*THE HON’BLE SRI JUSTICE P.S. NARAYANA +WRIT PETITION Nos. 490 of 2000, 6874, 9486 & 9498 of 2001, 21788 of 2002, 5756 of 2004 and 14077, 14030 & 13746 of 2006 % Dated 20-09-2006 # Progressive Constructions Co. … Petitioner in W.P.No.490/00 M/s. Madhucon Projects Ltd. … Petitioner in W.P.No.6874/01 M/s. Naveen Stone Crushers. … Petitioner in W.P.No.9486/01 K.Srinivasa Rao --- Petitioner in W.P.No.9498/01 M/s. Siddardha Constructions (P) Ltd. … Petitioner in W.P.No.21788/02 Robho Sillicon Private Ltd. … Petitioner in W.P.No.5756/04 M/s.Rock Sand Minerals … Petitioner in W.P.No.14077/06 Rank Silicon Private Limited. … Petitioner in W.P.No.14030/06 M/s. Jyothi Constructions. … Petitioner in W.P.No.13746/06 AND $ The South Central Railway and others … Respondents in all the Writ Petitions ! Counsel for Petitioners : Smt. Shoba. ^Counsel for Respondents : 1. Sri Panduranga Reddy, G.P. for Industries & Commerce. 2. Sri Gourishankar Sanghi, Standing Counsel for railways. <GIST: > HEAD NOTE: ? Cases referred 1. (1998) 6 SCC 476 2. AIR 1995 SC 858 3. 1996 (1) ALD 198 (D.B.) 4. (2004) 6 SCC 281 THE HON’BLE SRI JUSTICE P.S. NARAYANA WRIT PETITION Nos.490 of 2000, 6874, 9486 & 9498 of 2001, 21788 of 2002, 5756 of 2004 and 14077, 14030 & 13746 of 2006 Date: .09.2006 Between: Progressive Constructions Co. … Petitioner in W.P.No.490/00 M/s. Madhucon Projects Ltd. … Petitioner in W.P.No.6874/01 M/s. Naveen Stone Crushers. … Petitioner in W.P.No.9486/01 K.Srinivasa Rao --- Petitioner in W.P.No.9498/01 M/s. Siddardha Constructions (P) Ltd. … Petitioner in W.P.No.21788/02 Robho Sillicon Private Ltd. … Petitioner in W.P.No.5756/04 M/s.Rock Sand Minerals … Petitioner in W.P.No.14077/06 Rank Silicon Private Limited. … Petitioner in W.P.No.14030/06 M/s. Jyothi Constructions. … Petitioner in W.P.No.13746/06 AND The South Central Railway and others … Respondents in all the Writ Petitions THE HON’BLE SRI JUSTICE P.S. NARAYANA WRIT PETITION Nos.490 of 2000, 6874, 9486 & 9498 of 2001, 21788 of 2002, 5756 of 2004 and 14077, 14030 & 13746 of 2006 COMMON ORDER: This batch of writ petitions is being disposed of by a common order since substantial question involved in all these writ petitions being the same. In certain of these writ petitions, there are interim orders and in certain of these writ petitions, no interim orders are made. Learned Government Pleader for Industries and Commerce had opposed the passing of an interim order on the ground that there is a change of situation by virtue of G.O.Ms.No.217, dated 29.09.2004. 2. The learned Counsel representing the petitioners would submit that in the nature of the reliefs prayed for, it would not alter the situation in any way and even otherwise subsequent to the said G.O. in certain writ petitions interim orders have been made. Inasmuch as, counter-affidavits are filed, this Court thought it fit to dispose of all these matters finally. 3. Submissions at length were made by Smt. Shoba, learned Counsel representing the petitioners, Sri Panduranga Reddy, learned Government Pleader for Industries and Commerce and Sri Gourishankar Sanghi, Standing Counsel for Railways. 4. Learned Counsel representing the petitioners had taken this Court through the pleadings of the parties and would contend that certain arithmetical calculations and the details specified in the expert committee report, the petitioners are not aware of and they were never put on notice. Learned Counsel also had drawn the attention of this Court to Sections 9, 13 and 15 of the Mines and Minerals (Development and Regulation) Act 1957, hereinafter in short referred to as Act for the purpose of convenience. Learned Counsel also had drawn the attention of this Court to Rule 64 (b) of the Mineral Concession Rules, 1960 and also to Schedules I and II under Rule 10 as substituted by G.O.Ms.No.217, I&C (M-1) Department, dated 29.09.2004 of A.P. Minor Mineral Concession Rules 1966 in short hereinafter referred to as Rules for the purpose of convenience, and would maintain that absolutely the petitioners have no objection if the respondents follow Rule 10 of the Rules specified supra read along with Schedules I and II. Certain submissions were made by the learned Counsel in relation to the Technical Study Report. The Counsel also had further explained that even in relation to the Technical Study Report none of the petitioners were put on notice. Learned Counsel would also had drawn the attention of this Court to Rule 34 of the Rules and also placed reliance on certain decisions to substantiate her contentions. Learned Counsel also contended that if the unit is elsewhere, the Government had no right to make any claim at all. 5. Per contra, Sri Panduranga Reddy, learned Counsel representing the respondents had distinguished the decisions and would maintain that the issue of dispatch permits and the variations being a new issue, it cannot be said that any of the decisions cited by the learned Counsel for the petitioners would be applicable to the facts of these cases. Learned Counsel had explained the Technical Study Report on Volumetric and Tonnage Variation due to crushing of stones and boulders by department of Mines and Geology, Government of A.P., Hyderabad, several mathematical and arithmetical calculations and how the leaseholders are making attempts to evade the payments due to the Government. Learned Counsel also had well explained Rule 10 of the Rules and Scheduled I and II thereunder as amended and Rules 26 and 28 of the Rules as well and would conclude that the writ petitions are liable to be dismissed. 6. Sri Gourishankar Sanghi, learned Counsel representing the Railways in one of the matters had clarified the position by explaining the stand of the railways in this regard. Heard the Counsel. W.P.No.490 of 2000 7. Progressive Constructions Company, the writ petitioner, filed this writ petition praying for a Mandamus directing the respondents to assess the quantities of ballast by applying conversion factor which is followed by other railways including the South Eastern Railways and not to insist on volumetric method and pass such suitable orders. 8. In this matter Rule Nisi was issued on 20.01.2000 and in WPMP.No.631 of 2000 interim stay was granted and notice was ordered. In WVMP.No.1909 of 2003 the interim order was made absolute on 27.10.2003 with a direction to expedite hearing by fixing a date. 9. It is stated that the petitioner – Firm is one of the contractors of supply of ballast to the South Central Railway and with a view to supply the material, the petitioner firm had obtained a quarry lease for stone and metal over an extent of 2 hectors in Sy.Nos. 217 and 271 of Vattinagulapalli, Rajendranagar Mandal, R.R. District for a period of 10 years. Necessary quarry lease deed had also been executed between the petitioner and the State Government of Andhra Pradesh. Since then, the work order was given on 17.06.1998 by the Assistant Director of Mines and Geology, Hyderabad. 10. It is further stated that the petitioner was given a contract by the South Central Railway to supply 1,05,000/- cum. of ballast. So far the petitioner had supplied 23,384 cum. of ballast to the respondents. The petitioner had obtained permits for the transport of the ballast from the 5th respondent herein and he had paid seigniorage fee on 23,206 cum. If the conversion factor is applied, the quantity of ballast will be 42,192 cum. That’s why the petitioner prays that the respondents should assess the quantity of ballast by applying “Conversion factor” which is being done by the South Eastern Railway. The respondents cannot measure supplied quantity of ballast on “Volumetric Method”. It is further stated that it is held by this Court that, ‘Seigniorage fee is payable only on the excavated and dispatched mineral’. The Hon’ble Supreme Court also held in the decision reported in STATE OF ORISSA & OTHERS vs STEEL AUTHORITY INDIA LIMITED (AIR 1998 SC 3052) that ‘the levy of royalty is in respect of the mineral removed or consumed by the contractor from the leased area’. It is further stated that Ballast is manufactured from stones obtained from quarries leased out by the Mines Department of Government of A.P. The raw material or stones are taken from the quarries to the crusher for crushing and by crushing the big stones they were converted into small stones of 50 mm size, which are used on the Railway tracks as ballast. 11. At para 7 Rules 10 and 34 of the APMMC Rules 1966, hereinafter in short referred as Rules 1966, were referred to. 12. It is further stated that the ballast made from the raw stones, when measured on volumetric basis measures more in volume on account of the bulkage resulting from the ‘Voids’, which is inherent in the very nature of things as they are. This fact is also supported by P. N. Khanna’s India Practical Civil engineering Handbook. It is also relevant to note that this procedure is also followed by the South Eastern Railway. Even the recent test report on conversion of big stones into ballast given by Chitanya Bharati Institute of Technology, Hyderabad, supports the view that ‘the ballast made from the raw stones, when measured on volumetric basis measures more in volume’. It is further stated that according to proven physical laws, there is a large variation between the quantity of material actually removed from the quarry in the shape of big stones (for which seigniorage fee has to be paid under the APMMC Rules, 1966 as mentioned above) and the quantity of ballast in the shape of small pieces supplied to the Railways. This variation is due to the fact that a large piece of stone measuring 1 cum. of volume, when converted into small stones either by breaking or crushing and heaped would measure 1.818 or 1.82 cum. The resultant higher volume is due to the ‘voids’ that develop in between the heaped up small stones. When the heaps of ballast are measured according to the standard methods those ‘voids’ are also taken into account. These are built into the heaps or stacks. The inflate volume here is an illusion, but that is mixed with reality. 13. It is further stated that from the above proposition it is seen that the volume of large stone measuring 1 cum when converted into small stones and stacked would measure about 1.818 or 1.82 cum. due to ‘voids’ occurring between the small stones. Now, if the monolithic stone of 1 cum. volume is weighed and compared with the weight of the total quantity of the small stones manufactured from this i.e. 1.818 or 1.82 cum., both would be identical. In other words, the inflationary content in the volume of stacked stones can be established by weighment method since ‘voids’ would not weight. It is further stated that the above stated ‘conversion factor’ was brought to the notice of the respondents and the petitioner informed them that the demand made by them for payment of seigniorage fee on the basis of ‘volume’ of the finished product i.e. ballast is not tenable under the circumstances stated above. He also brought to their notice that a precedent in this regard is existing on the South Eastern Railways. There at huge quantity of ballast and metal were supplied by a contractor earlier for the construction of new railway line between Koraput and Raigada stations of South Eastern Railways. The question of assessing the quantity of stone for payment of seigniorage fee to the Government of Orissa had arisen then. For this purpose, the Chief Engineer (Con.) South Eastern Railway, Laxmipur (Orissa) who was incharge of the work, fixed the conversion factors based on unit weight of stone and issued a Circular No.CE(C)/ LXP/11/R/1518, dt.27/28.11.90. The Contractor who executed ballast supply works on South Eastern Railway had paid the Seigniorage fee, which had been accepted without any demur by the Railway authorities and Government of Orissa. 14. It is further stated that the petitioner brought all the above facts to the notice of the 2nd respondent and requested him for applying the ‘conversion’ factor for assessment of quantity of ballast supplied to the Railways, and also requested him not to make recovery of any amount from the bills payable to him. The petitioner had submitted the vouchers showing details of seigniorage charges paid to the Mines and Geology Department for quantities of raw material removed from the quarries. The petitioner had submitted proof of payment of seigniorage charges for a quantity of raw material and that the respondents are bound to calculate the royalty charges payable by him on the ‘conversion factor’ which was accepted by the South eastern Railways and pass the bills till the quantity reaches. Thereafter, the petitioner will submit fresh vouchers in proof of further payment to cover further quantities of supply. It is further stated that there is a Special Condition No.8(a) of the Contract entered with the respondents by the petitioner by which the Railway reserved the right to recover royalty charges from the on accounts bills if the contractor does not submit proof of payment. The above clause is only to ensure correct payment of seigniorage charges to the State Government. But, the seigniorage charges actually due to the State Government have been paid as per Rule 10 of the Rules, 1966 and the various decisions of this Court and Supreme Court. 15. The Assistant Director, Mines and Geology, filed WVMP.No.1909 of 2003 wherein in the counter-affidavit it is averred that the petitioner was granted a quarry lease of stone and metal over an extent of 2 hectors in Sy.Nos.217 and 271 of Vattinagulapalli village, Ranga Reddy district for a period of 10 years. According to Rules, 1966 the quarry lease holders for stone and metal are permitted to undertake the processing of stone boulders into road metal/ballast by manual operations and transport the rough stone boulders to the crushing unit and undertake the process of crushing the granite boulders into various sizes by mechanical process and supply to the consumers. In the first method, the rough stone is subjected to manual processing into road metal/ballast and the finished product is dispatched from quarry site. Therefore, the levy of seigniorage fee is decided on the finished goods dispatched from quarry site, under Rule 10(1) of Rules, 1966. In the second method, the rough stone is dispatched from the quarry site in lump form (as boulders only) and subjected to mechanical crushing to derive various sizes of metal as 60 MM, 50 MM, 40 MM, 30 MM, 20 MM, 12 MM and 6.7 MM. Therefore, the seigniorage fee paid for one Qubic Metre of Stone and metal yields 20% of 50 MM and 60% are other sizes of metal produced in the mechanical crushing leaving 20 to 25% its processing waste in air. Therefore 0.2 Cub. Metre of 50 MM Ballast is only derived from 1 Cub. Mt. of stone and metal and the quantity covered by payment of seigniorage fee is only 0.20 Cubic Metre. Therefore the imposition of seigniorage fee is not based on the ‘Volumetric measurement’ of Ballast supplied, but on the finished product derived from mechanical conversion of Stone and Metal dispatched and utilized in the process. Further ‘Ballast’ supplied by the petitioner is one of the finished products yielded in Mechanical crushing of stone and metal in a crushing unit and it is not existing freely in the quarry leased area as raw material useful for supply as ‘Railway Ballast’. Hence the volumetric measurement of Ballast for determination of the raw material utilized for deriving the finished product and imposition of seigniorage fee on the proportionate quantities is not disputed by any authority. Therefore allowing the air voids in volumetric measuring of Ballast produced in crushing and applying the conversion factor for deciding the raw material required is a settled law and there is no irregularity. W.P.No.17417/99 (but not W.P.No.17917/99) is filed questioning the demand notice issued by the Deputy Director of Mines & Geology, Hyderabad and the said writ petition is disposed of by an order dated 13.11.2001 directing the petitioner therein to file appeal. 16. It is also further stated that the petitioner is having a valid quarry lease for stone and metal over an extent of 2 hectors in Sy.Nos.217 and 271 of Vattinagulapalli, Ranga Reddy District for 10 years with effect from 17.06.1998 and that the petitioner is permitted to dispatch a rough stone boulders to the existing unit after payment of seigniorage fee in advance and accordingly the petitioner obtained a valid dispatch permit under Rules. 17. It is also stated that the petitioner was permitted to dispatch from the quarry site a quantity of 23.286 Cubic Metres of Stone & Metal to be crushed in the “Crushing Unit”. As per the established norms the products derived in the crushing unit are 20% 50 MM Ballast and 60% other size metal products such as 20 MM, 12 MM and 6.7 MM. The petitioner is supplying 50 MM metal only to Railway Department and other products are being sold to local consumers. This is evident by the invoices available with the lessee in support of the sale of by-products other than 50 MM. By applying the conversion factor in between the raw material utilized for manufacturing of 50 MM metal is only l:02 Cubic Metres. Therefore the lease holder can produce 50 MM metal in his crusher by dispatching 23,386 Cubic metres from the quarry site is only 4676 cubic metre. Therefore, as per the petitioner’s contention that he had supplied 23,384 Cubic Metres of Ballast by utilizing 23,286 Cubic Metre of Stone & Metal in his crushing unit is totally incorrect and false. He had extracted more material without payment of seigniorage fee and derived 23,384 Cubic Metres illegally in violation of Rules, 1966 and supplied the same to the Railway Department. Further, the contention of the petitioner that by applying the conversion factor the quantity of Ballast will be 42,192 Cubic Metres is lacking the support and evidence since the material supplied by the petitioner is a product mechanically derived from crushing the stone boulders. The products derived in the crushing is not only 50 MM metal, but also 20 MM, 12 MM, & 6.7 MM Metal. The petitioner totally ignored the other products derived in the process and tried to misrepresent the facts before this Court with a determined bid to derive personal gain by drawing attention wrongly to volumetric method. The metal supplied was not available in the quarry in free state and the petitioner is not having any valid permit for dispatch of 50 MM Metal from the quarry site for considering the volumetric conversion factor. Further, the fact that the granite used as Stone & Metal for producing Road Metal, building Stone & Rough Stone exists as small boulders. The granite existing in large quantities and amenable to be recovered as dimensional stones attracts higher seigniorage fee as per Granite Conservation Rules, 1999. The seigniorage fee leviable on small granite boulders useful as Stone & Metal is Rs.33 per Cubic Metre and the compact form is applicable for recovery as granite in 1 Cubic Metre attracts the Granite Conservation Rules, and attracts the imposition of seigniorage fee Rs.1,000/- to 1,500/- per 1 Cubic meter depending on the colour component. Therefore, the petitioner’s contentions are totally irrelevant, improper and against the existence of raw material in nature. 18. It is further stated at para 6 of the counter-affidavit that as per Rule 10(1) of Rules, 1966 the seigniorage fee is leviable on the quantities of Stone & Metal dispatched from the quarry site to the crusher. After processing the Stone & Metal in the crusher, the products derived in the process are 60 MM, 50 MM, 40 MM, 20 MM, 12 MM and 6.7 MM and the products depend on the hardness of the stone available in the quarry. Therefore, the contention of the petitioner to assess his supplies considering that he had supplied 50 MM Railway ballast of 1.82 Cubic metre by utilizing 1 cubic metre of stone & Metal is totally incorrect and it is an attempt to disregard the basic concept about the resultant yields in the process of stone and metal by mechanical crushing. The conducive and conjugate laws forbid for application of irrelevant factors for deriving the estimated quantities derived in industrial process in mining industry. Therefore, the quantities of Ballast produced including air voids by utilizing rough stone boulders and physical measurement of Ballast by volumetric basis and deciding the volume of stone and metal taking into consideration voids and other factors exist on similar factors. The imposition of seigniorage fee on stone and metal depends on small boulders extracted from quarry lease as per Rules, 1966 is Rs.33/- per cubic metre. If the same stone is existing in prescribed dimension and compact form of 1 cubic metre and above, the seigniorage fee leviable attracts the Conservation of Granite Rules 1999 is Rs.1,000/- or Rs.1,500/- per cubic metre depending on colour. Therefore the existence of granite in compact form or in small boulders is considered and differentiated while imposition of seigniorage fee. Therefore, the physical measurement quantities applicable to a natural product existing in the nature and the product derived by breaking boulders and produced along with other 60 MM, 40 MM, 20 MM, 12 MM and 6.7 MM cannot be equated and made applicable. The hardness of the stone boulders, the sharpness and breaking capacity of jaw crushers used in crushing unit are the prime factors for determination of the yield. The total industrial by-products are to be assessed while assessing the quantities utilized for producing a particular size of metal and depending on this factor the imposition of seigniorage fee depends and no other procedure is prescribed in the Rules, 1966. The total quantity of 1 Cubic metre rough stone in the form of small boulders does not yield only 50 MM metal during crushing process. The ratio in between the raw material and production of 50 MM metal is 5:l. Therefore, the conversion factor of the raw material required for drawing 1 cubic metre of 50 MM metal had to be worked out and assessed accordingly. The air voids existing in the 50 MM are also included to determine the yield. Therefore, introduction of weight-age factor to avoid the existing voids in the heaps is against the Rules, 1966 as stipulated by Government of Andhra Pradesh by exercising rule making power under Section 15(1A)(g) of the Act 1957. 19. It was also stated at para 7 of the counter-affidavit that the Regulation of Minor Minerals in A.P. is regulated by Rules, 1966 formulated under Section 15 of the Act, 1957. The Rules framed by Government of Orissa on Minor Minerals cannot be made applicable in Andhra Pradesh and they are to be regulated as per Rules, 1966 and the imposition of seigniorage fee depends on the rules that are in force on the day of consideration. The adequate provisions to assess the seigniorage fee considering the stocks in tons is not existing in the rules. Therefore, the request of the petitioner to follow the rules formulated by Orissa Government in case of supplies made from Andhra Pradesh is not acceptable and there are no provisions in Rules, 1966 to this effect. 20. It was further stated that the Government of A.P. stipulated the condition to State Government Departments and Central Government Departments to recover single time seigniorage fee on the minor minerals consumed while executing the local works by the contractors. The orders of Government of A.P. do not find any alternative to examine the contentions of the petitioner on the ground of volumetric method. Hence, the imposition of seigniorage fee on the quantities consumed by the contractors is subjected for assessment of seigniorage fee due on the material utilized in the works. Hence, the stand taken by petitioner is untenable. 21. In the counter-affidavit filed by respondents 1 to 4, it was averred at paras 3 to 10 as hereunder: “The petitioner had agreed to supply 105000 m3 of stone ballast crushed and loaded into railway wagons by