Statutory Determination of Minor Mineral Royalty Liability Precludes Writ Interference Over Disputed Factual Assessments

The petitioner, an infrastructure company, was awarded an EPC contract in 2017 for the four-laning of the Dholabari to Jamuguri section of NH-52

The contract was later foreclosed by mutual agreement in 2021

Following an inquiry by the Bureau of Investigation (Economic Offence), the Forest Department issued a series of demand notices alleging evasion of forest royalty, GST, and penalties on minor minerals (earth, sand, boulders) used in the project

The demanded amount escalated from an initial Rs. 12.97 crore to approximately Rs. 40.04 crore following reassessments by the Divisional Forest Officer (DFO)

The petitioner challenged these demands, asserting that all materials were lawfully procured from authorized sources, neighboring states, or through site excavation, and that the demands lacked statutory basis and violated principles of natural justice

1. Whether the demand for forest royalty and penalties was issued in accordance with the statutory framework of the Mines and Minerals (Development and Regulation) Act, 1957, and the Assam Minor Mineral Concession Rules, 2013

2. Whether the respondent authorities followed the principles of natural justice and due process in quantifying and revising the liability

3. Whether the NHIDCL was contractually entitled to withhold the petitioner’s payments based on the Forest Department's demand

The court primarily applied the Assam Minor Mineral Concession Rules, 2013, specifically Rule 5, which mandates that contractors for government projects obtain permits and pay royalty in advance

It further utilized Rule 63, defining "illegal or unauthorised mining" as operations conducted without a valid concession

Rule 64, which prescribes the recovery of the mineral's price, royalty, and fines for such unauthorized acts

The court also referenced Section 15 of the Mines and Minerals (Development and Regulation) Act, 1957, which empowers the State to regulate minor minerals

The court distinguished the restrictive application of royalty as discussed in Promoters & Builders Association of Pune v. State of Maharashtra regarding the commercial use of excavated earth

The court found that the Forest Department's actions were not arbitrary but based on a "prolonged process of verification" and field inspections

It noted that while the petitioner claimed lawful procurement, they failed to produce valid statutory documentation (permits, challans, or transit passes) for the full quantity of materials utilized

The court reasoned that under Rule 63 and 64, the absence of such documentation creates a legal inference of "unauthorised extraction," thereby triggering the state's power to recover the price and penalties

Regarding natural justice, the court observed that the petitioner participated in the inquiry and that the downward and upward revisions of the demand demonstrated an "application of mind" and reconciliation of records rather than administrative caprice

Finally, the court held that since the EPC Agreement required the contractor to indemnify the State against non-compliance with law, NHIDCL’s decision to withhold dues was a valid "protective measure"

The court answered the issues by affirming that the statutory exercise under the 2013 Rules was validly initiated once the petitioner failed to substantiate the lawful source of the minerals

It held that the High Court, under Article 226, cannot adjudicate "disputed questions of fact" involving voluminous technical records and source-wise reconciliation

However, the court granted the petitioner liberty to pursue alternative remedies before a competent forum to adjudicate the specific factual quantification of the dues. All interim protections were vacated