Case: National Mineral Dev.Corpn.Ltd Vs. State Of M.P.

Mineral Concession Rules, 1960. The Mineral Concession Rules, 1960 (hereinafter referred to as the Rules, for short) have been framed by the Central Government in exercise of the powers conferred by Section 13 of the Mines and Minerals Regulation and Development Act, 1957. Rules 64-B and 64-C have been introduced therein by GSR 743(E) dated 25.9.2000 which read as under: "64-B. Charging of Royalty in case of minerals subjected to processing : (1) In case processing of run-of mine mineral is carried out within the leased area, then, royalty shall be chargeable on the processed mineral removed from the leased area.(2) In case run-of-mine mineral is removed from the leased area to a processing plant which is located outside the leased area, then, royalty shall be chargeable on the unprocessed run-of-mine mineral and not on the processed product." "64-C Royalty on tailings or rejects- On removal of tailings or rejects from the leased area for dumping and not for sale or consumption, outside leased area such tailings or rejects shall not be liable for payment of royalty:Provided that in case so dumped tailing or rejects are used for sale or consumption on any later date after the date of such dumping, then, such tailings or rejects shall be liable for payment of royalty." 33. Though the objects and reasons which prompted the abovesaid amendment are not known to us (none placed for consideration by any of the parties) in all probability the same seems to have been prompted by the pronouncement of this Court in State of Orissa vs. Steel Authority of India Ltd. (supra). Be that as it may, the abovesaid Rules also suggest the intention of the Government that dumped tailings or rejects (or in other words slimes) are to be treated as a separated head and charge of royalty therein is not to be made as a matter of course. Dumped tailings or rejects may be liable to payment of royalty if only they are sold or consumed. Rules 64-B and 64-C are general in nature, applicable to all types of minerals. There are several other entries in the Second Schedule where a mineral is liable to royalty on tonnage basis no sooner extracted and as run-of-mine (ROM). Such entries do not further classify the mineral by reference to its constituents. The case of iron ore is different. So far as the iron ore is concerned, the provisions of the Section 9 of the Act read with Entry 23 of the Second Schedule and the abovesaid Rules homogeneously construed do not subject the run of mine (ROM) to payment of royalty. The Second Schedule does not prescribe any rate of royalty on the iron ore as run-of-mine and the levy of royalty has to be postponed until the processing has been done and the quantity of lumps, fines and concentrates (none of which will include slimes) has been found out on the availability of which data alone the royalty is capable of being quantified. Under the Second Schedule, the slimes which have come into existence shall have to be excluded from the charge of royalty.34. S/Shri S.K. Agnihotri and Prakash Shrivastava, the learned counsel for the States of Madhya Pradesh and Chhatisgarh submitted that the Rules 64-B and 64-C have come to be framed on 25.9.2000 and cannot be applied retrospectively. We agree. There is no question of giving the abovesaid amendment in Rules a retrospective operation. These Rules only clarify the position as it already existed and are intended to remove the doubts. We have pressed the said two Rules into service only for the purpose of reinforcing the conclusion which we have already arrived at de hors the said amendment in Rules. 35. The case of State of Orissa vs. Steel Authority of India Ltd. (supra), which was relied on by the High Court and by the learned counsel for the respondents before us is distinguishable. There the question arose as to the charge of royalty on dolomite and limestone dealt with by Entries 15 and 26 respectively of the Second Schedule. Both these minerals were utilized as raw material by the mining lessees on the leased area itself. The mining lessee claimed that dolomite and limestone having been extracted from the mine underwent processing wherein a part of the mineral was wasted and the wastage remained on the leased area and not removed therefrom. The contention of the lessee was that royalty could not be demanded on that portion of the wastage which was not removed from the mining area. This contention was repelled by this Court by reference to Section 9(1) of the Act which speaks of payment of royalty in respect of any mineral removed or consumed by the lessee. The Court held that though the impurities part of dolomite and limestone was not removed from the leased area but that would not make any difference as the run-of-mine was itself consumed in the processing on the leased area. 36. Entry 15 levies royalty on tonnage basis on the dolomite itself so also Entry 26 levies royalty on limestone itself as run-of-mine though two different rates are prescribed depending on the grade or percentage of silica content in the limestone. The scheme of those two entries is different from the scheme of Entry 23 dealing with iron ore. As no rate of royalty has been prescribed in the Second Schedule to be charged on slimes and also no rate of royalty has been prescribed or iron ore as run-of-mine, royalty cannot be charged on the wastage.37. Our answers to the questions framed in the earlier part of this judgment are:(i) Slime or slimes is a term well understood in mining industry and trade. It is different from fines and concentrates - the term as used in the Second Schedule, Entry-23 of this Act;(ii) Slime or slimes cannot be included in fines or concentrates for the purpose of charging royalty under Section 9(1) read with Entry-23 of the Second Schedule of the Act.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. From the abovesaid definitions as available in two reference books, the High Court has concluded that slime is nothing but powdery form of iron ore and it contains small grains ofA little after we will test the impact of the inference sothe submission of the appellant, the iron ore slimes have been treated as waste product though it contains iron content in the range ofbecause it is not usable by any of the existing technologies. Suitable technologies are still being explored and examined for converting these iron ore slimes into valuable added products.22. The submission is not refuted by the respondents that although efforts are being made to win ferrous material from the slimes by innovating scientific and technological methods, the achievements made till this date do not make the process commercially viable inasmuch as the cost incurred in winning ferrous material from slimes is prohibitive; the cost incurred exceeds the value of the ferrous so won, out of all proportion. Thus whatever may be the future, as on the day, the slime, including its ferrous contents, is just a waste with no commercial value as it can neither be used or consumed and there are not takers of the same in business, commerce andcharging provision and the computation provision do differ qualitatively. In case of conflict, the computation provision shall give way to the charging provision. In case of doubt or ambiguity the computing provision shall be so interpreted as to act in aid of charging provision. If the two can be read together homogenously then both shall be given effect to, more so, when it is clear from the computation provision that is meant to supplement the charging provision and, is, on its own, a substantive provision in the sense that but for the computation provision the charging provision alone would not work. The computing provision cannot be treated as mere surplusage or of no significance; what necessarily flows therefrom shall also have to be given effect to.25. Applying the abovestated principle, it is clear that Section 9 neither prescribes the rate of royalty nor does it lay down how the royalty shall be computed. The rate of royalty and its computation methodology are to be found in the Second Schedule and therefore the reading of Section 9 which authorizes charging of royalty cannot be complete unless what is specified in the Second Schedule is also read as part and parcel of Section 9.26. A bare reading of Entry 23 reveals that the Parliament has not chosen to compute royalty on iron ore by itself and quantifiable as run of mine (ROM). The Parliament is conscious of the fact that iron ore shall have to be subjected to processing whereafter it would yield (i) lumps, (ii) fines, (iii) concentrates and (iv) slimesthe last one to be found deposited in the tailing pond. The Parliament has to be attributed with the knowledge that keeping in view the advancements in the field of science and technology as on the day, the slimes do not have any commercial value. While carrying out prospecting operations it is known what will be the strength of the iron ore (i.e. the percentage of ferrous content) available in a particular area. By reference to such strength or quality of iron ore, the rate of royalty could have been made available for calculation based on the quantity of the iron ore as run of mine and quantifiable on per tonne of iron ore, that is, tonnage of iron ore as such. Parliament has chosen not to do so. Entry 23, the manner in which it has been drafted, mandates the quantification of royalty to await or be postponed until the processing has been carried out and the lumps, fines and concentrates are prepared. Once the result of processing is available, the lumps, fines and the concentrates are subjected to levy of royalty at different rates applied by reference to the quantity of each of the three items earned as a result of processing. The slimes have been left out of consideration by Entry 23 for the purpose of quantification and levy.27. The High Court is, therefore, not right in forming an opinion that the slimes are part of fines and hence liable to be included in Clause (ii) of Entry 23 for the purpose of charging the royalty. In the mining circles, fines and slimes both have different meanings. Both the terms are well understood as two different objects. Slimes cannot be included inreason is that it is they who are concerned with it, and, it is the sense in which they understand it which constitutes the definitive index of legislative intention." "The true test for classification was the test of commercial identity and not the functional test". The learned author states that the question to be asked in such cases in how is the product identified by the class or section of people dealing with or using the product? If the word has acquired a particular meaning in the trade or commercial circles that meaning becomes the popular meaning in the context and should normally be accepted. The words having a special meaning in the context of a particular field of art or science ought to be understood in that sense. Such a special meaning, i.e. the technical meaning, shall be assigned as distinguished from the more common meaning that the word may have.29. It is clear that in iron or production the run of mine (ROM) is in a very crude form. A lot of waste material called impurities accompanies the iron ore. The ore has to be upgraded. Upgrading the ores is called beneficiation. That saves the cost of transportation. Different processes have been developed by science and technology and accepted and adopted in different iron ore projects for the purpose of beneficiation. In the processes, a stage is reached which yields concentrates. They are treated in the concentrate plant by resort to physical, chemical and / or electrical methods. The valuable constituents are retained and what is discarded as tailings or slimes is something of no commercial value, being just impurities consisting of unusable materials. Concentrates is not necessarily a stage reached in all the processes. Concentrates consist of enriched ore segregated from waste in concentration plant. It is a substance of intensified strength having been purified by removal of valueless mud, slurry, impurities and waste. Wet processing (at a stage after fines have already been won) separates extremely fine particles, grains or fragments of ore which are too poor to be treated any further and have to be flown for being consigned to tail bonds as waste separated from concentrates. From concentrates iron can yet be won. Concentrates differ from slimes are to be found as such not in concentration plant but only in tail pond. What reaches tailing dam or pond is slurry. Solid particles are deposited and clean water overflows. This processing is done to prevent pollution and to protect environment. There are ferrous contents in the slurry but that is a total waste. Inasmuch as, and undisputedly, by any process or technique known to science and technology till this date, winning of ferrous contents from out of the slurry is commercial unviable. The slimes are accepted by the mother Earth once again to be dissolved in itsdone so the Parliament has not saidfines including slimes. Though slimes are not fines the Parliament could have assigned an artificial or extended meaning to fines for the purpose of levy of Royalty which it has chosen not to do. It is clearly suggestive of its intention not to take into consideration slimes for quantifying the amount of royalty. This deliberate omission of Parliament cannot be made good by interpretative process so as to charge royalty on slimes by reading Section 9 of the Act divorced from the provisions of the Second Schedule. Even if slimes were to be held liable to charge of royalty, the question would still have remained at what rate and on what quantity, which questions cannot be answered by Section 9.Though the objects and reasons which prompted the abovesaid amendment are not known to us (none placed for consideration by any of the parties) in all probability the same seems to have been prompted by the pronouncement of this Court in State of Orissa vs. Steel Authority of India Ltd. (supra). Be that as it may, the abovesaid Rules also suggest the intention of the Government that dumped tailings or rejects (or in other words slimes) are to be treated as a separated head and charge of royalty therein is not to be made as a matter of course. Dumped tailings or rejects may be liable to payment of royalty if only they are sold or consumed. Rulesare general in nature, applicable to all types of minerals. There are several other entries in the Second Schedule where a mineral is liable to royalty on tonnage basis no sooner extracted and as(ROM). Such entries do not further classify the mineral by reference to its constituents. The case of iron ore is different. So far as the iron ore is concerned, the provisions of the Section 9 of the Act read with Entry 23 of the Second Schedule and the abovesaid Rules homogeneously construed do not subject the run of mine (ROM) to payment of royalty. The Second Schedule does not prescribe any rate of royalty on the iron ore asand the levy of royalty has to be postponed until the processing has been done and the quantity of lumps, fines and concentrates (none of which will include slimes) has been found out on the availability of which data alone the royalty is capable of being quantified. Under the Second Schedule, the slimes which have come into existence shall have to be excluded from the charge of royalty.34. S/Shri S.K. Agnihotri and Prakash Shrivastava, the learned counsel for the States of Madhya Pradesh and Chhatisgarh submitted that the Ruleshave come to be framed on 25.9.2000 and cannot be applied retrospectively. We agree. There is no question of giving the abovesaid amendment in Rules a retrospective operation. These Rules only clarify the position as it already existed and are intended to remove the doubts. We have pressed the said two Rules into service only for the purpose of reinforcing the conclusion which we have already arrived at de hors the said amendment in Rules.Entry 15 levies royalty on tonnage basis on the dolomite itself so also Entry 26 levies royalty on limestone itself asthough two different rates are prescribed depending on the grade or percentage of silica content in the limestone. The scheme of those two entries is different from the scheme of Entry 23 dealing with iron ore. As no rate of royalty has been prescribed in the Second Schedule to be charged on slimes and also no rate of royalty has been prescribed or iron ore asroyalty cannot be charged on the wastage.37. Our answers to the questions framed in the earlier part of this judgment are:(i) Slime or slimes is a term well understood in mining industry and trade. It is different from fines and concentratesthe term as used in the Second Schedule,of this Act;(ii) Slime or slimes cannot be included in fines or concentrates for the purpose of charging royalty under Section 9(1) read withof the Second Schedule of the Act.