Case: State of M.P.  Vs. Mahalaxmi Fabric Mills Limited and Ors

of Rs. 5.30 per tonne to Rs. 70 per tonne w.e.f. 1.3.1991. These rates have not been made applicable to the States of Assam and West Bengal because these States are levying/ collecting cesses on coal as their Cess Acts have not been struck down by the Courts so far. Placing reliance on these averments, of the concerned authorities it was vehemently contended by Mr. Sorabajee and Mr. Ramaswamy that the impugned Notification is issued not for the purpose of development of mineral as contemplated by Section 9(3) but entirely for a collect oral purpose of compensating the State Governments for the loss of cess revenues and for swelling their coffers. It is not possible to agree with this contention. The aforesaid averments clearly indicate that from 1981 rates of royalty were not increased further and there was a demand from all States to make suitable increase in rates of royalty to be commensurate with the rising prices of coal. That is why the first study group was appointed in 1984 and that was followed by second study group of 1991. Naturally the second study group came to the conclusion that the cesses imposed were struck down by this Court and, therefore, there was a need for properly enhancing royalty rates. As Section 9(3) is the only Section remaining in field which could permit such an exercise and it was only the Central Government which could do so, accordingly the impugned Notification has been issued. It tried to enhance the rates of royalty which earlier the States unauthorisedly tried to bring about. If the original writ petitioners contentions are accepted, it could even be contended that neither the Central Government under Section 9(3) nor the State Governments could increase the rates of royalty and 1981 rates which have become illusory with the passage of time continue to hold the field ad infinitum. It has to be kept in view that a fresh exercise of delegated legislative function in the facts and circumstances did justify such enhancement at least after 10 years of the earlier revision in 1981. The motive underlying the said enhancement to compensate the States for loss of revenue which they have suffered cannot be said to be totally irrelevant or having any vitiating effect on the exercise of power under Section 9(3) which is otherwise required to be resorted to in the facts and circumstances of the case. The motive of legislature or for that matter of the delegate in exercising delegated legislative function for enacting a provision within its competence cannot be considered to be in any way having any relevant nexus to the efficacy of the product of such an exercise. As we have already discussed earlier, the mineral belongs to the States, and so, if the Central Government has taken into consideration the fact that the States revenues are required to be re-compensated on account of the loss suffered by them in their abortive efforts to escalate the royalty, it cannot be considered to be an irrelevant consideration. It clearly appeared that after 10 years from 1981 during which the royalty rates remained static there was a crying need of the day for the Central Government to exercise its power under Section 9(3) and to revise upward the royalty rates in conformity with the rising prices of the minerals around as mentioned in the counter and for which there was a strong representation by the various States Governments to the Central Government. With respect we are not in a position to endorse the view of the High Court that the impugned Notification was a colourable devise and was issued for extraneous. Equally, we are not in a position to agree with the contention of Shri Ramaswamy that the said Notification was issued for an alien purpose. The third point for our consideration is, therefore, answered in the negative. Point No. 4 27. So far as this point is concerned, it is true that even the exercise of delegated power can be challenged on the ground that that it is highly arbitrary, irrational and confiscatory in nature and would not stand the test of Articles 14 and 19(1)(g). Learned counsel for the writ petitioners submitted that as compared to the rates of royalty fixed in 1981, the present rates have gone up by 200 to 400 per cent and, therefore, they have become confiscatory in nature. It is not possible to agree with the contention as the writ petitioners have laid no evidence to show as to how this escalation of rates for different types of coal extracted by the lessee of mines had adversely affected their business or that they are thrown out of business because of such heavy burden of escalated royalty. It is not the case of any of writ petitioners that their mining operations had to be closed down because of such high rates of royalty as enhanced by the impugned Notification. Also there is nothing on record to show whether the burden of this enhanced rates of royalty is borne only by the lessee of the mines who have extracted the minerals and has not been passed on to the customers by adding it to the price of coal. As all these are questions of facts there should be clear pleading and proof. There is no such material on the record from which on the basis of such arguments any decision can be rendered. Only on this short ground, we must hold that the original writ petitioners have failed to show how the enhanced rates of royalty as per the impugned Notification have become unreasonable or confiscatory in nature. Point No. 4 is, therefore, answered in the negative. 28. As all the points raised by the writ petitioners are answered against them, the inevitable result is that the orders passed by the High Court in their favour by partly allowing the writ petitions will have to be quashed and set aside and their writ petitions will have to stand dismissed.

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

Explanation:
1[ds]12. It becomes obvious that Parliament while enacting Section 9 has already laid down the rates of royalty to be charged on the removal and consumption of mineral by any lessee of mining lease, his agent or manager or Sub-lessee, from the leased area. The rates of royalty are scheduled in the Act. So far as coal is concerned it is by Entry 11 of the Second Schedule. Separate rates of royalty are prescribed for different types of coal. However, the Parliament felt that these rates of royalty may be required to be enhanced or reduced from time to time due to fall of money value with the passage of time or vice versa. For that very purpose the Central Government as per section 9(3) is permitted by Parliament to amend the second Schedule by Notification to be published in official Gazette from time to time subject to the proviso that the Central Government shall not enhance mineral and mines royalty for more than once during the period of three years. The power conferred upon the Central Government under Section 9(3) is by way of delegated legislative power.13. In our considered opinion there is no substance in either of the twin contentions for challenging vires of Section 9(3). So far as competence to enact Section 9 is concerned, the question is no longer res Integra. It is covered by the Constitution Bench decision of this Court in the case India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors. [1991]188ITR690(SC) . In that decision the Constitution bench speaking through Sabyasachi Mukherji J., as he then was, expressly rules that royalty is a tax and for imposing such royalty the State legislature will have no power under Entry 50 of the Second list. Mr. Sanghi contended that strictly royalty cannot be said to be a tax and to that extent the decision of the Constitution bench may appear to be erroneous. It is not possible to agree with this contention. In paragraph 34 of the report the Constitution Bench has made the following pertinent observations :34. In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State legislature because Section 9 of the Central Act covers the field and the State legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under. Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land.14. It is true that in paragraph 13 of the report the Constitution Bench noted the Judgments of Rajasthan, Punjab and Gujarat High Courts which had taken the view that royalty was not a tax and it is equally true that it is not expressly mentioned in the judgment of the Constitution Bench that these judgments were erroneous or were required to be over ruled. However on a conjoint reading of paras 31 and 34 of the report, it becomes obvious that the view that royalty is not a tax as expressed by these High Courts did not find favour with the Constitution Bench of this Court which took a contrary view. Therefore, these judgments necessarily stood over ruled, on this aspect. It is true that in the last line of paragraph 34 it is mentioned that royalty on mineral rights is not a tax on land but a payment for use of land but these observations are in connection with Entry 49 List II which deals with a tax on land. But so far as nature of royalty is concerned it is clearly rules to be a tax by the Constitution Bench, and that is the reason why the Constitution Bench reached the conclusion that any cess on the royalty would be a tax. It would be beyond legislative competence of the State legislature as Entry 50 in List II would be of on avail once the Parliament has occupied the field by enacting the Act, especially Section 9 thereof. The view of the Constitution Bench that royalty is a tax as found in paragraph 34 of the report can also be supported from other paragraphs of the report. In paragraph 23 of the report while agreeing with Mr. Nariman that royalty which is indirectly connected with land cannot be said to be a tax directly no land as a unit, it has been observed that no tax can be levied or leviable if no mining activities are carried on. Hence it is manifest that is not related to land as a unit which is the only method of valuation of land under Entry 49 of List II but is relatable to minerals extracted. Royalty is payable on a proportion of the minerals extracted. These observations in paragraph 23 clearly indicates that in view of the Constitution Bench, royalty was a tax which had a nexus with mining activities meaning thereby it was a tax on mineral rights. Similarly in para 27 of the report, the Constitution Bench noted with approval of the decision of the Division Bench of the High Court of Mysore in Laxminarayana Mining Co., Bangalore v. Taluk Dev. Board AIR (1972) Mys 299. In that case the Court was concerned with the Mysore Village Panchayats and Local Boards Act, 1959. Under the said Act the Board had sought to levy tax on mining activities carried on by the persons holding mineral concessions. The Mysore Court had observed that once the Parliament made a declaration by law that it is expedient in the public interest to make regulation of mines and minerals development under the control of the Union to the extent to which such regulation and development is undertaken by the law made by the Parliament, the power of the State legislature under entries 23 and 50 of List II got denuded. It would, therefore, be not said that even after passing of the Central Act, the State legislature by enacting Section 143 of the Act could confer power on the Taluk Board to levy tax on the mining activities carried on by the persons holding mineral concessions. The Constitution Bench then noted that at page 306 of the report of Mysore case it was held that royalty fixed under Section 9 of the Mines and Minerals Act was really a tax. It must be kept in view that this decision of the Mysore High Court was noticed by the Constitution Bench and was not dissented from. On the other hand it got approved by it. It must, therefore, be held that royalty imposed has to be treated as tax as ruled by the Constitution Bench of this Court in India Cement Case (supra). It is no doubt true that in the later decision of this Court in Orissa Cement Ltd. and Ors. etc. etc. v. State of Orissa and Ors. etc. etc. [1991]2SCR105 , a three-Judge Bench of this Court did not go into the question whether there was any typographical error in the judgment of the Constitution Bench as found in para 34 of its report when it held that royalty is a tax. But in view of what we have discussed above it becomes absolutely clear that there was no typographical error but on the contrary the said conclusion logically flew from the earlier paragraphs of the Judgment referred to by us hereinabove.15. Once the conclusion is reached that royalty is a tax, the next question arises whether Entry 50 of the State list can at all be resorted to for imposing such a tax by the State legislature.15. Once the conclusion is reached that royalty is a tax, the next question arises whether Entry 50 of the State list can at all be resorted to for imposing such a tax by the State legislature.Even that question is fully covered against the writ petitioners by the very same Constitution Bench Judgment of India Cement and Ors.In para 24 of the report it has been observed while repelling the contention of Mr. Krishnamurthy Iyer for the State of Timal Nadu that Entry 50 in List II of the Seventh Schedule can be of any avail, the Constitution Bench noted that Entry 23 of List II deals with regulation of mines and minerals development subject to provision of List I with respect to regulation and development under the control of the Union and Entry 54 in List I deals with regulation of mines and minerals under the control of Union declared by the Parliament by law to be expedient in public interest. Thereafter it was observed that even if minerals are part of the State list they are treated separately and, therefore, the principle that the specific excludes the general must be applied. In this connection reference was made to the case of H.R.S. Murthy v. Collector of Chittor [1964]6SCR666 , where it was held that cess on minerals would be covered by Entry 49 of List II. The Constitution Bench with regard to H.R.S. Murthys case observed in Paragraphs 29 and 30 of India Cement Ltd. case that attention of the Court was not invited to provisions of Mines and Minerals (DevelopmentRegulation) Act, 1957 and Section 9(3) thereof. Section 9(3) of the Act in terms States that royalties payable under the IInd Schedule of the Act shall not be enhanced more than once during the period of four years. It is, therefore, a clear bar on the State legislature taxing royalty so as to in fact amend IInd Schedule of the Central Act. As seen earlier in paragraph 32 of the report in India Cement case, it has been clearly mentioned that in view of the express provisions of MinesMinerals Act. 1957, Entry 50 cannot be of any assistance to sustain such legislation by the State. Oza J. in his concurring judgment has highlighted one additional dimension of the matter in para 40 of the report. It has been observed by Oza., that it is no doubt true that mineral is extracted from the land and is available but it could only be extracted if there are three things :(1) land from which mineral would be extracted. (2) capital for providing machinery, instruments and other requirements, and (3) labour. It is, therefore, clear that unit of charge of royalty is not only land but land + labour + capital. It is also clear that if royalty is a tax or an imposition or a levy, it is not on land alone but it is a levy or a tax on mineral, including land, labour and capital employed in extraction of the mineral. It is therefore clear that royalty if imposed by the Parliament could only be a tax not only on land but also on these three things stated above.16. In view of the decision of Constitution Bench it is no longer open to the writ petitioners to submit that Entry 50 of List II can still be available to State legislature. It is easy to visualise that once the Parliament has occupied the field in connection with regulation of mines and minerals development in the country and when the Parliament declares that it is expedient in the public interest so to do, Entry 23 of the State list regarding regulation of mines and minerals development would be of no avail to the State legislature as Entry 23 List II is subject to the provision of List I, nor will Entry 50 of the State list can be of any assistance to the State authorities. In short, both, the entries will be out of way in enacting appropriate legislation imposing the rates of royalty to be paid by those who extract minerals in the country. Once these Entries are out of picture, it is Entry 54 in the Union list which will operate and the imposition of tax on minerals extracted would be squarely got covered by Entry 54 of the Union list. To recapitulate, as the entire Act has been upheld by this Court in its earlier decisions to which we have made reference in the light of Entry 54 of the Union list, Section 9 being part and parcel thereof cannot be out of the sweep of Entry 54. However, even assuming that there should be a specific taxing entry regarding taxing of royalty on mineral rights which can sustain such legislation under the said entry, being a topic of legislative power, we find that there is no such specific entry in Union list nor in State . list or concurrent list which can be of any assistance in this connection. Entry 50 in the State list is out of picture as we have seen earlier. In these circumstances the State legislature cannot rely on any entry in the State list or concurrent list for imposing such a tax once a valid legislation by Parliament under Entry 54 of the Union list is holding the field. In the alternative imposition of such hybrid tax on mines + capital + Labour would be covered by residuary Entry 97 of the Union list which empowers the parliament to enact laws on topics not covered by other specific entries in List II or List III. This conclusion squarely flows from the observations made by Oza J., in his concurring judgment in India Cement case. It must, therefore, be held that Section 9 of the Act is within the legislative competence of the parliament both under Entry 54 of the Union list as well as Entry 97 thereof. The first ground of attack on Section 9 by Shri Sanghi is thus devoid of substance and is, therefore, rejected.It must be kept in view that Parliament itself has laid down the rates of royalty in the IInd Schedule of the Act. However, the Parliament felt that with passage of time these rates of royalty may be to be suitably modified. This is obvious as the Act was enacted years back in 1957. The purchasing power of rupee went on falling year after year and decade after decade. Therefore, instead of Parliament itself every time being required to increase the rates, it is left to the Central Government to do so but it imposed certain fetters on the power of the Central Government. Firstly. the proviso of Section 9(3) clearly lays down that such enhancement should not be made before the end of four years and now after amendment before the end of three years. This itself indicates a guideline laid down by the Parliament that the rate of inflation and fall of money value of the rupee should be considered once in three years and that the royalty should be enhanced only once in three years. The second guideline in Section 9(3) is pertaining to the very topic of delegation of such legislative power. The Central Government has to keep in view the original rates mentioned in IInd Schedule in connection with different types of minerals and to suggest suitable enhancement once in three years depending upon the requirements of the States concerned for whom the royalty is meant. It is to be paid by holder of mining lease who extracts minerals. If a person is merely in occupation of land which contains mines and minerals, he is not liable to pay any royalty but it is only when he holds a mining lease and by virtue of that extracts one or more minerals then only he is called upon to pay royalty to the State Government as the lease is in respect of the land in which minerals vest in the State Government. This exercise is to be carried out keeping in view the very object and purpose of the Act, namely, regulation of mines and development of minerals which are the catch words of Entry 54 of List II under which the Act is enacted. Therefore, fixation of royalty should have a direct nexus with the minerals through out the country on uniform pattern so that activity of winning the minerals for the benefit of the lessee of such mining leases in the first instance and ultimately for the economy as a whole should not get in any way frustrated. There are sufficient guidelines from the Act to enable the Central Government to exercise its delegated legislative function in a just and proper manner keeping in view the uniform development of minerals through out the country. In this connection it is also necessary to keep in view Section 28 Sub-section (1) which provides that every rule or notification made by the Central Government be placed before each House of Parliament for a total period of 30 days in one session or two more successive session and if both Houses agree in making any modification in the rule or notification or both Houses agree that the rule or Notification should not be made, the rule or Notification shall thereafter have effect only in such modified form or be of no effect, as the case may be. When such a safety valve is provided it cannot be said that the exercise of delegated legislative power by Central Government in the first instance under section 9(3) would suffer from any excessive delegation of legislative power or effacement of legislative power of the Parliament.18. In our view the High Court correctly held that Section 9(3) does not suffer from any excessive delegation of legislative power.efore parting with this discussion we may deal with one more submission of Shri Sanghi, He submitted that earlier the legislation had itself provided in Section 9(3) a ceiling for enhancement of rates of royalty and to that extent there was a safety valve or guideline by Parliament. But after amendment this ceiling is given a goby and hence the Section has become arbitrary. It is not possible to agree with this contention for the obvious reason that whatever enhanced rate of royalty is fixed by Notification by the Central Government under Section 9(3), it has got to filtered through the process of Section 28(1) and if the Parliament finds the proposed hike to be uncalled for it may veto it out. There are sufficient guidelines as to for what purpose the royalty can be enhanced as discussed hereinabove, once in three years. In this connection we may profitably refer to the decision of this Court in the Case N.K. PapiahSons v. The Excise Commissioner and Anr [1975]3SCR607 . In that case this Court was concerned with the question of constitutional validity of Section 22 of Karnataka Excise Act. Section 22 conferred power on the Government to fix rates of excise duty. There was no guideline in Section 22 about upper limit of the duty which could be fixed. Repelling the contention that this had resulted in excessive delegated power, Mathew J. speaking for this Court held that power conferred on the Government by Section 22 was valid. From the mere fact that it is not certain whether the preamble of the Act gives any guidance for fixing the rate of excise duty, it cannot be said that the legislature has no control over the delegate; that requirement of laying of rules before the legislature is control over delegated legislation. The legislature may also retain its control over its delegate by exercising its power of repeal.19. In the case of Delhi Cloth and General Mills Co. Ltd., Arvind Mills Ltd. etc. etc. v. Union of India and Ors. etc. etc., [1983]3SCR438 , another Bench of this Court speaking through Desai J. held that the provision of Sections 58A and 642 of the Companies Act requiring every rule enacted in exercise of the power conferred by it must be placed before each House of Parliament for a period of 30 days and both Houses have power to suggest modification in the proposed rules to check any transgression of permissible limits of delegated legislation by the delegate, made the challenge on the ground of excessive delegation unsustainable. In view of this settled legal position in cannot be held that Section 9(3) suffers from any excessive delegation of legislative power. There is full control of parliament under Section 28 for checking such exercise of the delegate and for correcting the same, if found necessary. The second ground canvassed by Shri Sanghi for challenging the vires of Section 9(3) is also without any substance and stands rejected. Therefore, point No. 1 is answered in the negative.21. Having given our anxious consideration we find there is no substance in this contention. The reasons are obvious. The legislature has entrusted the Central Government with the power to enhance the rates of royalty from time to time. It is of course true that traditionally speaking royalty is an amount which is paid under contract of lease by the lessee to the lessor, namely, the State Governments concerned and it is commensurate with the quantity of minerals extracted. But we cannot lose sight of the fact that since 1981 such enhancement of royalty has not been done by the Central Government. Rates of royalty fixed before a decade, with the passage of time and fall in money value and increase in inflation would naturally become illusory. Therefore, the States would legitimately claim for increasing the rates of royalty. They unsuccessfully tried to do so themselves by imposing cesses on royalty. In these circumstances, it was perfectly open to the Central Government to exercise its power under Section 9(3) and enhance the rates of royalty so that loss to the States exchequer of the amounts which otherwise would have been available to the States could be compensated. It is not that the States were otherwise not entitled to the royalty amounts; but because of the operation of Section 9, the power of the States to enhance the royalty get vested in the Central Government. But once the rates are enhanced by the Central Government, the enhanced royalty was to be received by the State and same is to be recovered from concerned lessee of minerals. In fact Mr. Sanghi was right when he contended that there is no question of the royalty amounts being distributed by the Central to the States as per Articles 268 and 269 of the Constitution. That once royalty amounts are fixed by the Central Government under Section 9(3), the States automatically become entitled to receive the same from lessees of minerals who are allowed to extract them on payment of such amounts of royalty to the State which is the owner-lesser of these minerals. Enhancement of rates or royalty cannot be said to have no nexus with the development of minerals as contended by learned counsel for the writ petitioners, only because the enhanced rates of royalty are to go to swell the exchequers of concerned States.As pointed out in India Cement case, the Central Act bars an enhancement of the royalty directly or indirectly, except by the Union and in the manner specified by the 1957 Act.22. It becomes, therefore, clear that enhancing uniformly rates of royalty for the entire country even though minerals might be extracted from different States territory is necessary for having uniform pattern of price of minerals and that has a direct linkage with the development of minerals. It is also to be kept in view that regulating the rates of royally on extraction of minerals has also on important role to play in opening up new mining areas for winning minerals.It is obvious that rules framed under Section 18(2) have a direct nexus with the development of minerals. In this connection we may refer to Minerals Conservation and Development Rules, 1988 framed under Section 18 Sub-section (2) of the Act. It is true that these rules do not apply to coal but as laid down by Section 18(1) read with Section 30A even for mining leases for coal such rules in appropriate cases may be made applicable. Rule 45 of these rules deals with monthly, quarterly and annual returns by owners of every mine. When we refer to prescribed return from the owner of the mine we find from Form I-9 that Form I-1 will govern the monthly return for other mines and various information sought for iron ore in part I of the form. Item No. 4 in that part deals with rent and royalty paid. Thus royalty amount has to be mentioned in the form. It becomes, thus, clear that fixation of royalty rates is in the realm of development of minerals as envisaged by Section 18 of the Act. It is, therefore, not possible to agree with the learned counsel for the writ petitioners fixation of rates of royalty has nothing to do with the development of minerals.23. That takes us to the contention that even if it were so the impugned Notification is ultra vires Section 9(3) as it has nothing to do with the development of minerals. As we have already seen earlier, to have a uniform pattern of rates of royalty to be charged for extracting different qualities and quantities of minerals from different parts of the country is a very vital aspect of the development of minerals. It is true that one of the main objects of the Notification was for recompensating the loss suffered by States; but the facts remains that they suffered loss since the last hike in royalty was done in 1981 by the Central Government. It cannot be said that even as purchasing power of rupee had fallen and inflation had risen including the prices of coal in national and international market, there was no felt need for raising the rates of royalty to be charged for extraction of minerals like coal from the lease holders when the mineral belonged to the State. If the amount of royalty is so enhanced, it has to go to the coffers of the State concerned which is the owner of the mineral. This is a logical corollary of enhanced rates of royalty. It cannot be said to be an irrelevant consideration as tried to be suggested by the learned counsel for the petitioners. On the contrary, it was a relevant consideration because the States have to monitor the working of the mines and the income generating from extraction of minerals within their respective territories. If the Central Government exercised its power under Section 9(3) of the Act though belatedly in 1991 for bringing out this result, it cannot be said that it has done what is ultra vires or beyond the scope of Section 9(3) of the Act. In this connection we may keep in view the basic fact that mineral as found in the bowels of the earth or attached to earth surface by itself cannot develop. For developing it, it has to be brought on the surface and separated from the crust of the mother earth and that can be done by mining operation for winning these minerals. In this connection it is profitable to took at Section 3 of the Act. It defines minerals to include all minerals except mineral oils including natural gas and petroleum. Mining lease is defined to mean a lease granted for the purpose of undertaking mining operations and includes a Sub-lease granted for such purpose. Mining operation means any operations undertaken for the purpose of winning any mineral. It is obvious that development of mineral as envisaged by Section 18 of the Act and even by Entry 50 of List II of the Seventh Schedule of the Constitution, necessarily would mean extraction of mineral out of the bowels of earth or from crust of earth by mining operations. Therefore, the term development of minerals has a direct linkage with mining operation.24. It must therefor, be held that regulation of mines and development of minerals are interconnected concepts. Consequently, it is not possible to agree with the contention of the learned counsel for the writ petitioners that imposition of royalty has nothing to do with the development of minerals or that enhancing the rates of the royalty by the impugned Notification is extraneous to the purpose of developing mines but is solely for swelling the coffers of the States. Once that conclusion is reached, there would survive no question of Notification being issued partly for legitimate purpose of enhancing royalty rates after a decade from 1981 and partly for an irrelevant purpose of swelling the State exchequer. In fact the entire purpose of this exercise is for a legitimate relevant purpose for developing the minerals and enabling the State which are the owners thereof to properly manage the mining lease so that minerals can develop on a uniform pattern through out the country. In that view of the matter the submission made by Shri Ramaswamy relying on case S. Pratap Singh v. The State of Punjab (1966)ILLJ458SC that alien purpose cannot be mixed with statutory purpose is of no avail to him. The argument of Shri Sanghi relying upon the decision of this Court in case State of Haryana and Anr., Amrit Singh and Ors. v. Chanan Mal and Ors. State of Haryana and Ors., [1976]3SCR688 in para 23 at page 350 that declaration, under Section has a limited coverage also cannot be of any assistance to him for the simple reason that whatever may be covered by Section 2 declaration, it has definitely covered the imposition of royalty by the Parliament as held in the Constitution Bench decision of this Court in India Cement case (supra). As a result of this discussion it must be held that the impugned Notification cannot be said to be ultra vires of Section 9(2) of the Act. The second point is, therefore, answered in the negative.It has to be kept in view that it is an exercise of delegated legislative function entrusted to the Central Government by Parliament under Section 9(3). The concept of colourable legislation has a well defined connotation so far as parent legislation is concerned. If the legislation trespasses on a field not reserved for it under the relevant entry of the Seventh Schedule it can be said to be a colourable legislation meaning thereby it purports to get covered by an entry which does not give legislative competence to the legislature concerned to enact such a law.Adverting to the concept of colourable legislation a Constitution Bench of this Court in case of Federation of HotelRestaurant v. Union of India and Ors. , made the following pertinent observations :The constitutionality of the law becomes essentially a question of power which in a federal constitution, unlike a legally omnipotent legislature liked the British Parliament, turns upon the construction of the critics in the legislative lists. If a legislature with limited or qualified jurisdiction transgressed powers, such transgression may be open direct and overt or disguised indirect and covert. The latter kind of trespass is figuratively referred to as colourable legislation, connoting that although apparently the legislature purports to act within the limits of its own powers yet, in substance and in reality, it encroaches upon a field prohibited to it, requiring an examination, with some strictness, the substance of the legislation for the purpose of determining what is that the legislature was really doing. Wherever legislative powers are distributed between the Union and the States situations may arise where the two legislative fields might apparently overlap. It is the duty of the Courts, however, difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each legislature and to define in the particular case before them, the limits of the respective powers.26. It is obvious that this aspect of calculable legislation would not strictly apply while judging the legality of the exercise of the delegated legislative function. In fact it could not he contended by learned counsel for the writ petitioners that the Central Government had no power to act under Section 9(3). Therefore, in the strict sense, there is no question of the said Notification being a piece of colourable legislation touching upon the power of some other authority functioning under any other provision of delegated legislation. However, it has also to be observed that even in cases of delegated legislation, there are well defined limitations beyond which if such an exercise projects itself, it would become ultra vires the provision permitting such an exercise.It was submitted by the writ petitioners that though purporting to act under Section 9(3) of the Act and by which an effort was made by the Central Government to raise the rates of royalty, in substance they wanted only to augment the coffers of the State Government and nothing more and in that manner it was a colourable exercise of power on the part of the Central Government. While discussing Point No. 2, we have already repelled this contention. For the reasons recorded therein even this contention has to be rejected.Placing reliance on these averments, of the concerned authorities it was vehemently contended by Mr. Sorabajee and Mr. Ramaswamy that the impugned Notification is issued not for the purpose of development of mineral as contemplated by Section 9(3) but entirely for a collect oral purpose of compensating the State Governments for the loss of cess revenues and for swelling their coffers. It is not possible to agree with this contention. The aforesaid averments clearly indicate that from 1981 rates of royalty were not increased further and there was a demand from all States to make suitable increase in rates of royalty to be commensurate with the rising prices of coal. That is why the first study group was appointed in 1984 and that was followed by second study group of 1991. Naturally the second study group came to the conclusion that the cesses imposed were struck down by this Court and, therefore, there was a need for properly enhancing royalty rates. As Section 9(3) is the only Section remaining in field which could permit such an exercise and it was only the Central Government which could do so, accordingly the impugned Notification has been issued. It tried to enhance the rates of royalty which earlier the States unauthorisedly tried to bring about. If the original writ petitioners contentions are accepted, it could even be contended that neither the Central Government under Section 9(3) nor the State Governments could increase the rates of royalty and 1981 rates which have become illusory with the passage of time continue to hold the field ad infinitum. It has to be kept in view that a fresh exercise of delegated legislative function in the facts and circumstances did justify such enhancement at least after 10 years of the earlier revision in 1981. The motive underlying the said enhancement to compensate the States for loss of revenue which they have suffered cannot be said to be totally irrelevant or having any vitiating effect on the exercise of power under Section 9(3) which is otherwise required to be resorted to in the facts and circumstances of the case. The motive of legislature or for that matter of the delegate in exercising delegated legislative function for enacting a provision within its competence cannot be considered to be in any way having any relevant nexus to the efficacy of the product of such an exercise. As we have already discussed earlier, the mineral belongs to the States, and so, if the Central Government has taken into consideration the fact that the States revenues are required to be re-compensated on account of the loss suffered by them in their abortive efforts to escalate the royalty, it cannot be considered to be an irrelevant consideration. It clearly appeared that after 10 years from 1981 during which the royalty rates remained static there was a crying need of the day for the Central Government to exercise its power under Section 9(3) and to revise upward the royalty rates in conformity with the rising prices of the minerals around as mentioned in the counter and for which there was a strong representation by the various States Governments to the Central Government. With respect we are not in a position to endorse the view of the High Court that the impugned Notification was a colourable devise and was issued for extraneous. Equally, we are not in a position to agree with the contention of Shri Ramaswamy that the said Notification was issued for an alien purpose. The third point for our consideration is, therefore, answered in the negative.27. So far as this point is concerned, it is true that even the exercise of delegated power can be challenged on the ground that that it is highly arbitrary, irrational and confiscatory in nature and would not stand the test of Articles 14 and 19(1)(g). Learned counsel for the writ petitioners submitted that as compared to the rates of royalty fixed in 1981, the present rates have gone up by 200 to 400 per cent and, therefore, they have become confiscatory in nature. It is not possible to agree with the contention as the writ petitioners have laid no evidence to show as to how this escalation of rates for different types of coal extracted by the lessee of mines had adversely affected their business or that they are thrown out of business because of such heavy burden of escalated royalty. It is not the case of any of writ petitioners that their mining operations had to be closed down because of such high rates of royalty as enhanced by the impugned Notification. Also there is nothing on record to show whether the burden of this enhanced rates of royalty is borne only by the lessee of the mines who have extracted the minerals and has not been passed on to the customers by adding it to the price of coal. As all these are questions of facts there should be clear pleading and proof. There is no such material on the record from which on the basis of such arguments any decision can be rendered. Only on this short ground, we must hold that the original writ petitioners have failed to show how the enhanced rates of royalty as per the impugned Notification have become unreasonable or confiscatory in nature. Point No. 4 is, therefore, answered in the negative.28. As all the points raised by the writ petitioners are answered against them, the inevitable result is that the orders passed by the High Court in their favour by partly allowing the writ petitions will have to be quashed and set aside and their writ petitions will have to stand dismissedThat counter is found at page 52 in SLP (C) No. 8190/94. A combined counter was filed on behalf of the respondent Nos. 1, 3 and 4 in Misc. Petition No. 2907 of 1992 before the High Court in the case of M/s. Saurushtra CementChemicals India Ltd. and Another and it was relief upon by the concerned authorities in all the other cases. In the said counter at paragraph Q it has been averred that the State Government tried various methods for increasing their revenue from time to time as stated in the petition. The State Government enacted various Laws imposing Minerals Area Development and other cesses. These have been struck down by the Honble Supreme Court and the State Governments, therefore, were left with practical difficulties in making necessary financial arrangement. The matter was examined in details on the representation made by the various State Governments and after considering all aspect of the matter, a reasonable increase in the royalty was found justified and, therefore, the Central Government has issued the said Notification. That after revision of rates of royalty on coal in February, 1981 the next revision was due in February, 1985. Study group was appointed in 1984 to consider all aspects in depth regarding revision of rates of royalty on coal. The study group met representatives of the State Government and ascertained their views. It also issued a questionnaire to the State Governments, calling for data relating to production of coal, rates of royalty, cesses, if any levied by them and other relevant information. The study group found that most of the coal producing States were levying cesses and taxes on coal the incidence of which was much higher than that or royalty. Some of these taxes cesses were being levied as a percentage of the pit-head value of coal by the State Governments. All the State Governments represented to the Study group that the rates of royalty on coal should bear a close correlation with the prices of coal. The coal producing States, particularly West Bengal and Bihar pressed for fixation of royalty on ad valorem basis instead of the existing specific rates. The study group expressed its view that any levy of royalty on ad valorem basis, without a commitment from the State Governments to refrain from levying cesses, would not be equitable as it would have a cascading effect on the prices of coal paid by the consumers. Thereafter the counter referred to the striking down of cesses imposed by various State legislatures by this Court and then at paragraph T it is stated that Governments whose cess acts were declared unconstitutional and collection of cesses was stopped were suffering substantial losses of revenues, they approached the Central Government to revise the rates of royalty on coal immediately to help to get out of the financial crisis. It is further averred in the counter that in order to examine the requests of State Governments to increase the rates of royalty Department of Coal appointed yet another study group on 6th February, 1991 to examine the report of the earlier study group and recommend appropriate increase in royalty in the wake of the Supreme Courts Judgment in India Cements case and subsequent judgments of the High Courts. The study group discussed the issues with the representatives of the coal producing State Governments and considered their views. Then follows paragraph U which states that after considering the report of the second study group the rates of royalty on coal have been revised from an average of Rs. 5.30 per tonne to Rs. 70 per tonne w.e.f. 1.3.1991. These rates have not been made applicable to the States of Assam and West Bengal because these States are levying/ collecting cesses on coal as their Cess Acts have not been struck down by the Courts so far.