06.05.2019 and remanded the
matter to the State Government to reconsider the demand in light of
the decision taken at the meeting held on 31.03.2012. Meanwhile,
another demand dated 17.08.2019 was raised for the year 2018-19.
This demand was admittedly not in conformity with the order dated
06.05.2019, as it was not based on actual consumption but on
normative basis.
17. ACC preferred another Revision Petition to challenge the said
demand. While that Revision Petition was pending, the State
Government issued a letter dated 05.06.2021 directing the Director,
DMG to submit a report regarding the arrears of Royalty after taking
into account the Government Order dated 21.08.2020 – passed in
the case of another cement company. Since the matter was under
1
Revision Application No.13(01)/2019/RC-I
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consideration, ACC withdrew its Revision Petition, which was
dismissed as withdrawn by an order dated 28.06.2021 with liberty to
file a fresh application, if required.
18. It is the State's contention that the decision taken at the
meeting dated 31.03.2012 did not bind the DMG. It is the State's
case that the Director, DMG, by the proceedings dated 10.05.2022
[Annexure-R5 to the Statement of Objections in WP
No.25298/2024], held that the said decision could not be applied to
ACC in view of the Government Order dated 21.08.2020. The said
Government Order had been passed in the case of M/s UltraTech
Cement Ltd. (Unit of Rajashree Cement Works), wherein the State
Government had observed that the proceedings of the meeting
dated 31.03.2012 did not constitute a decision of the Government,
as the same were not expressed as a Government Order "by order
and in the name of the Governor of Karnataka", and had accordingly
directed that the said proceedings "shall be eschewed by the
Director of Mines and Geology". The State contends that the said
Government Order was applied to ACC as well, pursuant to the
directions issued by the State Government by its letter dated
05.06.2021.
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19. Thereafter, on 25.08.2022, the State Government passed an
order extending the mining lease bearing ML No.2641 up to
31.03.2030. The State Government directed the Director, DMG to
execute a Supplementary Lease Deed subject to submission of the
necessary statutory clearances and payment of all arrears payable
to the Government.
20. The Director, DMG issued an intimation letter dated
19.09.2022 calling upon ACC to submit the requisite documents for
executing the Supplementary Lease Deed, including a No Due
Certificate. Given the fact that the arrears of Royalty as demanded
were disputed, ACC could not secure the No Due Certificate. The
twenty-year term of the mining lease bearing ML No.2641 expired
on 18.02.2023.
21. On 21.11.2023, the Deputy Director, DMG blocked the ILMS
Portal, which prevented ACC from downloading the e-permits for
transportation of limestone from the mining area to its cement plant
and from paying the Royalty.
22. Thereafter, ACC submitted various representations
(representations dated 27.11.2023, 28.12.2023, 12.01.2024,
27.03.2024 & 01.04.2024) praying that directions be issued to the
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Director, DMG to unblock access to the ILMS portal.
23. By a letter dated 14.03.2024, the State Government directed
DMG to execute the Supplementary Lease Deed with ACC only afer
verifying and determining the loyalty amount payable and collecting
the arrears.
24. On 10.04.2024, the Deputy Director, DMG, pursuant to the
proceedings dated 10.05.2022, issued a demand order directing
ACC to pay a sum of 792.41 crores towards arrears of Royalty
from 1995 and other consequential charges. The said demand was
based on a notional consumption ratio of 1:1.42. ACC made a
representation dated 13.06.2024, inter alia, assailing the demand on
several grounds. First, it claimed that the demand did not conform
to the Government's decision dated 31.03.2012 and the order dated
06.05.2019 of the Revisional Authority directing that the issue of
Royalty be considered in light of the said decision. Second, it
submitted that the calculation of the amount of ` 733,82,54,978/-
was ex facie erroneous as it was arrived at by appropriating the
Royalty payments against the notional interest on the disputed
demand of Royalty. A plain reading of the said representation
indicates that it refers to the differential Royalty as ` 58,59,14,686/-.
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ACC also claimed that even if the constant factor of 1:1.42 was to
be applied for determining the total consumption of limestone and
`
shale, the same would result in a refund of 4.94 crores.
25. ACC challenged the demand dated 10.04.2024 by filing a
Revision Application under Section 30 of the MMDR Act, being
Revision Application No.13/02/2024/RC-I. ACC also raised the
grievance regarding the blocking of the ILMS Portal in the said
proceedings. The Revisional Authority passed an interim order
dated 31.07.2024 directing the State Government to obtain the
information required to restart the ILMS portal and resolve the issue
relating to restarting the issuance of the transit permits through the
ILMS Portal. Following the said interim order, ACC sent a letter
dated 03.08.2024, inter alia, referring to the interim order and stating
that it had installed beltometers to weigh the complete quantity of
limestone produced from the mine-leased area that fed into the
Clinkering Unit through conveyor belts. ACC further stated that it
had also maintained daily weighment records. In addition, ACC also
offered to integrate the weighing devices with the ILMS if software
utilities were made available.
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26. Meanwhile, on 12.07.2024, a Departmental Technical
Committee [hereafter “ DTC ”] was formed to verify the limestone
production and dispatches by ACC from 1995-96 to 2022-23, and
the DTC submitted a Report dated 20.08.2024. The DTC, inter alia ,
noted that arrears demand had been issued by imposing compound
interest instead of simple interest.
27. In the meantime, ACC also tendered a sum of ` 33,35,20,193/-
(Rupees Thirty-Three Crores Thirty-Five Lacs Twenty Thousand
One Hundred & Ninety-Three only) towards Royalty, DMF & NMET
payable for the period of nine months during which ILMS portal was
de-activated and due to which it was unable to make the said
payments. It also tendered interest on the said amount calculated at
the rate of 12% per annum by way of demand drafts, under the
cover of its letter dated 27.08.2024.
28. On 02.09.2024, the Deputy Director, DMG issued a revised
demand notice calling upon ACC to pay a demand of
` 257,60,37,297/- (Rupees Two-Hundred Fifty-Seven Crores Sixty
Lacs Thirty-Seven Thousand Two Hundred Ninety-Seven only),
which included interest computed at ` 177,11,01,965/- (Rupees One
Hundred Seventy-Seven Crores Eleven Lacs One Thousand Nine
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Hundred Sixty-Five only).
29. Thereafter, DMG issued a show cause notice dated
26.09.2024, inter alia, alleging that ACC had continued to unlawfully
carry out mining activities for more than eighteen months between
19.02.2023 and 14.08.2024 without obtaining a valid mining lease
deed, and that the same would attract the provisions of Section
21(5) of the MMDR Act. ACC responded to the said show cause
notice by its letter dated 10.10.2024. ACC relied on Section 8A(5) of
the MMDR Act to contend that the mining lease had been statutorily
extended. It further stated that it had all statutory clearances,
including environmental clearance and an approved mining plan, for
carrying out mining activities, and therefore, the allegation that it had
raised minerals without authority of law was erroneous.
30. Notwithstanding the said reply, DMG issued a further show
cause notice dated 15.10.2024 calling upon ACC to show cause as
to why action under Sub-sections (1) and (5) of Section 21 of the
MMDR Act should not be initiated against it. ACC submitted a
further reply dated 15.10.2024, inter alia , seeking a personal
hearing.
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31. As noted above, ACC filed the present Petition, W.P.
No.25298/2024, inter alia, praying for access to the ILMS portal and
seeking a declaration that executing the Supplementary Lease
Deed is not necessary to extend the term of the lease. After ACC
filed the aforesaid petition, the State constituted a Committee by a
Government Order dated 18.10.2024, referred to as a High Level
Committee [hereafter “ HLC ”], to scrutinise the following aspects and
submit a report:
“1. The records and information pertaining to
Limestone Production in the mining lease area.
2. Quantity of clinker produced by mining lease
holder.
3. Quantity of limestone produced by the mining
lease holder according to clinker and limestone
ratio (1:1.42) as per the proceedings
dated:10.05.2022.
4. The ratio of clinker and limestone is fixed at
1:1.42 and whether this ratio includes shale
mineral.
5. Weighing machine has been installed after 2009,
to undertake comparative check of limestone
quantity obtained through weighing machine and
quantity of limestone produced as per clinker ratio
and opinion on the adoption of clinker ratio after
2009.
6. Procedure followed in respect of the demand
notice issued on: 10.04.2024 and 02.09.2024.
7. In case of mining lease holder has produced
limestone as per the above clinker ratio, the
methodology for collecting Royalty in respect of
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difference quantity of limestone.
8. The procedure of reconciliation at this stage in
respect of permits obtained each year and the
amounts paid for the permits, to calculate the
outstanding amount in accordance with the rules.”
32. Considering the above, this Court passed an interim order
dated 29.10.2024 in WP No.25298/2024, inter alia, directing ACC to
deposit a sum of ` 125,00,00,000/- (Rupees One Hundred Twenty-
Five Crores Only) towards total demand of ` 257,60,00,000/-
(Rupees Two Hundred Fifty-Seven Crores and Sixty Lacs only) and
further directed that subject to ACC making the said payment, it was
permitted to undertake the mining operations.
33. It is material to note that the State filed its Statement of
Objections, inter alia, challenging the maintainability of WP
No.25298/2024 on the ground that ACC had preferred a Revision
Application under Section 30 of the MMDR Act. As noted at the
outset, one of the principal contentions advanced by the State was
that carrying on mining operations without the Supplementary Lease
Deed is unlawful.
34. On 21.03.2025, the HLC submitted its Report calculating the
`
arrears of Royalty and interest at 492,51,43,385/- (Rupees Four
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Hundred Ninety-Two Crores Fifty-One Lacs Forty-Three Thousand
Three Hundred and Eighty-Five only) for the period from 1995-96 to
2022-23. Thereafter, on 22.04.2025, the Director, DMG passed a
revised Royalty assessment order calling upon ACC to pay a
`
revised sum of 367,51,43,385/- (Rupees Three Hundred Sixty-
Seven Crores Fifty-One Lacs Forty-Three Thousand Three Hundred
and Eighty-Five only) after adjusting the initial amount of
`
125,00,00,000/- (Rupees One Hundred Twenty-Five Crores Only)
which was already deposited by ACC in terms of the order dated
29.10.2024. The said notice also recorded that the earlier demand
notices dated 10.04.2024 and 02.09.2024 stood withdrawn.
35. ACC filed an Application dated 19.05.2025 for amending the
Revision Petition pending before the Revisional Authority. While the
said Revision Petition was pending, DMG issued the impugned
demand notice dated 05.06.2025 imposing penalty of
` 482,69,65,137/- (Rupees Four Hundred Eighty-Two Crores, Sixty-
Nine Lacs Sixty-Five Thousand One Hundred and Thirty-Seven
only) under Section 21(5) of the MMDR Act on the ground that ACC
had extracted and consumed the limestone without a mining lease
for the period 19.02.2023 to 14.08.2024.
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36. Aggrieved by the said demand, ACC filed a writ petition, being
WP No.18655/2025, impugning the said demand.
37. The Revisional Authority heard the Revision Petition on
08.08.2025. On the said date, the State sought for and was granted
a further period of two weeks to file its para-wise comments.
However, the State did not file the same within the said period and
sent an e-mail dated 25.08.2025 requesting a further period of one
week for submitting its Statement of Objections. Thereafter, the
State sent its Statement of Objections on 02.09.2025, which was
delivered by post on 08.09.2025.
38. The Revisional Authority passed the order dated 09.09.2025,
inter alia, holding that it was not reasonable to reject the actual
weighment data and consider notional consumption data in the
absence of any basis for rejecting the record maintained by ACC.
The Revisional Authority also noted that ACC’s data matched with
the data of DMG for most of the period in dispute. Thus, the data
did not demonstrate any substantial variation from the measured
quantity, and there is no satisfactory reason for rejecting the said
data and placing reliance on a consumption factor. The Revisional
Authority, in the absence of any evidentiary documents indicating
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disputes regarding weighment data, held that application of a
notional factor for assessment of the limestone quantity was not
justified and remanded the matter to the State Government to take
suitable measures as pointed out above. As noted above, the State
has preferred the writ petition, being WP No.36850/2025,
challenging the said order.
SUBMISSIONS
39. Mr. K.N. Phaneendra, learned Senior Counsel appearing for
ACC, contended that the execution of the Supplementary Lease
Deed is neither contemplated nor mandated under the MMDR Act or
the Rules made thereunder. He further contended that there was a
difference between extension of the lease and its renewal. He
referred to the decisions of the Supreme Court in Provash Chandra
2
Dalui & Anr. v Biswanath Banerjee & Anr. ; State of UP v. Lalji
3
Tandon ; and State of Gujarat & Ors. v Nirmalaben S. Mehta &
4
Anr . in support of the said contentions.
40. Next, he submitted that even under the regime leading to the
enactment of the MMDR Act, the execution of a Supplementary
2
1989 (Supp) 1 SCC 487
3
(2004) 1 SCC 1
4
(2016) 9 SCC 240
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Lease Deed was not contemplated. He pointed out that under the
then-existing Rule 24-A(6) of the Mineral Concession Rules, 1960, if
an application for renewal of a mining lease was filed within the
stipulated period and no order was passed by the State Government
before the expiry of the lease term, the lease would be deemed to
have been extended for a further period of one year or until the
receipt of the orders of the State Government, whichever was
earlier. Subsequently, the said Rule was amended in 1994, and the
lease was deemed to have been extended until further orders.
41. He also referred to the decisions of this Court in National
5
Mineral Development Corporation Ltd. v. State of Karnataka
6
and Suggulammagudda Mining Co. v State of Karnataka and on
the strength of the said decisions contended that no orders were
required from the State Government to carry on the mining activities
and the term of the lease was deemed to have been extended.
42. In regard to the use of a notional conversion factor, he
contended that Section 9 of the MMDR Act stipulated payment of
Royalty on minerals removed or consumed at the rate specified in
the Second Schedule. He submitted that Royalty was payable on a
5
ILR 1997 KAR 2528
6
ILR 1992 KAR 2761
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tonnage basis and that the State Government could not adopt a
notional conversion factor without establishing that actual
weighment of the minerals consumed or dispatched was erroneous
and not feasible. He referred to the decisions in the case of Chief
7
Information Commissioner Anr. vs State of Manipur & Anr . and
Municipal Corporation of Greater Mumbai (MCGM) v. Abhilash
8
Lal in support of the said contention.
43. The learned AAG, advanced submissions on behalf of State
and DMG, on essentially three fronts. First, he contended that the
Supplementary Lease Deed was necessary for carrying on mining
operations. He submitted that no right in any immovable property
would arise without a registered lease and, therefore, execution of
the Supplementary Lease Deed is essential. Second, he contended
that the Government Order dated 25.08.2022 extending the term of
the said mining lease was subject to compliance with certain
conditions, which were not complied with. He submitted that it was
subject to payment of arrears to the Government. He submitted that
since ACC had not cleared the arrears, there was no deemed
extension of the mining lease, bearing ML No.2641. He contended
7
(2011) 15 SCC 1
8
(2020) 13 SCC 234
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that the mining plan was also approved, subject to the execution of
the Supplementary Lease Deed. Third, he submitted that, pursuant
to the Government Order dated 25.08.2022, ACC was called upon
to submit all clearances, but the same were not submitted before
the expiry of the lease term. Thus, in the absence of submission of
any requisite clearances, the benefit of deemed extension was not
available to ACC.
44. The learned AAG pressed the challenge to the order dated
09.09.2025 passed by the Revisional Authority on two fronts. First,
he submitted that the said order is vitiated as it was passed without
following the principles of natural justice. Second, he contested the
decision on merits regarding the adoption of the notional factor. He
submitted that as early as in 1995-96, the State had raised doubts
as to the accuracy of the data regarding the consumption of
limestone. He submitted that the beltometer had not been installed
until 21.10.2009 and, therefore, there was no authentic data on
limestone consumption. He submitted that the weighbridge was
installed earlier, but there were doubts as to the accuracy of the said
data.
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45. He also handed over a statement showing the actual
conversion factor of various cement industries in Kalaburagi district
and submitted that it ranged from 1:1.38 to 1:1.43. He referred to
the HLC Report and submitted that HLC had found that the notional
factor of 1:1.42 was justified. He contended that the Revisional
Authority had ignored the HLC Report and, therefore, the said order
was not sustainable.
46. He also referred to the decision of the Madhya Pradesh High
9
Court in ACC Ltd. v. State of M.P. & Ors. and on the strength of
the said decision contended that use of conversion formula has
been upheld by the Madhya Pradesh High Court in ACC’s case
relating to a mine in the State of Madhya Pradesh. Therefore, ACC
could not now raise any challenge to the use of the conversion
factor.
REASONS & CONCLUSION
47. As noted at the outset, the central dispute in the present
petitions revolves around (a) whether ACC could carry on mining
activities without execution of the Supplementary Lease Deed; and,
(b) whether the decision of the Revisional Authority holding that the
9
2018 SCC OnLine MP 1177
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application of the notional formula for computing Royalty is not
justified requires any interference in these proceedings.
A. Whether mining during the statutorily extended term,
without a Supplementary Lease Deed, attracts Section 21(5) of
the MMDR Act
48. The State has imposed the penalty under Section 21(5) of the
MMDR Act on the premise that the minerals extracted by ACC after
18.02.2023 were without authority of law. This, in turn, was
premised on the basis that ACC could not carry out any mining
activities after the mining lease’s renewed term expired on
18.02.2023, notwithstanding that it was deemed to have been
extended till 31.03.2030. Thus, the key question to be addressed is
whether ACC’s extraction of limestone after 18.02.2023 is without
authority of law.
49. Sub-section (1) and (5) of Section 21 of the MMDR Act are
set out below:
―
“21. Penalties. (1) Whoever contravenes the
provisions of sub-section (1) or sub-section (1A) of
section 4 shall be punishable with imprisonment for
a term which may extend to five years and with fine
which may extend to five lakh rupees per hectare of
the area.
*
(5) Whenever any person raises, without any lawful
authority, any mineral from any land, the State
Government may recover from such person the
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mineral so raised, or, where such mineral has
already been disposed of, the price thereof, and
may also recover from such person, rent, Royalty or
tax, as the case may be, for the period during which
the land was occupied by such person without any
lawful authority.”
50. As is apparent from the plain language of Section 21(5) of the
MMDR Act, it is attracted only if the minerals are raised without
authority of law.
51. In the present case, there is no dispute that ACC has a valid
lease. The contention that ACC extracted limestone without
authority of law rests on two fundamental assertions. First, that
execution of the Supplementary Lease Deed is necessary for ACC
to derive the authority to carry on mining operations. This assertion
is based on provisions of Section 105 of the Transfer of Property
Act, 1882 [hereafter “ TP Act ”]. As noted above, the learned AAG
also referred to the decision of the Supreme Court in Tarkeshwar
10
Sio Thakur Jiu v. Bar Dass Dey & Co. and Ors. in support of the
said contention. The second assertion is that the benefit of deemed
extension under Section 8A(5) of the MMDR Act is available only if
the lessee has complied with the conditions of the lease, which,
according to the State, ACC has failed to comply with.
10
(1979) 3 SCC 106
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Deemed extension under Section 8A(5) of the MMDR Act
52. It is relevant to refer to Section 8A(5) of the MMDR Act which
is reproduced below:
“ 8A. Period of grant of a mining lease for
minerals other than coal, lignite and atomic
―
minerals.
*
(5) Notwithstanding anything contained in sub-
sections (2), (3) and sub-section (4), the period of
lease granted before the date of commencement of
the Mines and Minerals (Development and
Regulation) Amendment Act, 2015 (10 of 2015),
where mineral is used for captive purpose, shall be
extended and be deemed to have been extended
up to a period ending on the 31st March, 2030 with
effect from the date of expiry of the period of
renewal last made or till the completion of renewal
period, if any, or a period of fifty years from the date
of grant of such lease, whichever is later, subject to
the condition that all the terms and conditions of the
lease have been complied with.”
53. In the present case, there is no dispute that the aforesaid
provision is applicable as the minerals extracted by ACC are used
for captive purpose. Thus, the lease is deemed to have been
extended till 31.03.2030.
54. It is important to refer to the reasons for introducing the
provisions for deemed extension. The object of inserting Section 8A
in the MMDR Act can be found in the Statement of Objects and
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Reasons appended to the Mines and Minerals (Development and
Regulation) Amendment Bill, 2015, which, inter alia , refers to the
hardship caused to the mining industry due to the renewals
remaining pending with the Government for a protracted period.
Paragraphs 5 and 6 thereof are set out below.
“5. In view of the urgent need to address these
problems, the Mines and Minerals (Development
and Regulation) Amendment Ordinance, 2015 was
promulgated on 12-1-2015. The present Bill is to
replace this Ordinance. This Bill is designed to put
in place mechanism for:
(i) Eliminating discretion;
(ii) Improving transparency in the allocation of
mineral resources;
(iii) Simplifying procedures;
(iv) Eliminating delay in administration, so as to
enable expeditious and optimum development of
the mineral resources of the country;
(v) Obtaining for the Government an enhanced
share of the value of the mineral resources of the
country; and
(vi) Attracting private investment and the latest
technology;
6. The salient features of the MMDR Amendment
Bill, 2015 are as follows:
(i) Removal of discretion; auction to be sole method
of allotment: The amendment seeks to bring in
utmost transparency by introducing auction
mechanism for the grant of mineral
concessions. The tenure of mineral leases has
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been increased from the existing 30 years to 50
years. There is no provision for renewal of leases.
(ii) Impetus to the mining sector: The mining
industry has been aggrieved due to the second and
subsequent renewals remaining pending. In fact,
this has led to closure of a large number of mines.
The Bill addresses this issue also. The Bill provides
that mining leases would be deemed to be
extended from the date of their last renewal to 31-3-
2030 (in the case of captive mines) and till 31-3-
2020 (for the merchant miners) or till the completion
of the renewal already granted, if any, or a period of
fifty years from the date of grant of such leave,
whichever is later.”
55. The aforesaid Objects and Reasons for the MMDR
Amendment Bill 2015 were noted by the Supreme Court in
11
Common Cause v. Union of India , and the Court observed as
under:
“ 29. From a perusal of the extract reproduced
above, it is apparent that the insertion of Section 8-
A into the MMDR Act was to address the hardship
faced by the leaseholders, besides other reasons,
due to the second and subsequent applications for
renewal remaining unattended at the hands of the
State Government. The instant amendment to the
MMDR Act introduced a uniform original grant
period of fifty years for all mining leaseholders. It
also excluded renewal(s) after the expiry of the
original lease period. Accordingly, no renewal
application can now be filed (after 12-1-2015).
Under sub-sections (5) and (6) of Section 8-A, in
our view such leaseholders who had moved
applications for renewal of captive/non-captive
mines would be entitled to continue up to 31-3-
2030/31-3-2020. The “Objects and Reasons” for the
11
(2016) 11 SCC 455
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amendment to the MMDR Act aim at remedying the
position which emerged upon the interpretation of
the provisions of the MMDR Act as they existed
hitherto before. The instant amendment was also
directed at remedying the grievances of the mining
industry due to “second and subsequent renewals”
remaining pending. And also, because the
provisions of law relating to renewals had been
found to be wanting. The above view is also
endorsed by the fact that Section 8-A(9) deals with
a situation wherein “… renewal has been
rejected…”. It is therefore apparent that sub-
sections (5) and (6) of Section 8-A of the amended
MMDR Act are aimed at situations wherein an
application for renewal (validly made) has remained
unattended. Therefore, for no fault of the
leaseholder he would be subjected to an arbitrary
prejudice. It needs to be clarified that since an
application for renewal cannot be filed after 12-1-
2015, an application for renewal as would be
treated as having been validly made, ought to have
been made before 12-1-2015. We are of the view
that out of the three contingencies contemplated
under Sections 8-A(5) and 8-A(6) referred to above
the first of the contingencies positively pertains to a
situation wherein applications validly made for
renewal were pending without any final decision at
the hands of the State Government. Because in the
absence of a renewal application, the leaseholder
can be taken to have already expressed his
disinterest to continue mining operations. Therefore
logically, the words “… with effect from the date of
expiry of the period of renewal last made…”, should
relate to an expired lease prior to 12-1-2015 in
relation to which a valid application for renewal had
already been made.”
56. It would frustrate the legislative intent of statutorily extending
the term of mining leases if the same is held to be contingent on
execution of the further deeds and conditions. Bearing the
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aforesaid in mind, the State Government's contention that the
mining must be held to be unlawful for want of a Supplementary
Lease Deed covering the period of deemed extension must be
rejected.
Re: Section 105 of the Transfer of Property Act, 1882
57. The question whether a Supplementary Lease Deed is
mandatory by virtue of Section 105 of the TP Act is necessary to be
considered in the context of the term of the lease being statutorily
extended.
58. Section 105 of the TP Act is reproduced below:
“ 105. Lease defined.— A lease of immoveable
property is a transfer of a right to enjoy such
property, made for a certain time, express or
implied, or in perpetuity, in consideration of a price
paid or promised, or of money, a share of crops,
service or any other thing of value, to be rendered
periodically or on specified occasions to the
transferor by the transferee, who accepts the
transfer on such terms.
Lessor, lessee, premium and rent defined.—The
transferor is called the lessor, the transferee is
called the lessee, the price is called the premium,
and the money, share, service or other thing to be
so rendered is called the rent.”
59. As held by the Supreme Court in Tarkeshwar Sio Thakur Jiu
v. Bar Dass Dey & Co. and Ors. (supra), the right to carry on
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mining operations in a land to extract specified minerals and to
remove the same is a right to enjoy an immovable property and falls
within the sweep of Section 105 of the TP Act. However, in the
present case, there is no dispute that ACC has a mining lease which
is duly registered. The only issue relates to the term of the said
lease. By virtue of Section 8A(5) of the MMDR Act, the term of the
mining lease in question has been extended till 31.03.2030. Thus,
by virtue of the statute, ACC held the mining lease and the right to
extract minerals – of course subject to possessing all other
clearances – till the expiry of the term of the lease as statutorily
extended. In this view, the minerals extracted by ACC cannot be
construed as minerals extracted without authority of law solely on
the reason that a Supplementary Lease Deed recording the
extension of term (which was extended by operation of statute), was
not executed.
60. In Provash Chandra Dalui and another v. Biswanath
12
Banerjee and another , the Supreme Court explained the
distinction between the words ‘extension’ and ‘renewal’. The
following passage from the said decision is instructive:
12
1989 Supp (1) SCC 487
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“14. It is pertinent to note that the word used is
“extension” and not “renewal”. To extend means to
enlarge, expand, lengthen, prolong to carry out
further than its original limit. Extension, according
to Black's Law Dictionary , means enlargement of
the main body; addition of something smaller than
that to which it is attached; to lengthen or prolong.
Thus extension ordinarily implies the continued
existence of something to be extended. The
distinction between “extension” and “renewal” is
chiefly that in the case of renewal, a new lease is
required, while in the case of extension the same
lease continues in force during additional period by
the performance of the stipulated act. In other
words, the word “extension” when used in its proper
and usual sense in connection with a lease means
a prolongation of the lease. Construction of this
stipulation in the lease in the above manner will
also be consistent when the lease is taken as a
whole. The purposes of the lease were not
expected to last for only 10 years and as Mr A.K.
Sen rightly pointed out the schedule specifically
mentioned the lease as “for a stipulated period of
20 years”. As these words are very clear, there is
very little for the court to do about it.”
61. In the event of an extension, the same lease would continue
in force. As noted above, a mining lease has been executed in
favour of ACC. Its term has been extended by virtue of the MMDR
Act. Although the execution of a Supplementary Lease Deed may
be relevant for good order, failing to do so does not deprive ACC of
the right to carry on mining during the period of the lease as
statutorily extended by virtue of Section 8A(5) of the MMDR Act.
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62. In State of U.P. v. Lalji Tandon ( Supra ), the Supreme Court
observed that in case of an extension, it is not necessary to have a
fresh deed or lease executed. We consider it apposite to refer to the
following observations of the Supreme Court in the said decision.
“13. In India, a lease may be in perpetuity. Neither
the Transfer of Property Act nor the general law
abhors a lease in perpetuity. ( Mulla on the
th
Transfer of Property Act , 9 Edn., 1999, p. 1011.)
Where a covenant for renewal exists, its exercise
is, of course, a unilateral act of the lessee, and the
consent of the lessor is unnecessary.
( Baker v. Merckel [(1960) 1 All ER 668 : (1960) 1
QB 657 : (1960) 2 WLR 492 (CA)] , also
Mulla, ibid ., p. 1204.) Where the principal lease
executed between the parties containing a
covenant for renewal, is renewed in accordance
with the said covenant, whether the renewed lease
shall also contain similar clause for renewal
depends on the facts and circumstances of each
case, regard being had to the intention of the
parties as displayed in the original covenant for
renewal and the surrounding circumstances. There
is a difference between an extension of lease in
accordance with the covenant in that regard
contained in the principal lease and renewal of
lease , again in accordance with the covenant for
renewal contained in the original lease. In the case
of extension it is not necessary to have a fresh
deed of lease executed, as the extension of lease
for the term agreed upon shall be a necessary
consequence of the clause for extension.
However, option for renewal consistently with the
covenant for renewal has to be exercised
consistently with the terms thereof and, if
exercised, a fresh deed of lease shall have to be
executed between the parties. Failing the
execution of a fresh deed of lease, another lease
for a fixed term shall not come into existence
though the principal lease in spite of the expiry of
the term thereof may continue by holding over for
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year by year or month by month, as the case may
be.”
63. The aforesaid principle was reiterated by the Supreme Court
13
in the State of Gujarat & Ors v. Nirmalaben S. Mehta & Anr, in
the context of the question whether the right to carry on mining
activities is rendered unlawful for want of a Supplementary Lease
Deed. It is also apposite to refer to the decision of the Supreme
Court in Gujarat Pottery Works Pvt. Ltd. v. B.P. Sood, Controller
14
of Mining Leases for India . In that case, the lessors had entered
into an agreement for executing a perpetual lease on 02.12.1939,
but the lease was not executed. In the said context, the court
observed as under:
“ 7. The granting of a lease is different from the
formal execution of the lease deed. The Mineral
Concession Rules, 1949, made under Section 5 of
the 1948 Act and hereinafter referred to as “the
1949 Rules”, deal with the procedure for the grant
of mining leases in respect of land in which the
minerals belong to the Government, under Chapter
IV. Rule 27 deals with applications for mining
leases. Rule 28-A provides that when a mining
lease is granted the formal lease shall be executed
within six months of the order sanctioning the lease
and if no such lease is executed within the
aforesaid period, the order sanctioning the lease
shall be deemed to have been revoked. It is really
the sanctioning of the lease which amounts to the
granting of the lease. Execution of the formal lease
13
(2016) 9 SCC 240
14
1966 SCC OnLine SC 126
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is only compliance with the legal requirements to
make the grant legally enforceable.”
Re: Rule 24A of the Mineral Concession Rules, 1960
64. Although the decision in Gujarat Pottery Works Pvt. Ltd.
( supra ) was rendered in a different context, it does set out the
principle that certain rights in respect of mining vest in the grantee of
a lease even if no formal deed has been executed. There is yet
another instance where the statute recognises that the mining would
be lawful although a formal deed has not been executed. Sub-rule
(6) of Rule 24A of the Mineral Concession Rules, 1960, as in force
(prior to the substitution on 08.10.2014), expressly provided that if
an application for renewal of mining lease was made within the
period as stipulated and it was not disposed of by the State
Government before the expiry of the lease, the period of the lease
would be deemed to have been extended for a further period of 2
years or till the State Government passes an order, whichever is
earlier. Rule 24A was subsequently substituted with effect from
08.10.2014 and Sub-rule (2) of Rule 24A was inserted with effect
from 29.05.2020. Rule 24A of the said Rules, as it stood prior to its
repeal, reads as under:
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24A. Renewal of mining lease
(1) An application for the renewal of a mining lease
shall be made to the State Government in Form J,
at least twenty four months before the date on
which the lease is due to expire, through such
officer or authority as the State Government may
specify in this behalf:
PROVIDED that in cases where the mining lease is
th
due to expire on or before the 7 January, 2017,
the application for renewal shall be made at least
twelve months before the date on which the lease is
due to expire.
(2) If an application for renewal of a mining lease
made within the time referred to in sub-rule (1) is
not disposed of by the State Government before the
date of expiry of the lease, the period of that lease
shall be deemed to have been extended by a
period of two years or till the State Government
passes order thereon, whichever is earlier.
65. Rule 24A of the Mineral Concession Rules, 1960, thus,
extended the term of mining lease by operation of the statute
pending disposal of renewal application. The mining activities
carried on by a lessee during the period after expiry of the term of
the lease and prior to the State Government passing an order
cannot be considered unlawful. During this period, no formal lease
deed to cover the extended term exists.
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Penalty under Section 21(5) for want of a Supplementary Lease
Deed is unsustainable
66. The demand dated 05.06.2025 (the impugned demand
notice), which is impugned in W.P. No.18655/2025 is premised
solely on the basis that the mining lease had expired and the mining
activities had been carried out without a valid Supplementary Lease
Deed. A show cause notice dated 26.09.2024 was issued, which
was followed by another notice dated 15.10.2024. The said notices
expressly stated that the mining lease had expired on 18.02.2023
and that the State had not executed the Supplementary Lease Deed
as ACC had not cleared the arrears. It alleged that ACC had
continued its mining activities beyond 18.02.2023 unlawfully. It is on
this basis that the penalty under Section 21(5) of the MMDR Act
was proposed to be levied. ACC responded to the said notice,
maintaining that it had a valid mining lease and that proceedings
under Section 21 of the MMDR Act were unwarranted. The State
rejected the contentions advanced by ACC and raised the impugned
demand. A plain reading of the impugned demand notice also
indicates that it is based on the assertion that continuing mining
activities beyond the term of the renewed mining lease is unlawful
because a Supplementary Lease Deed had not been executed. It
also proceeds on the basis that the extension of the mining lease
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was subject to the execution of a Supplementary Lease Deed. As
noted above, in the given facts, the mining activity would not be
rendered unlawful for want of execution of the Supplementary Lease
Deed.
Re: Statutory clearances
67. It was also contended at a later stage in the proceedings that
ACC had not furnished the requisite clearances. However, it is not
disputed that all the requisite clearances existed for carrying on
mining activities. Thus, on this ground as well, the mining activities
carried on by ACC cannot be considered as unlawful.
Conditions of the Government Order dated 25.08.2022
68. We may also note that the State had extended the mining
lease under the Government Order dated 25.08.2022. The learned
AAG referred to the conditions set out in the said order to canvass
that the same has not been complied with and, therefore, the lease
would not be deemed to be extended. In our view, the extension of
the lease is by virtue of Section 8A(5) of the MMDR Act and is not
contingent on any conditions that the State Government may
impose. The statutory right cannot be frustrated by imposing
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conditions that may otherwise be unsustainable. The Supreme
15
Court in Common Cause v. Union of India observed as under:
“31. … the benefit of extension of the lease period
postulated under Section 8-A of the MMDR Act is
available, subject to a further overriding condition,
namely, “… that all the terms and conditions of the
lease have been complied with”…”
69. Having stated above, we may now examine the conditions as
set out in the Government Order dated 25.08.2022. The said
Government Order (Annexure C to WP.No.18655/2025) is set out
below:
“Government Order NO. CI 06 CMC
2021,Bengaluru, dated:--25-08-2022
In the light of the facts and circumstances
mentioned in preamble and as per the provision of
Section 8A (5) of MMDR Act, 2015 and 8A (2) of
KMMC (Amendment) Rules, 2021, ML. No. 2641
for Limestone, Shale and Clay over an extent of
На
471.03 . in Ingalagi & Ravoor village of Chittapur
Taluk. Kalaburagi District granted in favour of M/s
Associated Cement Corporation Ltd extended upto
31-03-2030 for the period of 50 years from the date
of original grant with the following conditions:-
1. The Director, Department of Mines and Geology
is directed to execute a supplementary lease deed
subject to submission of necessary statutory
clearances & N.A., all arrears payable to
Government and all the terms and conditions of the
lease.
2. The deemed extension shall not absolve the
lessee or any other person claiming through the
15
(2016) 11 SCC 455
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original concessionaire from payment of any dues,
Royalty, dead rent, surface rent, fine, compounding
charges, Environment Protection Fee, Energy dues
etc., which are due to the State Government from
such lessee or any person claiming through him or
the erstwhile concessionaire/lessee for their acts or
omissions prior to this letter.
3. The deemed extension shall not absolve the
lessee from any action under MMDR Act and Rules
framed there under for the acts done prior to this
letter.
4. No mining operations shall be undertaken in the
lease hold area unless all statutory clearances such
as Forest Clearance under Forest (Conservation)
Act, 1980, Environmental Clearance under
Environmental (Protection) Act, 1986, KSPCB
Consents, Permissions etc.. Under various
Legislations, Acts, Rules, Regulations, Notifications
as amended from time to time to the satisfaction of
concerned authorities under such Acts, Rules etc.,
are in place.
5. The lessee shall abide by the conditions laid in
the Act and Rules and in this letter and the
conditions stipulated in the original lease deed also.
6. The lessee shall comply with the provisions of
the Stamp Duty and Registration Fee as applicable
under the Karnataka Stamp Act, 1957, and as
amended from time to time to the satisfaction of the
concerned authority under the Act.
7. This deemed extension is subject to any
independent proceedings under MMDR Act,
including proceedings for violation of any provisions
of the Rules made there under.
70. There is no dispute that the first condition – that is submission
of the necessary statutory clearances – is complied with. ACC, on
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its part has submitted the statutory clearances and has stated that
the arrears payable to the Government are the subject matter of
dispute, which, as it stands, is covered by the decision of the
Revisional Authority. The second condition clarifies that the
extension would not absolve ACC from payment of any dues,
Royalty, dead rent, surface rent, fine, compounding charges,
environmental protection fee, energy dues etc. There is no cavil with
this condition as well. Undisputedly, notwithstanding that the lease
is deemed to be extended, ACC would be liable to pay all dues in
accordance with law.
71. There is no dispute as to the other conditions as well. ACC
does not dispute that it would be liable to comply with all laws and
the extension does not absolve it of any liability in the event it has
violated any statutory provision.
72. It is important to note condition No.4. This restrained ACC
from undertaking any mining operations in the leasehold area
unless statutory clearances such as Forest Clearance under the
Forest (Conservation) Act, 1980, Environmental Clearances,
consents of the Karnataka State Pollution Control Board under the
various legislations are obtained. There is no dispute as to this
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condition as well. As the Supreme Court explained in Common
Cause ( supra ), compliance with all laws is a fundamental condition
for carrying on mining activities. Condition No.4 assumes
significance as the Government order expressly provides that no
mining activities would be carried on if requisite clearances were not
obtained. None of the other clauses prohibit mining activities unless
the same are complied with. Thus, it stands to reason that wherever
the Government intended that no mining activity be carried on
unless a condition was complied with, it expressly so provided.
Re: IBM’s approval of the mining plan
73. The contention that the mining activities were unlawful
because the mining plan approved by IBM was also subject to
execution of the Supplementary Lease Deed is equally unmerited.
Mr. Arvind Kamath, learned Additional Solicitor General of India
appearing for the Union of India, submitted that the dispute
regarding Royalty is a matter between ACC and the State
Government, and that IBM's approval of the mining plan could not
be construed as contingent upon resolution of that dispute.
74. He referred to a letter dated 21.10.2024 sent by IBM inter alia
stating as under:
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“03. The issue of the statutory payments like
Royalty, DMF & NMET etc., for the Limestone
consumed / being consumed / proposed to be
consumed and execution of the Supplementary
Mining Lease Deed are the subject matter of the
State Government of Karnataka over which IBM
has no jurisdiction & is subjudice. Further, this
matter has already been brought to the notice of
The Director, Department of Mines & Geology,
Government of Karnataka."
The Central Government’s view of Section 8A(5)
75. Mr. Kamath, the learned ASG supported ACC's contention
that the right to carry on mining during the extended period of the
lease was not contingent upon execution of a Supplementary Lease
Deed. He referred to a letter dated 05.02.2015 addressed by the
Ministry of Mines, Government of India to the Principal Secretaries
of the Mines Departments of all State Governments/UTs, inter alia ,
stating as under:
“While all this is underway, it is requested that
necessary action may kindly be taken to implement
the provisions of the Ordinance that can be
implemented right away. More importantly,
immediate action may be taken to implement the
transition provisions of the Ordinance - sub-sections
(5) & (6) of Section 8A which relate to extension of
st
the lease period upto 31 March, 2030 for captive
st
mines and upto 31 March, 2020 for non-captive
mines and to issue the necessary orders amending
the respective mining leases at the earliest, and, at
th
any rate, latest by 28 February, 2015. A draft of a
model letter that could be used by State
Governments in this connection is enclosed. You
may consider adopting the same, if suitable to your
requirements.”
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76. He also referred to the model letter annexed with the
aforementioned letter, which is set out below:
“Draft letter from State Government to the lessee
To: (Lessee)
Subject: Extension of lease period in
terms of Section 8A introduced
by the MMDR (Amendment)
Ordinance, 2015.
Reference: Lease No.
This is to inform you that Section 8A that has
been recently introduced by the MMDR
(Amendment) Ordinance, 2015, incorporating
special provisions relating to the tenure of existing
leases.
As per the lease granted to you vide the
above mentioned lease deed, the same was valid
until (date).
In terms of the provision of Section
8A(5)/8A(6) (strike out what is not applicable) the
period of your above mentioned lease now stands
extended upto (date).
The relevant lease deed will stand modified
accordingly.”
77. It is clear from the above that the Central Government has
also understood that executing a Supplementary Lease Deed would
not be an essential condition for carrying on lawful mining activity
during the extended lease period.
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ACC’ s willingness to execute the Supplementary Lease Deed
78. We may also clarify at this stage that there is, in fact, no
dispute between the parties regarding execution of the
Supplementary Lease Deed, as noted hereinbefore. ACC has no
reservation in executing the Supplementary Lease Deed or in
paying the requisite stamp duty.
79. The Director, DMG, or the concerned authority, is required to
execute the Supplementary Lease Deed. However, the raising of
minerals pending its execution cannot be held to be unlawful so as
to attract penalty under Section 21 of the MMDR Act.
80. In view of the above, the decision of the Deputy Director,
DMG to block ACC’s access to the ILMS is unsustainable.
Denial of benefit of Section 8A(5) of the MMDR Act – whether
justified
81. The learned AAG referred to Section 8A of the MMDR Act
and submitted that the extension of the lease would be subject to
the condition that all terms and conditions of the lease are complied
with. He submitted that since ACC had not paid Royalty and had
not submitted the statutory clearances, the terms of the mining
lease in question (ML No.2641) had not been complied with;
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therefore, the benefit of deemed extension of the lease under
Section 8A(5) is inapplicable.
82. We find little merit in this contention given the facts in the
present case. As noted above, the principal dispute between the
parties relates to the payment of Royalty. The lease deed did not
provide that the Royalty would be paid under a notional formula.
However, ACC was bound to comply with the lease condition
requiring payment of Royalty.
83. There is no dispute that the Royalty is the compensation to be
paid for rights and privileges enjoyed by the grantee. In Mineral
16
Area Development Authority v. Steel Authority of India , the
Supreme Court examined the nature of Royalty, and it is apposite to
refer to the following extract of the said decision:
“99. At the outset we clarify that in this reference,
we are dealing with "Royalty" in the context of the
MMDR Act. Royalty is generally understood as
compensation paid for rights and privileges enjoyed
by the grantee. It has its genesis in the agreement
entered into between the grantor and grantee. In
Inderjeet Singh Sial v. Karam Chand Thapar
[(1995)6 SCC 166], this Court observed that
Royalty is equivalent to the expression "jura
regalia" or "jura regia". Jura regalia is defined as
royal prerogatives or rights. For centuries, gold and
silver mines (also called as royal metals) in the
United Kingdom were treated as belonging to the
16
(2024) 10 SCC 1
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Crown. Royal metals could be mined only after
payments in the form of royalties were made to the
Crown. The use of the word "Royalty" underwent
change in the United Kingdom with the
decentralisation of the sovereignty which was
absorbed by the landowners. Land ownership was
concentrated in the hands of landowners, who
conceded the right to work mines to lessees in
return for consideration which took the form of dead
rent and royalties.
101. Minerals are exhaustible and finite resources.
Each quantity of mineral removed leads to the
depletion of the mineral stock of the mine. Under a
mining lease, a lessee acquires a right or interest in
minerals. This right or interest allows the lessee to
extract minerals and consume them. Royalty is a
payment made by the lessee to the lessor or
proprietor of the minerals for the removal of
minerals. Royalty also serves to compensate the
lessor for the degradation of the value of the mine
because of the extraction of minerals.
*
103. The essential characteristics of Royalty are
that:
(i) it is a consideration or payment made to the
proprietor of minerals, either the government or a
private person;
(ii) it flows from a statutory agreement (a mining
lease) between the lessor and the lessee;
(iii) it represents a return for the grant of a privilege
(to the lessee) of removing or consuming the
minerals; and
(iv) it is generally determined on the basis of the
quantity of the minerals removed.”
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84. In this context, the pivotal question is whether ACC breached
the terms of the lease by not paying the Royalty on a notional basis
as demanded.
85. Under Section 9 of the MMDR Act, Royalty is payable in
respect of any mineral that is removed or consumed.
86. In the present case, there is no cavil that ACC has paid
Royalty as per its records of consumption. The dispute essentially
relates to the assessment of consumption for the purposes of
determining the Royalty. ACC prevailed in its Revision Application
filed under Section 30 of the MMDR Act, and the order dated
06.05.2019 passed by the Revisional Authority directed the State
Government to consider the demand in light of the decision taken at
the meeting held on 31.03.2012. The said decision required that
Royalty be assessed on the basis of actual weighment. The
disputed demands raised to date do not conform to the order dated
06.05.2019.
87. Further, by an order dated 09.09.2025 passed in RA
No.13/02/2024/RC-I, the Revisional Authority held that the demand
on a notional basis was unjustified. Thus, the demand for Royalty on
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the basis of which the State claims that lease terms are not
complied with is as of date unenforceable.
88. The question regarding payment of Royalty on a notional
basis has been the subject matter of contention between the parties.
The Royalty as claimed by the State has also swung in the range of
` 792.41 crores to ` 257.60 crores and thereafter to ` 492.51 crores.
The Revisional Authority has found that the fundamental basis of
demand of Royalty is not justified. Thus, in any view of the matter, it
cannot be disputed that there is a bona fide dispute between the
parties regarding the demand of Royalty. As far as ACC is
concerned, it has paid the Royalty on the basis of actual
measurement. In the given facts, the contention that ACC has not
complied with the terms of the lease has little merit.
89. We also cannot accept that, merely because there is a
dispute regarding the quantum of Royalty assessment, it
automatically leads to the conclusion that the terms of the lease
have not been complied with. It is also material to note that the
State did not cancel the lease.
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B. The State’s challenge to the impugned order - Royalty on
a notional basis
90. As noted above, the State Government challenged the
impugned order passed by the Revisional Authority on two grounds.
First, that it was passed in violation of the principles of natural
justice. Second, that it was erroneous on merits.
Re: Alleged violation of the principles of natural justice
91. There is no dispute that the Revisional Authority afforded the
State a full opportunity to be heard. The contention that the
impugned order violates the principles of natural justice is premised
on the basis that the Revisional Authority had not considered the
written response furnished by the State Government and had
proceeded to render a decision on merits.
92. The Revisional Authority heard the revision application filed
by ACC with due notice to the State Government. It is not disputed
that the hearings were held on 31.07.2024, 03.12.2024, 26.05.2025
and 08.08.2025.
93. The State Government was also represented before the
Revisional Authority.
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94. At the hearing held on 31.07.2024, the State was directed to
file its para-wise comments in response to the revision application.
The next hearing was held on 03.12.2024. However, the State
Government did not file its comments or submissions as directed.
95. On 03.12.2024, the State Government was again directed to
file its objections or submissions. But it did not do so. Subsequently,
at the hearing held on 26.05.2025, the State Government was
directed to file the written submissions within a period of fifteen (15)
days. The State Government did not comply with the said directions
and failed and neglected to furnish its written submissions despite
sufficient opportunity.
96. At the hearing held on 08.08.2025, the State Government was
again granted an opportunity to submit para-wise comments within a
period of two weeks, along with any material it sought to rely on.
97. Once again, the State Government failed to file its
submissions within the said period. It sought a further week's
extension on 25.08.2025 but did not file its submissions within that
period either. The State Government apparently dispatched its
submissions by post. The postal tracking indicates delivery at the
office of the Revisional Authority on 08.09.2025 at 16:58:49 hours.
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The impugned order was pronounced on 09.09.2025. It is obvious
that the impugned order would have been prepared much earlier,
and it is doubtful whether the submissions delivered at the dak
counter at the end of business hours could have reached the
Revisional Authority prior to the pronouncement of the impugned
order.
98. However, even assuming the written submissions were filed
on 08.09.2025, they were filed beyond the extended time, as they
were not filed within the time provided by the Revisional Authority.
Further, they were filed beyond the extended period as sought for
by the State Government.
99. The principles of natural justice require the concerned
authority to afford the parties sufficient opportunity. In this case, the
parties were afforded sufficient opportunity. The State Government
was heard and granted multiple opportunities to file its written
submissions, which it did not avail of. The State's failure to avail the
opportunity cannot furnish it a ground to contend that the impugned
order was rendered in violation of the principles of natural justice.
Accordingly, the said contention is rejected.
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Whether adoption of a notional conversion factor was justified
100. As observed earlier, the dispute regarding assessment of
Royalty on a notional basis has been a long-standing dispute
between the parties. The State seeks to assess Royalty payable
based on records of clinker production and by applying a ratio of
1:1.42 for consumption of limestone.
101. ACC contends that it is liable to pay Royalty on the ore
actually raised and consumed and not on a notional basis. It is not
disputed that the Royalty is to be paid on the basis of the mineral
consumed.
102. In the present case, the mine is a captive mine and the
mineral raised is for captive use in the cement plant; therefore,
Royalty is payable on the mineral actually consumed. The issue
only concerns the assessment of the quantity consumed.
103. The Revisional Authority found that there was no material on
record that indicated any irregularity in measurement. It also noted
that, during the year 2009, a beltometer was installed to weigh the
entire quantity of limestone transported from the mining lease to the
cement manufacturing plant and that its readings were regularly
furnished. The Revisional Authority reasoned that, in the absence of
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any dispute relating to the beltometer readings either by DMG or by
the Legal Metrology Department, the DMG could not resort to
assessing the consumption on a notional basis.
104. At this stage, it would be relevant to understand the
methodology adopted by the State before addressing the question
of whether the same would be warranted. The manufacturing of
cement entails different stages, which were noted by the HLC as
under:
“(a) Firstly, in the 'raw mix' stage different raw
materials like limestone, shale and other additives
like Iron ore slag, aluminous laterite/ bauxite, clay
etc., are mixed according to specific weight
percentage/ 'proportion' depending on their target
quality of clinker to be achieved. Here, each
individual component and the 'raw mix' as a whole
are subjected to chemical analysis to ascertain the
grade of CaO, SIO2, Loss on Ignition (LOI) etc.,
(b) This raw mix is homogenised through
crushing, grinding and blending and later fed into
kiln for heating using different variety of coal/ coke.
The kiln feed quantity will be measured and
samples drawn are analysed to know the values of
CaO, SIO2, LOI etc.,
(c) During the burning process, raw materials
react and fuse together to form clinker. Upon
cooling, the clinker quantity will be measured and
samples drawn are analysed to ascertain the
values of CaO, SIO2, LOI etc.,
(d) Finally, clinker is grounded with gypsum etc.,
to get cement.”
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105. As is apparent from the above, the quantity of limestone
required to produce a given quantity of clinker would vary, inter alia ,
on the basis of the chemical composition of the raw materials in a
given lot. Thus, the ratio of mineral consumed to clinker produced is
not constant; it varies considerably from mine to mine and batch to
batch. It must, therefore, be understood that the limestone
consumption factor fixed by the State is based on broad
assumptions. It represents average consumption, which is an
aggregate of averages. It is necessary to bear in mind that the
consumption ratio, by its very nature, is merely a device to estimate
consumption and it is not an absolute measure of the quantity of
limestone consumed.
106. It is also necessary to observe that, although there is no cavil
that, in real terms, the ratio of consumption would vary considerably,
the State Government has not fixed any tolerance limits within which
the consumption figures furnished by ACC ought to be accepted.
107. Bearing the aforesaid in mind, we may now examine whether
the decision of the Revisional Authority would warrant any
interference in these proceedings.
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108. As noted above, the controversy regarding the consumption
has a chequered history. The documents placed on record are
sketchy and not exhaustive. However, the learned Additional
Advocate General referred to a notice dated 20.08.1998 issued by
the Senior Geologist, DMG, Gulbarga, alleging that the use of shale
in the manufacturing of cement was not justifiable and that the
monthly returns were misleading and an attempt to evade the
Royalty. On 31.12.1998, another notice was issued to ACC,
referring to the earlier letters dated 18.08.1998 and 20.08.1998,
inter alia , stating that no shale mining activity had been observed
and, therefore, the quantity of shale shown as dispatched would be
treated as limestone for the purposes of Royalty.
109. Thereafter, an inspection of the mine was also conducted on
30.09.1999. The inspection report suggested that the material be
weighed regularly.
110. The learned Additional Advocate General also referred to a
notice dated 05.10.1999 which indicates that a revised ratio of
1:1.40 had been adopted to raise a demand of Royalty of
` 2,78,80,302/- for the period 1995-96 to 1998-99. On the strength of
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the said documents, he contends that the issue of limestone
consumption was raised as early as 1998-99.
111. Undoubtedly, the issue of assessing consumption on a
notional basis was raised as early as 1998-1999. However, there is
no dispute that ACC thereafter installed a beltometer to weigh the
limestone fed to the manufacturing unit, and there is no material on
record to establish that the weighing equipment was found faulty or
not in conformity with the prescribed standards.
112. The Revisional Authority had rightly held that there is no
material to indicate that any complaint had been raised to the Legal
Metrology Department regarding the functioning of the equipment.
There is also no dispute that daily weighment records have been
maintained. Whether consumption could be assessed on the basis
of norms must be examined in light of these facts.
113. The State Government considered the issue at a meeting held
on 31.03.2012, under the chairmanship of the Secretary to the
Government of Karnataka, Commerce and Industries Department.
The meeting was also attended by the Director, DMG, and the
Additional Director, DMG – the highest-ranking officials of DMG – as
well as representatives of the industries. It is important to note that
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during the course of the meeting the normative ratios as assessed
by DMG and NCCB, were discussed. A tabular statement setting
out the ratios as assessed by DMG in the year 2000, by NCCB in
2001, and by DMG in 2010, in respect to various cement
manufacturing units, as set out in the minutes to the meeting held
on 31.03.2012, is reproduced below:
“Details of the study report done by NCCB
on Clinkar Ratio during 2001, Department of
Mines and Geology during 2000, and report
during 2010 from the Department of Mines and
Geology are as follows:
DMG
2000
NCCB
Ratio
DMG
2010
1) M/s Vasavadatta
Cement
1:1.4 1:1.37 1:1.424
2) M/s Rajashree
Cement
1:1.4 1:1.35 1:1.396
3) M/s ACC 1:1.4 1:1.18 1:1.42
4) M/s Kanoria 1:1.46 1:1.41 -
114. During the said meeting, the company representatives
expressed that the ratio fixed by DMG was not tenable and
requested that the norms fixed by NCCB be considered. It is
material to note that the representative of ACC was absent from the
said meeting. After deliberations, it was decided that the Royalty
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should be calculated as per actual production and weighment of
limestone. The relevant extract is set out below:
“After considering all the issues as detailed
above and keeping in view of this issue pending
since 1995 on limestone consumption factor in
Cement manufacturing in the State, following
decision was taken so as not to cause any loss to
Government exchequer and also to mitigate the
grievances of the Cement Producing Companies in
the State.
i) Henceforth the Royalty should be calculated
as per actual production and weighment of
limestone.
ii) The Royalty for the previous years should
also be calculated as per actual weight as
stated above at(i).
iii) If found to be refundable by the government
should not be insisted by the companies
whereas if excess amount is to be credited
to the Government by the company should
be done so forthwith by the companies .
The representatives of the above Cement
Companies and officers present, appreciated the
above decision and as such, further action in
accordance with the above decision should be
initiated by the Director of Mines and Geology
Department.
Meeting was concluded with thanks from the
Chairman to officers present.”
[emphasis added]
115. Plainly, once the decision was taken at the meeting chaired
by the Secretary and attended by DMG officials, the controversy
ought to have been put to rest. However, notwithstanding the said
decision, the State continued to raise demands on a notional basis
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by applying the ratio 1:1.42. The State issued a demand notice
`
dated 24.11.2018 demanding an amount of 215,61,22,220/-.
The Revisional Order dated 06.05.2019
116. Aggrieved by the said demand notice, ACC filed a revision
application (Revision Application No.13(01)/2019/RC-I) before the
Revisional Authority under Section 30 of the MMDR Act in 2019.
The said revision petition was disposed of by an order dated
06.05.2019, whereby the matter was remanded to the State
Government to reconsider the demand in the light of the minutes of
the meeting dated 31.03.2012.
117. It is material to note that the revisional order records ACC's
contention that it had been decided at the meeting held on
31.03.2012 that the Royalty should be calculated as per actual
production and weighment of limestone; that Royalty for the
previous years should also be calculated as per actual weight; and
that if any amount was found refundable, the companies would not
insist on the same but if any excess amount payable to the
Government would be paid forthwith. On the basis of said decision,
ACC prayed that the demand of ` 215,61,22,220/- as raised in terms
of an order dated 24.11.2018 be set aside.
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118. It is also material to note that it was the State Government’s
stand before the Revisional Authority that it had no objections if the
matter was remanded to it for considering afresh “as per the
proceedings on 31.03.2012." In view of the said stand, the Revision
Application was disposed of directing the State Government to
reconsider the demand in light of the minutes dated 31.03.2012.
The said order dated 06.05.2019 is set out below:
“Order
[Under Section 30 of the Mines and Mineral
(Development and Regulation) Act, 1957 (MMDR
Act) and Rule 36 of the Minerals (other than
Atomic & Hydro Carbons Energy Minerals)
Concession Rules, 2016]
This Revision Application has been filed by
M/s ACC Ltd. (herein after called Revisionist)
against Order No. DMG/UNQ/ML-1853/2641/2018-
19/2255 dated 24.11.2018 passed by the State
Government of Karnataka (herein after referred to
as impugned order).
2. Through the impugned order, the State
Government directed the Revisionist to pay an
amount of Rs.215,61,22,220/- arrears with 24%
interest.
3. Final hearing of the Revision Application was
held on 25.03.2019. The Revisionist was
represented by Shri Alok Kumar, Ms Somya Yadav,
Ms Singdha Singh Advocates and Shri Ajay Saha,
Sr. G.M. Legal, Shri A. Gupta, Sr. G.M. Legal and
Shri K. S. Bhada, G.M. The State Government was
represented by Shri Shashi Kanth Reddy, Joint
Director and Shri D. Hanuamantharaya, FDA,
DMG, Bangalore.
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4.1 The Revisionist was granted a mining lease for
a period of 20 years w.e.f. 19.02.2003 over an area
of 471.03 hectare in Wadi Mines, for extracting
st
limestone for manufacturing cement. On 21
st
October, 2009 and 1 November 2010 approved
weighing machine known as belt weigher was
installed for passing the raw material on the
conveyor belt the reading of the belt weigher was
displayed on the digital screen setup for this
purpose. At the beginning and end of the shift
reading for production for a particular shift was
recorded. Thereafter amount to be paid was
computed in terms of Section 9 of the MMDR Act,
1957.
4.2 The amount of Royalty payable was thus
directly correlated with the actual exact quantity of
lease mineral. But the State Government through
the impugned order demanded differential Royalty
i.e. difference between the actual Royalty paid as
per the actual weighment and Royalty demanded
by assumed formula by the State Government.
4.3 On the request of the cement manufacturer in
Karnataka, a meeting was held between the State
Government authorities and cement manufacturers
and the error in computing Royalty on the assumed
formula of the State Government was discussed on
31.03.2012. It was agreed that:-
(a) Royalty should be calculated as per actual
production & weighment of limestone.
(b) Royalty for the previous years should be also be
calculated as per actual weight.
(c) If found to be refundable the companies should
not insist for the same whereas if excess amount is
to be credited to the Government by the company
should be done so forthwith by companies.
4.4 The State Govt. without adhering to the agreed
outcome of the meeting held on 31.03.2012
demanded differential amount of Royalty. The State
Government's calculation was malafide, illegal. The
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Revisionist requested that the impugned order
should be set-aside.
5. No counter reply was submitted by the State
Government. During final hearing, the counsels of
the Revisionist stated that in a similar nature of
case i.e. M/s Utra Tech Cement Ltd. vrs State
Government of Karnataka, the Revisionary
Authority in his final order No.371/2017 dated
14.12.2017 remanded the case for fresh
calculation. The Counsel also requested that
following the above the instant Revision Application
may also be remanded to the State Government for
fresh calculation in the light of the minutes signed
by the State Government on 31.03.2012. The State
Government representative submitted that the
demand notice was sent to the Revisionist based
on Audit report. However, they have no objection if
the matter would be remanded to the state
Government for re-considering the matter a-fresh
as per the proceeding on 31.03.2012.
6. In view of the above, the case is remanded to
the State Government to re-consider the
demand in the impugned order in light of
minutes dated 31.03.2012. The case is disposed
of accordingly.
7. The parties concerned be informed accordingly.”
[emphasis added]
119. The aforesaid revisional order dated 06.05.2019 is
unambiguous. In terms of the said order the State Government was
required to determine the Royalty in light of the minutes dated
31.03.2012, that is, on the basis of actual weighment records. The
said order was passed with the State’s consent and it is material to
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note that the State Government did not challenge the revisional
order dated 06.05.2019. The said order has attained finality.
The State could not disregard the Revisional Order dated
06.05.2019
120. However, it appears that the State sought to sidestep the said
order on the ground that the minutes dated 31.03.2012 were not
enforceable as they were not in the form of a Government Order.
121. The Director, DMG passed an order dated 10.05.2022
referring to a Government Order dated 21.08.2020 (GO No.CI 156
CMC 2018) passed in context of another entity, whereby it was
observed that the proceedings dated 31.03.2012 did not constitute a
decision of the government as it was not expressed as a
government order and therefore, the conclusion reached in the
proceedings dated 31.03.2012 need not be taken into account in the
proceedings of the Director of Mines and Geology “which were held
pursuant to the directions of the High Court in Writ Petition
No.38153/2009” . Referring to the aforesaid reasoning, the Director
DMG concluded that the minutes of the meeting dated 31.03.2012
need not be considered.
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122. We are unable to accept that the State Government could
disregard the order dated 06.05.2019 passed by the Revisional
Authority under Section 30 of the MMDR Act on the aforesaid
reasoning. The Revisional Order dated 06.05.2019 was passed with
the consent of the parties, and under the said order, the State
Government was required to decide whether to reconsider the
17
quantum of Royalty in light of the minutes dated 31.03.2012 .
123. The question whether the minutes of the meeting dated
31.03.2012 constitute a Government Order is not relevant. The
question is whether the State Government was bound by the
Revisional Authority's decision directing that the matter be
considered in light of the said minutes. Once the Revisional
Authority had so directed, it was no longer open for the State
Government to disregard the decision taken on 31.03.2012, as it
now formed part of the directions issued under Section 30 of the
MMDR Act.
124. The State Government, in complete disregard of the said
order, issued another demand notice dated 17.08.2019, which was
the subject of another revision petition filed by ACC. However, ACC
17
Final order No.27/2019
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withdrew the said petition as the State was reconsidering the matter.
However, pursuant to proceedings dated 10.05.2022, the Director,
DMG once again directed that the demand be computed by applying
the clinker-to-limestone ratio of 1:1.42 as determined by the DMG
committee in its report of 2010. Thus, the issue once again reverted
to the same stage as it was prior to 31.03.2012.
The demand notices dated 10.04.2024 and 02.09.2024
125. On 10.04.2024, the Deputy Director, DMG, issued a revised
demand of ` 792.41 crores, which ACC again challenged by filing a
revision petition under Section 30 of the MMDR Act. As noted
earlier, the said demand was subsequently reduced to ` 257.60
crores vide the demand notice dated 02.09.2024. ACC assailed the
demand dated 02.09.2024 by seeking an amendment of its Revision
Application and, in W.P. No. 25298 of 2024, sought a direction
restraining the State from taking any precipitative action pursuant to
it pending the revision.
126. During the proceedings, another committee, HLC, was
constituted. The HLC held that adopting the clinker-to-limestone
ratio instead of actual weighment was justified. This is the core of
the dispute between the parties.
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Absent a credible challenge to actual weighment, notional
assessment is not justified
127. As noted earlier, there is no fixed or constant ratio between
the limestone consumed and the clinker produced. It depends on
the chemical composition of the raw material used, which admittedly
varies widely. The tabular statement furnished by the State setting
out the ratios for the various cement manufacturers in Kalaburagi
District from 2013-14 up to October 2024 shows that the ratio of
consumption differs not only from cement manufacturer to cement
manufacturer, but also from year to year for the same manufacturer.
For example, for Chettinad Cement (ML No.2648), the State
Government reported that the limestone consumption ratio
fluctuated from 1.31 in 2020-2021 to 1.71 in 2021-2022.
128. Although there exists wide fluctuation in the ratios of
consumption, the State Government has not provided any tolerance
limits for testing the veracity of the actual consumption as reported.
The method of using the average consumption ratio has an inherent
shortcoming. Even if the said ratio is assumed to be accurately
computed, in the years in which actual consumption is lower than
the average, the industry would pay a higher Royalty than actually
payable, and in the years in which consumption is higher, it would
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pay less. Considering that interest is also payable on delayed
payment of Royalty, whether the industry or the State would benefit
depends on whether actual consumption was higher or lower in the
initial years.
129. Viewed in the aforesaid context, in the absence of any serious
challenge to the accuracy of the weighing equipment installed for
weighing the limestone fed to the plant, the adoption of a ratio to
determine consumption would be plainly unjustified. The Revisional
Authority examined this aspect and concluded that there was no
serious challenge to the accuracy of the weighment data; it noted
that ACC had installed a beltometer in 2009 and that neither the
DMG nor the Legal Metrology Department had raised any dispute in
relation to it after its installation.
130. The Revisional Authority had also taken note of the HLC's
report and had observed that “the revisionist's data is matching with
DMG data in most of the period under dispute”.
131. In this regard, we may also refer to Table-4 of the HLC’s
Report, which is reproduced below:
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“TABLE-4
Details of Limestone production as per Clinker
ratio and weighing machine
Sl.
No.
YEAR Clinker Limestone
Production
as reported
by ACC
Limestone
Production
as per
clinker ratio
1.42
Limestone
Production as
per
beltometer
132. The said table indicates that ACC had produced an aggregate
1 2011-12 46,02,210 58,58,544 65,35,138 56,97,625
2 2012-13 40,61,589 52,11,041 57,67,456 52,11,041
3 2013-14 41,04,305 50,53,025 58,28,113 50,51,991
4 2014-15 44,58,320 54,74,760 63,30,814 54,74,760
5 2015-16 47,05,907 58,32,078 66,82,388 58,32,078
6 2016-17 40,49,385 51,00,099 57,50,127 51,00,099
7 2017-18 46,08,596 56,80,730 65,44,206 56,80,730
8 2018-19 44,37,916 61,28,618 63,01,841 61,28,618
9 2019-20 44,39,947 59,32,933 63,04,725 59,32,933
10 2020-21 39,04,422 55,26,321 55,44,279 55,26,321
11 2021-22 42,81,772 63,44,642 60,80,116 63,44,642
12 2022-23 41,37,970 62,04,013 58,75,917 62,04,013
Total 5,17,92,339 6,83,46,804 7,35,45,120 6,81,84,851
5,17,92,339 metric tonnes of clinker during the period 2011-12 to
2022-23. It reported production of 6,83,46,804 metric tonnes of
limestone and a beltometer reading of 6,81,84,851 metric tonnes
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during this period. On this empirical data, the ratio of clinker to
18
limestone works out to 1:1.32 , as against 1:1.42 adopted by the
HLC.
133. It is once again clear that the reported consumption is not
outside the realm of probability. This is also supported by the data
furnished by the State Government in the note submitted during
these proceedings. The note indicates that the consumption ratio of
another cement industry in the same district was also found to be
1:1.31.
134. During the proceedings, the learned Additional Advocate
General also handed over a note containing a tabular statement for
the period of 28 years, which recorded the Royalty amount paid by
ACC on production of limestone during the years 1995-1996 to
2022-2023. The tabular statement also records the consumption
ratio based on actual consumption as furnished by ACC. The
tabular statement indicates that in 3 of 28 years, ACC reported a
consumption ratio higher than 1:1.42: in the year 2010-11, the
consumption ratio was 1:1.58; in 2021-22, the consumption ratio
was 1:1.49; and in the year 2022-23, the same was 1:1.50. In two of
18
6,83,46,804 /5,17,92,339 rounded off to two decimal points
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the years, that is in 1995-96 and 2020-21 the ratio was 1:1.40. In
the other years, the ratio was lower than the ratio as determined by
the DMG. In the remaining 21 years, the ratio based on actual
production was more than 1:1.18, as determined by NCCB, but
lower than 1:1.42. However, in two years, that is, during 2008-09
and 2013-14, the ratio was lower than that determined by NCCB.
135. In the broader perspective, it would be difficult to accept that
the consumption as reported was such that it could never be
regarded as feasible and, therefore, ought to have been rejected.
136. It is also material to note that NCCB, which is an expert body,
had determined the consumption ratio as 1:1.18 in the report which
has been furnished in June, 2003. The Executive Summary as set
out at the outset of the said report is reproduced below:
“EXECUTIVE SUMMARY
Limestone Consumption Factor can be
described as a ratio of mass of limestone
consumed for the manufacture of unit mass of
clinker for a specific grade of cement.
Limestone Consumption Factor has been
arrived by using the following methods based on
1/ Chemical analysis of raw materials, kiln feed,
clinker, coal etc.
2/ The raw material consumption and dust losses
3/ Mass balance studies
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For M/s ACC Wadi, (Kiln 4-New unit), which is at
present producing the necessary quality of clinker
(6700 TPD) for the manufacture of PPC.
Based on the data provided by the plant,
measurements carried out by NCB team at the
plant and the chemical analysis of the samples
carried out at NCB, the limestone consumption
factor was calculated using various methods as
follows”
a) On the basis of chemical analysis data provided
by the plant for the previous three months period,
the limestone consumption factor is 1.18. On the
basis of data on actual klin feed and coal
consumption provided by plant for the previous
three months period, the limestone consumption
factor is 1:1.18
b) Based on the samples and data collected by
NCB team during the period of visit to plant, the
limestone consumption factor has been
determined to be 1.19 and 1.18 respectively on the
basis of chemical analysis and on the basis of
actual kiln feed consumed.
The above values are on the basis of
limestone as mined from the sponsor's own captive
mines and on an average 80.29% limestone is
used in the preparation of raw mix.
Taking into account all the factors
contributing to limestone consumption factor and
on the basis of the plant data and measurements /
analysis carried out by NCB, the average
limestone consumption per tonne of clinker works
out to 1.18 for the plant. This factor can vary
(increase or decrease) from time to time
depending on the variation in quality of coal,
limestone and other raw materials and her
variation, in proportion of shale used.”
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137. Thus, the ratio of consumption was determined based on
measurements carried out by the NCCB team at the plant and the
chemical analysis of the samples. However, the HLC differed from
that report. According to the HLC, the shale mined by ACC is in fact
shaly limestone, and it disregarded the NCCB report on the ground
that the limestone production as reported did not tally with a ratio of
1: 1.18.
138. Although we have broadly examined whether the actual
production of limestone as reported could possibly be discarded as
not feasible, it was not necessary for this Court to examine the
same in any great detail, given the limited scope of examination in
these proceedings under Article 226 of the Constitution of India.
However, we have done so as it was contended on behalf of the
State that in the given facts determination of consumption on the
basis of a notional consumption factor rather than the actual
reported consumption is necessary.
139. The State has not established a compelling case that the
reported consumption pattern was impossible or that the
assessment of limestone consumption on a notional basis presents
a more accurate method of assessment of actual consumption.
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Thus, absent any finding that the weighment equipment was
inaccurate, assessment of Royalty on a notional basis would be
unjustified.
140. The learned Additional Advocate General had referred to the
decision of the Madhya Pradesh High Court in ACC v. State of MP
19
and Others and on the strength of the said decision contended
that a notional conversion factor for assessing consumption had
been accepted and therefore, the same could not be faulted. In our
view, the said decision could be of little assistance on the given
facts. In the said case, the petitioner was paying Royalty on the
basis of a conversion formula which was approved by the Court in
an earlier decision in MP No.1225/1993 ( Associated Cement
Companies Ltd. v. Union of India and others decided on
28.06.1993) and was accepted by the manufacturers. The Division
Bench had noted that studies had earlier been conducted by the
NCCB in respect of the petitioner's plant, which had disclosed a
consumption factor of 1:1.43 and that the said factor had been
accepted by the industry and all persons. The said decision turned
on its own facts.
19
2018(4) M.P.L.J. 529
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141. In an earlier round before the Madhya Pradesh High Court a
challenge was raised to a circular dated 11.08.1993 issued by the
Government of Madhya Pradesh, issued by the Mineral Resources
Department, Government of Madhya Pradesh. It would be relevant
to refer to the said circular, which is set out in ACC v. State of MP
and Others ( supra ). The said circular is set out below:
“Government of Madhya Pradesh
Mineral Resource Department
N. K. Desai
Additional Secretary
Bhopal, dated 11-8-1993
Sub: Tax assessment on consumption of
limestone by cement plant.
Kindly peruse the directions issued on 19-
12-1992 on the aforesaid subject whereby it was
ordered that the tax assessment of those cement
plants which have not installed weighing machine
in the approved leased area, shall be done on the
basis of 1.6 tonne limestone for per tonne
cement.
It has come to knowledge that action is not
being taken accordingly and some of cement
plants which have kept the accounts by weighing
through weighing machine, the quantity of
consumption of limestone is being shown so
much less that it is not possible to prepare
cement on that basis. Therefore, while
assessment of tax of limestone consumed by the
cement plant, it is necessary to take into
consideration that how much of cement has been
produced by them and if consumption of
limestone for preparing per tonne cement has
been shown below 1.6 tonne then it is clear that
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the lease-holder has not properly kept the
account of consumption of limestone. Thus, it is
extremely necessary in all such cases to assess
tax by comparative study of consumption of
limestone and production of cement at the time
assessment of tax. The standard for the basis of
tax assessment that should be adopted must be
actual weight or 1.6 tonne per tonne cement
whichever is more. This should be strictly
complied with and apprise me with the action
taken in this regard.
Sd/-
(N. K. Desai)
Additional Secretary
State of M. P.
Mineral Resources Department”
142. It is apparent that the said circular provided for a norm for
assessing consumption on the premise that the consumption shown
by some cement plants was so low that it was not possible to
manufacture the reported quantity of cement from it. The said
circular was unsuccessfully challenged in a writ petition
(W.P.No.516/1996 - Associated Cement Companies Ltd. v. State
of MP and others ) decided by the learned Single Judge of the
Madhya Pradesh High Court on 15.05.2002. Subsequently, a
Division Bench of the Madhya Pradesh High Court in Grasim
20
Industries Limited, Neemuch v. State of M.P. and others ,
quashed the words 'whichever is higher' in the said circular, holding
that in the event of any incorrect or untrue information being
20
2014 SCC OnLine MP 8587
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furnished in the returns, the assessing officer would be obliged to
apply some tangible, just and reasonable yardstick. In this regard,
the relevant extract of the order passed in Grasim Industries Ltd.,
( supra ) is set out below:
"45. Be that as it may, the impugned Circular dated
11th August, 1993, will have to be held as
excessive to the extent it directs the Assessing
Officer to compute the liability on the basis of
weighment record or conversion factor of 1.6,
"whichever is higher". In cases, where the
Licensee/Assessee is able to satisfy the
Assessing Authority that the removal or
consumption of Limestone is much below the
notional conversion factor of 1.6, the question
of invoking the notional conversion factor of 1.6
will not arise nor can be countenanced.
Inasmuch as, the Royalty is payable on the
removed or consumed minerals. To that extent, the
instructions contained in the aforesaid Circular
cannot be sustained." [emphasis added]
143. It is apparent from the above that a notional conversion factor
could be applied only in cases where the lessee is unable to satisfy
that the removal or consumption of limestone is below the notional
factor.
144. It is also relevant to note that in Grasim Industries Ltd.
( supra ), the power to apply the notional conversion factor on a case-
to-case basis was accepted. However, the Court also observed as
under:
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“32. But, a word of caution may have to be
expressed that invocation of uniform notional
conversion factor must meet the test of necessity
to do so on account of rejection of the Assessee's
claim and the Return as filed in that behalf.
Royalty is payable on the quantum of minerals
extracted, as it is relatable thereto. At the same
time, applying a just and reasonable conversion
factor does not necessarily entail in demand of
Royalty from the Assessee in respect of non-
extracted minerals as such. On the other hand,
on finding that the notional conversion factor is
just and reasonable and in conformity with the
past experience of the concerned Cement
Company or Industry as a whole, it can be safely
assumed that the Assessee Unit has had
extracted and consumed the quantity equivalent
to the notional conversion factor of Limestone for
manufacture of cement. However, that would be
a rebuttable fact. The concerned cement
company/assessee will then have to
substantiate that it has extracted or removed
lesser quantity of Limestone than determined
as per the conversion factor and that the
records maintained by it are truthful. Suffice it
to observe that application of such notional
conversion factor in a given case would be a
matter of mode of assessment and nothing
more. Resultantly, the administrative instruction
issued in that regard cannot be considered as
ultra vires or impinging upon the occupied
legislative field or for that matter arbitrary and
discriminatory." (emphasis supplied)
145. There is no cavil that the State can assess the consumption of
limestone on the basis of a norm. However, the same would be
permissible only if there is a credible challenge to the quantum of
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actual consumption as reported or the lessee cannot substantiate
the quantum of mineral as consumed.
146. Plainly, if the State comes to the conclusion that the quantum
of clinker produced could not possibly have been produced from the
limestone consumption as reported, it would not be precluded from
assessing the consumption by applying a norm which is determined
on a scientific basis. However, in the present case, there is no
credible challenge to the accuracy of the weighment data. There is
also no material to establish that the quantity of cement as produced
could not possibly have been produced by the consumption as
reported. On the contrary, NCCB’s team had physically verified the
consumption at ACC's plant and had submitted a report on an
empirical basis. The State could not simply reject it.
147. Having stated the above, we may at this stage reiterate that it
was not permissible for the State Government to have disregarded
the Revisional Order dated 06.05.2019, whereby the State
Government was required to consider the matter of quantum of
Royalty on the basis of the minutes of the meeting dated
31.03.2012.
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148. In the view of the above, we find no infirmity in the decision of
the Revisional Authority in allowing ACC's revision petition and
finding that the adoption of the norm for determination of Royalty
was not justified.
CONCLUSION
149. In view of the above, we direct as under:
(i) the impugned demand notice is set aside;
(ii) the State and the DMG are directed to grant full
access to the ILMS Portal and not block the
ILMS Portal as prayed for in
W.P.No.25298/2024;
(iii) the State's challenge to the impugned order is
rejected;
(iv) the concerned authorities are directed to
execute a Supplementary Lease Deed in
favour of ACC without insisting on the no dues
certificate; and
(v) the State is directed to refund the amount
deposited by ACC pursuant to the interim order
dated 29.10.2024 passed in WP No.
25298/2024.
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150. W.P.No.25298/2024 and W.P.No.18655/2025 are allowed in
the aforesaid terms and W.P.No.36850/2025 is dismissed.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(K.S. HEMALEKHA)
JUDGE
KMV