1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- (1)CIVIL WRIT No.1451 of 2007 GKW LIMITED AND ANOTHER V. STATE OF RAJASTHAN (2)CIVIL WRIT No.1098 of 2007 FEDERATION OF MINING ASSOCIATION OF RAJ.& ANOTHER. V. STATE OF RAJ. & ORS. (3)CIVIL WRIT No.1288 of 2007 HINDUSTAN ZINC LTD. V. STATE OF RAJ. & ORS. (4)CIVIL WRIT No.1274 of 2007 M/S.POOJA MINERALS,GOHODAWAT V. STATE OF RAJ. & ORS. (5)CIVIL WRIT No.1275 of 2007 PUKHRAJ V. STATE OF RAJ. & ORS. (6)CIVIL WRIT No.1276 of 2007 M/S.SUNDER CHEMICALS AND MINES, GOTAN V. STATE OF RAJ. & ORS. (7)CIVIL WRIT No.1277 of 2007 SMT. TARUNA CHOUHAN V. STATE OF RAJ. & ORS. (8)CIVIL WRIT No.1278 of 2007 M/S.POOJA MINERALS,GHODAWAT V. STATE OF RAJ. & ORS. (9)CIVIL WRIT No.1279 of 2007 M/S.MOTI LIME PVT. LTD. V. STATE OF RAJ. & ORS. (10)CIVIL WRIT No.1280 of 2007 PUKHRAJ V. STATE OF RAJ. & ORS. 2 (11)CIVIL WRIT No.1281 of 2007 RAM KISHORE V. STATE OF RAJ. & ORS. (12)CIVIL WRIT No.1282 of 2007 MOTI LAL V. STATE OF RAJ. & ORS. (13)CIVIL WRIT No.1283 of 2007 SMT.TARUNA CHOUHAN V. STATE OF RAJ. & ORS. (14)CIVIL WRIT No.1284 of 2007 RAM KISHORE V. STATE OF RAJ. & ORS. (15)CIVIL WRIT No.1285 of 2007 RAM BHAROSE SHASHI V. STATE OF RAJ. & ORS. (16)CIVIL WRIT No.1286 of 2007 MOTI LAL V. STATE OF RAJ. & ORS. (17)CIVIL WRIT No.1287 of 2007 CHAMPA LAL V. STATE OF RAJ. & ORS. (18)CIVIL WRIT No.1378 of 2007 GUJARAT AMBUJA CEMENT LTD. V. STATE OF RAJ. & ORS. (19)CIVIL WRIT No.1379 of 2007 J.K. CEMENT LIMITED V. STATE OF RAJ. & ORS. (20)CIVIL WRIT No.1380 of 2007 DCM SHRIRAM CONCOLIDATED LTD. V. STATE OF RAJ. & ORS. (21)CIVIL WRIT No.1448 of 2007 BHANSALI ENGI.POLYMRS LTD. V. STATE OF RAJ. & ORS. 3 (22)CIVIL WRIT No.1483 of 2007 KHANIJ UTPADAK SANGH V. STATE OF RAJ. & ORS. (23)CIVIL WRIT No.1702 of 2007 NEYVELI LIGNITE CORP.LTD. V. STATE OF RAJ. & ORS. (24)CIVIL WRIT No.1845 of 2007 MAHESH MANTRI V. STATE OF RAJ. & ORS. (25)CIVIL WRIT No.1974 of 2007 MAHAVEER TRADING COMPANY V. STATE OF RAJ. & ORS. (26)CIVIL WRIT No.1981 of 2007 MAHADEV COTTON MILLS LTD. V. STATE OF RAJ. & ORS. (27)CIVIL WRIT No.2187 of 2007 M/S.ARAVALI MINERALS & CHEMICAL INDUSTRIES V. STATE OF RAJ. & ORS. (28)CIVIL WRIT No.2338 of 2007 GURDAYAL SINGH V. STATE OF RAJ. & ORS. REPORTABLE Mr. L.R.Mehta, Mr.Manish Shishodia, Mr. Ramit Mehta, Mr. M.S.Singhvi, Mr. D.D.Thanvi, Mr. B.K. Vyas, Mr. Dinesh Mehta, Mr.Avinash Acharya, Mr. Vijay Purohit, Mr. D.L.R.Vyas for Mr. B.M.Bohra, Mr.Tribhuvan Gupta, for Petitioners. Mr. N.M.Lodha,AAG with Mr.Anil Bhansali for the respondents. 4 Date of Order : 22-02-2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI MUNISHWAR NATH BHANDARI,J. ORDER ----- BY THE COURT: (PER HON'BLE BHANDARI, J.) In all these writ petitions, a challenge has been made to the Chapter VII to Rajasthan Finance Act, 2006 (hereinafter referred to as 'the Act of 2006') and Rules framed thereunder, as well as consequential notification issued. It has been contended that the State of Rajasthan initially enacted Rajasthan Land Tax Act, 1985 (for short, 'the Act of 1985') for imposition of tax on the mineral bearing lands. However, said enactment was held to be ultra vires by the Hon'ble Supreme Court for want of competence of the State Government to impose such tax. After the decision of the Hon'ble Supreme Court in regard to the enactment of Act of 1985, the State of Rajasthan has now come up with a new enactment under Chapter VII of the Rajasthan Finance Act, 2006 which was then published in the Gazette on 31st March, 2006. After the enactment, the Government even framed Rules on 25.9.2006 in exercise of the powers conferred by Section 61 of the Act of 2006. According to the petitioners, even the imposition of land 5 tax pursuant to Chapter VII of Rajasthan Finance Act, 2006 and Rules framed thereunder is beyond legislative competence of the State of Rajasthan, hence it is prayed that the aforesaid Legislation may be held to be ultra vires. Learned counsel Mr. Mehta appearing for the petitioners submits that the State Government can legislate Act and Rules on the subject-matters falling under their competence as per Schedule VII of the Indian Constitution. However, State of Rajasthan came up with enactments beyond their legislative competence, inasmuch as, at the first instance, Rajasthan Land Tax Act of 1985 was brought to impose tax on the minerals which was then struck down by the Hon'ble Apex Court in a reported case of Federation of Mining Association v. State of Rajasthan, AIR 1992 SC 103. Referring to the aforesaid judgment, it is submitted that when imposition of tax on mineral bearing land is already held to be ultra vires, then it was not open for the State Government to bring another Legislation again for imposition of tax on the minerals with same different provisions in the Act 8 of 2006. In that regard, reference of Paras 3, 4, 5 and 7 of the judgment aforesaid was made specifically and prayed that looking to the judgment of the Apex Court in the Federation of Mining Association case itself, Chapter VII of the Finance Act of 2006 and Rules made thereunder deserves to be struck down. 6 The further argument of the learned counsel for the petitioners is that as per Entry 49 of List II of Schedule VII of the Constitution, the State Government can impose tax on lands and buildings and as per Entry 50 of the same List, the taxes on mineral rights are subject to limitation imposed by the Parliament,if any, apart from the fact that even as per Entry 23 of the same List, regulation of mining and mineral development is subject to the provisions of List I of the Union. Thus, referring to the aforesaid Entries of the State List, it was submitted that though the Government may be competent to impose tax on lands and buildings as per Entry 49, but imposition of tax on minerals by the State Legislation is not permissible due to limitation provided under Entry Nos. 23 and 50 of List II of Schedule VII of the Constitution and in view of the Central Legislation of Mines and Mineral (Development and Regulation) Act, 1957 (for short, 'the Act of 1957'). Referring to Entry 86 of the List I of Schedule VII of the Constitution. It was further submitted that even tax on the capital value of the assets is subject-matter of competence of the Union alone, hence the Finance Act of 2006, being imposition of tax on the capital value of the assets, thus, is beyond the competence of the State. For convenience and ready reference, relevant entries of List I of the Union List, as well as List II of the State List are quoted hereunder :- 7 “List I – Union List. 86. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies. List II – State List 23. Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. 49. Taxes on lands and buildings. 50. Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.” Referring to the aforesaid Entries, it is submitted by the learned counsel for the petitioners that pursuant to Chapter VII of the Rajasthan Finance Act of 2006, imposition of tax is directly and indirectly on the minerals, therefore, the aforesaid enactment does not fall under Entry 49 of the Second List and in view of Entry 50 and Central Act, 1957, the State Government is not competent to impose taxes on mineral rights,in view of Union enactment of 1957, therefore, the whole enactment is made by the State Government beyond their competence. 8 To substantiate arguments, learned counsel for the petitioners referred to certain provisions of the impugned Act. Firstly, referring to Section 38 of the Act of 2006, it was focused that the definition of “land” as provided under Section 38 shows that the imposition of land tax is only on mineral bearing lands, inasmuch as, all other types of lands, like agricultural, residential and the urban lands have been excluded and by virtue of the aforesaid provisions, so far as the definition of the “land” is concerned, it remains same as was existing in the Land Tax Act of 1985. Hence,it is that except a superficial change in the language in the enactment of 2006, substantially it remains the same enactment as was enacted in the year, 1985. Referring to Section 39, it is urged that imposition of the tax is only on a particular class of land and at the rates as may be specified by the State Government from time to time. A reference of Sections 40, 41 and 42 was also made during the course of arguments to show that by virtue of the enactment of 2006, the State Government is again imposing tax on minerals, for which the State lacks legislative competence. A reference was also made in regard to the notification issued by the State Government prescribing the rate of tax to be imposed pursuant to the impugned enactment of 2006. In the first Notification dated 31st March, 2006, the State Government imposed tax at the rate of 5% of the market value of the land or Re.1/- per 9 square meter, whichever is lower. However, it is contended that subsequently, further notifications were brought to prescribe different rates for different class of land. For ready reference relevant provisions of Sections 38 and 39 of the Act of 2006 are quoted thus :- “38. Definitions.- In this Chapter, unless the context otherwise requires,- (a) ..... ....... ......... ..... (b) ..... ....... ......... ..... (c) “land” shall not include the land held or used exclusively for agricultural or residential purposes or an urban land as defined in the Rajasthan Land and Building Tax Act, 1964 (Act No.18 of 1964) or an abadi land as defined in clause (b) of Section 103 of the Rajasthan Land Revenue Act, 1956 (Act No.15 of 1956); (d) “land holder” means a person who holds or uses the land as its owner, tenant, lessee, licensee, grantee or under any right or contract or in any other capacity; (e) ...... ....... ...... ...... (f) “tax” means the tax on land payable under this Chapter; 39.Levy of tax and its rate.- Subject to the other provisions of this Chapter, there shall be levied and collected for each year a tax on such classes of lands at such rates, as may be specified by the State Government 10 from time to time by notification in the official Gazette: Provided that the rate of tax under this section shall not exceed ten percent of the market value of the land:” To support the arguments, learned counsel for the petitioners first referred the judgment reported in AIR 1962 SC 1563, Raja Jagannath Baksh Singh v. State of Uttar Pradesh and another. It is submitted that the imposition of tax in the aforesaid case was held to be valid, mainly for the reason that the imposition of the tax was of annual value to be ascertained in the manner prescribed under Section 5 of the U.P. Large Land Holdings Act, whereas in the Act of 2006, the imposition of tax is on the market value. The next judgment cited on the issue is reported in AIR 1964 SC 1284, State of Orissa v. M.A.Tulloch & Co., where the Hon'ble Apex Court considered the validity of the Orissa Mining Areas Development Fund Act. Referring to the aforesaid case, learned counsel for the petitioners submitted that pursuant to the Union competence, as per Entry 54 of Union List, having enacted Mines and Minerals (Regulations and Development) Act of 1957, the State was not competent to make legislation on the same subject- matter. The another judgment cited by the learned counsel for the petitioners is reported in AIR 1965 SC 177, H.R.S. 11 Murthy v. Collector of Chittoor. According to the learned counsel for the petitioners, in the aforesaid case, Hon'ble Apex Court considered the provisions of Madras District Powers Act, whereby as per Sections 78 and 79 of the aforesaid Act, land cess was imposed. However, considering the nature of the cess, it was held to be a tax, but, then, said imposition was found to be under Entry 49 of the State List. Therefore, the imposition of tax was held to be lawfully. The last judgment on the aforesaid issue is reported in AIR 1990 SC 85, India Cement Ltd. v. State of Tamil Nadu. It is contended by the learned counsel for the petitiones that the judgment of the Hon'ble Apex Court in the aforesaid case covers the issue involved in the present matter and was, otherwise, taken as basis while the Land Tax Act of 1985 was earlier struck down by the Hon'ble Apex Court in the case of Federation of Mining Association's case (Supra). The whole emphasis of the learned counsel for the petitioners is to demonstrate that though a new enactment has been brought under Chapter VII of the Enactment Act of 2006 to show that it is imposition of tax on land, in substance, it is nothing but imposition of tax on the minerals, because even as per the definition of “land”, all other types of lands have been excluded, except mineral bearing land. Thus, from the definition of the “land”, it becomes clear that the intention of the Government is to 12 impose tax on the mineral in camouflage manner, otherwise, while imposting such a tax, all other types of lands would not have been excluded. The State Government had brought the enactment of 2006 with somewhat different provisions to impose tax on the minerals as the earlier enactment of Land Tax Act of 1985 was struck down by the Hon'ble Apex Court, therefore, even if the language of the provision of somewhat different in the enactment under-challenge, substance of the provisions remains same and which shows that it is imposition of tax on the mineral under the new Legislations. However, for the reason that similar earlier enactment of 1985 having been struck down by the Hon'ble Apex Court on the ground of the legislative competence, the present enactment under-challenge, should not be allowed to stand. Thus, the prayer is made that not only the Chapter VII of the Finance Act of 2006, but Rules as well as Notifications issued thereunder may also be struck down, being beyond the legislative competence of the State Government. Mr. N.M.Lodha, learned Additional Advocate General, appearing for the State of Rajasthan, supporting the Legislations of Chapter VII of the Rajasthan Finance Act of 2006, submits that the State Government is competent to impose tax on land in view of Entry 49 of the State List in Schedule VII of the Constitution. Referring to the 13 provisions of the Act of 2006, it was urged that the impugned enactment nowhere provides tax on the mineral. Rather it is a tax on the land, therefore, the whole basis canvassed by the petitioners to project it to be tax on the mineral is not in consonance with the provisions of the Act of 2006. Referring to the Land Tax Act of 1985, it is submitted that Section 3 of the aforesaid enactment of 1985 was under consideration before the Hon'ble Apex Court in the case of Federation Mining Association (Supra) and as per the amended provision of Section 3 of the Act of 1985 the imposition of the tax was on the annual value equal to four times of the annual dead rent or twice of the amount of the royalty payable, whichever higher. The Hon'ble Apex Court after taking into consideration the provision of Section 3 and the definition of dead rent as was provided under Section 2 (d) of the Act came to the conclusion that the tax is being imposed on the dead rent/royalty, hence same is not within the competence of the State Government. Referring to the provisions of the Act of 2006 learned counsel for the State submits that there exists no provision for imposition of tax on the annual value to be determined either on the dead rent or royalty. Therefore, the judgment of the Hon'ble Apex Court in the case of Federation Mining Association (Supra) has no application. The learned counsel for the respondents further referring all the judgments so cited by the learned counsel for the petitioners, submitted that even as per those judgments, 14 the case of the State is fully supported, more specifically the judgment of the Hon'ble Apex Court consists of seven Judges in the case of India Cement Limited v. State of Tamil Nadu (Supra). Referring to the various paras of the aforesaid judgment, learned Additional Advocate General submitted that as per the Act of 2006, since there exists no imposition of tax on royalty or dead rent so as to co- relate the tax with the mineral, not only subject-matter remains within the legislative competence of the State Government but none of the judgments cited by the learned counsel for the petitioners supports the petitioners on that issue, therefore, it was prayed that all the writ petitions should be dismissed. We have considered the rival submissions of the learned counsel for the parties and scanned the matter carefully. The issue involved in the present matter is in regard to the competence of the State Government to legislate enactment of 2006, in view of the various Entries existing in Schedule VII of the Constitution of India. Thus, for deciding the aforesaid issue of the State's competence, not only reference of the various Entries is required to be given but, even the provisions of the Act of 2006 along with the various judgments cited by the learned counsel 15 for the parties are required to be considered. Since learned counsel for the petitioners have made reference to Land Tax Act of 1985, to start with and to demonstrate that a similar enactment of the year, 1985 has already been struck down by the Hon'ble Apex Court in the case of Federation of Mining Association. Thus, the Government was not competent to bring similar legislation with same intention to impose tax on the minerals. To consider aforesaid argument, we have perused the provisions of the Act of 1985 and gone through the judgment of the Hon'ble Apex Court in the case of Federation of Mining Association. The perusal of para 3 of the aforesaid judgment itself shows that pursuant to the amended provision, the imposition of tax was on dead rent/royalty whichever is higher and, for that reason, the enactment imposing tax on minerals was declared to be ultra vires. Paras 3 and 4 of the judgment in the case of Federation of Mining Associations of Rajasthan v. State of Rajasthan, is quoted hereunder :- “3. All these matters concern the question of the validity of the provisions of Section 3 of the Rajasthan Land Tax Act, 1985 (Rajasthan Act No.6 of 1985) – hereinafter referred to as 'the Act' – by which the State Legislature purported to levy a tax on every landholder on the annual 16 value of the land held or used by him in so far as it concerns land containing minerals. 'Land', inter alia, has been defined to include “land held or used for excavating, extracting, removing or utilising any ore or mineral”. The “annual value” of the category of land has been defined in Section 2 (a) which, in so far as is relevant, read as follows : “Annual value” means, in the case of land held or used in a year - (i) for excavating, extracting, removing or utilising any ore or mineral, [and amount] equal to the amount of the annual dead rent or half of the amount of the royalty payable for the year with regard to such ore or mineral, whichever is higher.” We may mention that subsequently this provision has been amended to make the annual value equal to four times of the annual dead rent twice the amount of the royalty payable, whichever is higher. Reference may also be made to the definition of the expression “dead rent” in Section 2 (d) of the Act as follows : “dead rent” means the minimum guaranteed amount to royalty payable yearly by the lessee under the Miens and Minerals (Regulation and Development) Act, 1957 (Central Act 67 of 1957) and the rules made thereunder or under an agreement for a mining 17 lease. 4.The question of validity of levies of this type has come up for consideration by a seven Judge Bench of this Court in India Cement Ltd. v. State of Tamil Nadu, (1990) 1 SCC 12: (AIR 1990 SC 85) and by a three-Judge Bench in Orissa Cement Ltd. v. State of Orissa, (1991) 2 JT 439 : (AIR 1991 SC 1676). Following the above two decisions, a Bench of this Court has also disposed of the challenge to a similar levy made by the Gujarat State in Writ Petitions Nos. 100-116 of 1991.” The perusal of the aforesaid paras clearly reveals that not only dead rent was defined under Section 2 (d), but imposition of tax was on the dead rent/royalty, whichever is higher. However, in the present case, while enacting the Act of 2006, the imposition of tax is not on dead rent/royalty. Thus, in view of the judgment of the Apex Court in the case of Federation of Mining Association, enactment of 2006 cannot be struck down, in view of the different provisions under the Act of 2006. Now, coming to the question as to whether the enactment of 2006 falls under Entry 49 or other Entries in different List as has been submitted by the learned 18 counsel for the petitioners, we have perused all the Entires which are, otherwise, quoted in the judgment above. Entry 49 provides State's competence to impose tax on land and building, whereas Entries 23 and 50 pertain to tax on mineral rights as well as regulations of mines, but both are subject to enactment by the Parliament which then was brought in by the Act of 1957. Entry 86 of the Union List pertain to tax on the capital value of the assets. In reference to the aforesaid entries, the provisions of the Act under-challenge was looked into by us to see as to whether the imposition of the tax falls under Entry 49 or under any other entires as referred to above and, in that regard, even we have considered the various judgments of the Hon'ble Apex Court on the issue. Since the Act of 2006 does not make a reference regarding imposition of tax on royalty or dead rent, rather provides for tax on the land, hence it cannot be said that the imposition of tax is on the minerals, only for the reason that while providing the definition of “land”, agriculture, urban and residential lands have been excluded. Mere exclusion of other category of land cannot mean that it is a taxation on minerals, because neither the provision of the Act, nor Rules made thereunder shows basis of the imposition of the tax is the royalty or dead rent so as to relate such imposition with minerals as was otherwise existing in the previous enactment of 1985. Therefore, the argument of the learned counsel for the petitioners that it is again a tax on 19 mineral, cannot be accepted. Our view is fortified from the various judgments of the Apex Court even cited by the learned counsel for the petitioners. In this regard, the reference of the judgment of the Apex Court reported in AIR 1962 SC 1563 would be relevant, where a tax was imposed on the agricultural land and