Civil Appeal No 2265 of 1970 From the Judgment dated 10101969 of the Calcutta High Court
DN Mukherji and GS Chatterjee for the Appellant
HK Puri for the Respondent
The Judgment of the Court was delivered by MISRA J
The present appeal by special leave directed against the judgment of the Calcutta High Court dated 10th October 1969 involves the interpretation of sections 6 and 72 of the Bengal Cess Act 1880 and arises in the following circumstances
The respondent company is the owner of a colliery situate at Ghusick Kalapahari within the district of Burdwan
As usual with C   the coalmines the percolated water which accumulates in the colliery has to be pumped out and discharged at the surface to prevent inundation of the colliery and for proper working of the mine
The percolated water of the mine of the respondent company was pumped out and sold by the company to a neighbouring glass factory the Hindustan Pilkington Glass works Limited which required such water for cooling and other purposes The respondent 354 company by such sale of water received for the year 1958 59 a sum of Rs 4207300 which amount was entered in their profit and loss account as miscellaneous income besides the sum of Rs 58200000 shown as the sale price of coal of the said colliery
The respondent company had been selling such precolated water in the earlier years also and paying cess there on
When the cess Authorities assessed cess on this income under the Bengal Cess Act 1880 for the year 1958 59 the respondent for the first time claimed exemption from the assessment of cess in respect of the sale price of water amounting to Rs 4207300 although the respondent never claimed such exemption in respect of such sale proceeds of water in the previous years
The Cess Deputy Collector of Burdwan by his order dated November 261959 disallowed the claim of exemption treating the said sum of Rs 4207300 as one of the items constituting the annual net profit derived from the mine in the process of extracting coal and by using the company s instruments equipments and staff
The respondent company took up the matter in appeal before the Collector of Burdwan who found that the cess levied was not contrary to the provisions of the Act and the rules freedom there under as the income was derived by the employment of machinery and staff of the coalmine
The respondent feeling aggrieved went up in revision before the Commissioner of Burdwan Division but that also met the same fate
The Commissioner took the view that the water which is pumped out to save the colliery from drowning is then sold at vast profit and therefore it comes within the ambit of the term gross earnings  and as such was liable to cess
The respondent went up in further revision before the Board of Revenue but the second revision was also dismissed
Undaunted by these failures the respondent took up the matter before the High Court under article 226 of the Constitution which was eventually allowed by the High Court
It took great pains to come to a conclusion that the water discharged from the mine was not a mineral It was also not land within the meaning of s6 of the Bengal Cess Act
On these findings the High Court observed The tenant of a mineral particularly of a coalmine is normally under the vanishing expenses of sinking new pits diving gallaries pumping out water and the like and some 355 of the expenses representing capital might be disallowed as working expenses of the colliery but that does not justify the authorities as in this case to imposes on the sale price of water and the sale price of such commodity does not form part of the annual net profit from the mine B The High Court referred to a large number of cases English and American and the history of the Cess Act to arrive at the above conclusion
We are of the opinion that the High Court has gone off the track
It was not at all necessary to enter into the complicated question whether the water oozing out of the mine was a mineral
In the present case we are concerned only with the interpretation of sections 6 and 72 of the Bengal Cess Act
Section 6 at the material time that is for the year 1958 59
in so far as relevant ran as follows 6
The road cess and the public works cess shall be assessed on the annual value of lands and until provision to the contrary is made by Parliament on the annual net profits from mines quarries tramways railway sand other immovable properties ascertained respectively as in this Act prescribed
 Section 72 reads On the commencement of this Act in any District and thereafter before the close of each year the Collector of the District shall cause a notice to be served upon the owner chief agent manager or occupier of every mine quarry tramway railway and other immovable property not included within the provisions of Chapter II such notice shall be in the form in Schedule contained and shall require such owner chief agent manager or occupier 
to lodge in the office of such Collector within two months a return of the net annual profits of such property calculated on the average of the annual net profits thereof for the last three years for which accounts have been made up
Such Collector may in his discretion extend the time allowed for lodging such return
356 The key words in these two sections on which the fate of this case hinges are on the annual net profits from the mines
 The precise question for consideration is whether the sale price of water pumped out and discharged from the mine could be included in the annual net profits from the mine
If so the cess levied on the respondent company was fully justified by s6
The contention on behalf of the respondent company is that the sale price of the water discharged from the mine cannot be taken to be a profit from the mine
We find it difficult to accept the contention
There is no doubt that water comes out of the mine and that water has got to be pumped out from the mine to save it from being inundated or to enable the working of the mine
But if that water is sold away for a price and an income derived in that way why can it not be said to be a profit from the mine  The exercise by the High Court in referring to a large number of cases of England and America are not of much relevance on the problem before us
A bare perusal of the section makes it evident that the income derived by the sale of water pumped out from the mine is a profit from the mine
Reliance was placed on Tata Iron and Steel Co Ltd vs The State of Bihar1
In that case the appellant company was the owner of certain mines in Bihar from where it extracted iron ore which it utilised in its factory at Jamshedpur for making iron and steel
Under sections 5 and 6 of the Bengal Cess Act 1880 as amended in Bihar all immovable property situate in any part of State of Bihar was liable to payment of local cess which in the case of mines was to be assessed on the annual net profits from them
For the assessment year 1954 56 the company was assessed by the Cess Deputy Collector on the basis that it had made a profit of Rs 470 per ton of iron ore extracted
The appellant claimed that it was not liable to the levy of cess under the Act because it did not sell any ore as such and could not therefore be treated as having made any profit  from the mines within the meaning of s6 of the Act
The question for consideration was whether a person could in law be said to have derived profit from a mine when the ore extracted is not sold by him as such but is utilised by him for the purpose of manufacturing a finished product which he sells
The contention of the appellant company that the ore extracted was not sold as such 1 19631 SCR 199
357 but was used by the owner in the production of other finished pro ducts and there was no question of the owner of the ore realising profit from the mine was repelled by this Court and it observed In our opinion therefore the principle of apportionment resting on the disintegration of the ultimate profits realised by the assessee is implicit in a provision like that in S6 of the Act under which the profit derived from an initial activity is brought to charge where further activities are undertaken by an assessee with reference to the ore won and a profit is realised by the sale of the end product
 The principle laid down in this case fully supports the contention of the appellant in the instant case
The facts of the present case go a step further inasmuch as the water pumped out from the mine was separately sold for a price and therefore obviously it is covered by the provisions of s6 read with s72 of the Act
The contention on behalf of the State has considerable force and must be accepted
The counsel for the respondent on the other hand contended that the income by sale of water was only a casual income and not a regular permanent income and therefore it could not be assessed to cess
We see no force in this contention
Section 6 does not make any distinction as to whether the income is casual or a regular one
All that we are concerned with is whether the income derived by the sale of water pumped out from the mine is included in the profit from the mine or not
We have not the slightest doubt that the income derived by sale of water pumped out from the coalmine constitutes a profit derived from the mine
F For the foregoing discussion the appeal must succeed
It is accordingly allowed and the judgment of the High Court is set aside
There shall however be no order as to costs


Summary:
The percolated water of the coal mine of the respondent Company was pumped out and sold by the Company to a neighbouring glass factory which required such water for cooling and other purposes
The respondent Company had been selling such percolated water for several years and was paying cess thereon under the Bengal Cess Act 1880
However for the year 1958
59 when the cess authorities assessed cess on this income the respondent for the first time claimed exemption from the assessment of cess in respect of the sale price of water
The Cess Deputy Collector however disallowed the claim of exemption treating the amount in respect of sale price of water as one of the items constituting the annual net profit derived from the mine
In appeal by the respondent Company the Collector found that the cess levied was not contrary to the provisions of the Act
The Commissioner dismissed the revision petition taking the view that the water which is pumped out to save the colliery from drowning is sold at a vast profit and therefore it comes within the ambit of the term gross earnings  and as such was liable to cess
A further revision to the Board of Revenue was also dismissed
However the respondent s writ petition to the High Court was allowed and the order levying cess was quashed holding that the water discharged from the mine was neither a mineral  and also nor land within the meaning of Section 6 of the Bengal Cess Act
353 Allowing the Appeal of the State to this Court A  HELD 1
The Cess levied on the respondent Company is fully justified by Section 6 of the Bengal Cess Act 1880
356A 2
There is no doubt that water comes out of the mine and that water has got to be pumped out from the mine to save it from being inundated or to enable the working of the mine
But if that water is sold away for a price and an income derived in that way it cannot be said that it is not a profit from the mine
356B C 3A bare perusal of Section 6 makes it evident that the income derived by the sale of water pumped out from the mine is a profit from the mine
356D 4
Section 6 does not make any distinction as to whether the income is casual or a regular one
357E Tata Iron and Steel Co Ltd vs The State of Bihar 1963 Supp 1 SCR 199 referred to