Case: State Of Rajasthan  Vs. M/S Deep Jyoti Company

the required mineral and rawanna book. Clause (3) of the said circular provides that if the contractor fails to produce copy of the short term permit, the works department will withhold the payment of bills. Clause (3) of the said circular further provided that in case, the government department which allots the work to the contractor makes the payment of contract bills without obtaining the copy of short term permit and rawanna book, then the works department shall be liable to deposit the cost of the mineral. Thus in terms of clauses (2) and (3), it is incumbent upon the works contractor to obtain short term permit before starting the work. 9. Some of the fundamental aspects, while dealing with the validity of the aforesaid circular dated 06.10.2008, need to be kept in mind. The said circular which mandates the contractors to obtain short-term permit fess is meant for those contractors who are registered as ‘A’ class contractors with various departments of Government of Rajasthan. Such registration qualifies them to bid for and obtain Government contracts, which are construction contracts. The circular dated 06.10.2008 imposing the conditions, thus, is required only for the purpose of undertaking that work which is awarded by the Government/Government Departments etc. Otherwise, there is no such requirement or obligation on the part of contractors while doing any other private work. It is trite that for awarding Government work, it can impose and stipulate conditions, eligibility criteria as well as terms and conditions on which the contract would be executed. If any person wants to bid for or undertake the work, such persons has to fulfill those conditions. The only limitation is that conditions so imposed should meet the test of fairness and reasonableness and such conditions should not be arbitrary or contrary to any law. The question, therefore, is as to whether imposition of the condition to obtain short-term permit as provided in circular dated 06.10.2008 is reasonable and not arbitrary. 10. In so far as the contention that in terms of the circular there is compulsion to obtain short term permit, in our view, as such there is no such compulsion. It is only to ensure that no mineral is excavated and used without payment of royalty. The purpose of short-term permit is to ensure that the material and minerals etc. used by the contractor in the construction work are royalty paid. It only means that such material is purchased by the contractor from the market which is legally mined and on which due royalty is paid. In other words, the objective is to see that illegally mined mineral/material is not purchased by the contractor and used in the construction work which is awarded by the Government. Not only it is a laudable object, such a stipulation is inserted in order to check illegal mining which unfortunately has assumed serious proportions in the recent past. Otherwise, the respondents herein do not stand to loose anything inasmuch as the moment evidence is produced to the effect that royalty was paid on the minerals by the leaseholder which was used in the construction, the construction contractor like the respondents would be refunded the royalty so paid by it in terms of circular dated 06.10.2008. In terms of clauses (5) and (7) of the said circular, the contractor has to pay royalty at the rates specified in the circular depending upon the nature of work and on production of bills showing payment of royalty, the contractor can get refund of royalty. There is, thus, no financial burden on the respondents of any nature. The purpose which is sought to be achieved, viz., non-royalty paid mineral (which would naturally be illegally mined mineral) is not used in the execution of the Government work and it cannot be treated as unreasonable or arbitrary. In our view, there is a complete justification for providing such a provision.11. The minor minerals removed from the quarries, admittedly are the property of the government and the same cannot be removed and used without payment of royalty. It is therefore the duty of the government to ensure that only royalty paid minerals are used in the work and the purpose of issuing such circular was to avoid pilferage/leakage of revenue because royalty can be very conveniently evaded by the contractors either by not purchasing the material from the mining leaseholders or obtaining it from unauthorized excavators. In case, if the contractor purchases the material from unauthorized person who has not paid royalty, there would be loss to the public exchequer and the circular was issued to check evasion or loss to the public exchequer. Such condition cannot be said to be unreasonable and arbitrary and therefore no prejudice could be said to have been caused to the contractors. 12. Learned counsel for the respondents contended that the royalty can be levied in respect of the mineral removed or consumed from lease areas at the rates prescribed in Mines and Mineral (Development and Regulation) Act 1957 and any such levy can only be by a legislation and not by any circular and the impugned circular dated 06.10.2008 which is in the nature of levy of royalty was rightly quashed by the High Court and the impugned orders warrant no interference. The clauses stipulating deduction of royalty payable to the mineral department at the rates stipulated in the circular cannot be said to be a levy. As noticed earlier, the circular stipulates that the royalty is deducted at the rates prescribed in the circular, on production of bills by the contractor to the mining department showing that they had purchased the royalty paid mineral from the leaseholder and thus it only provides the procedure for collection of royalty. The circular only provides the procedure for payment of royalty for the minerals used by the contractors who have been given the works contract by the government department. The High Court did not keep in view the object of the circular and erred in quashing the impugned circular.

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

Explanation:
1[ds]10. In so far as the contention that in terms of the circular there is compulsion to obtain short term permit, in our view, as such there is no such compulsion. It is only to ensure that no mineral is excavated and used without payment of royalty. The purpose of short-term permit is to ensure that the material and minerals etc. used by the contractor in the construction work are royalty paid. It only means that such material is purchased by the contractor from the market which is legally mined and on which due royalty is paid. In other words, the objective is to see that illegally mined mineral/material is not purchased by the contractor and used in the construction work which is awarded by the Government. Not only it is a laudable object, such a stipulation is inserted in order to check illegal mining which unfortunately has assumed serious proportions in the recent past. Otherwise, the respondents herein do not stand to loose anything inasmuch as the moment evidence is produced to the effect that royalty was paid on the minerals by the leaseholder which was used in the construction, the construction contractor like the respondents would be refunded the royalty so paid by it in terms of circular dated 06.10.2008. In terms of clauses (5) and (7) of the said circular, the contractor has to pay royalty at the rates specified in the circular depending upon the nature of work and on production of bills showing payment of royalty, the contractor can get refund of royalty. There is, thus, no financial burden on the respondents of any nature. The purpose which is sought to be achieved, viz., non-royalty paid mineral (which would naturally be illegally mined mineral) is not used in the execution of the Government work and it cannot be treated as unreasonable or arbitrary. In our view, there is a complete justification for providing such a provision.11. The minor minerals removed from the quarries, admittedly are the property of the government and the same cannot be removed and used without payment of royalty. It is therefore the duty of the government to ensure that only royalty paid minerals are used in the work and the purpose of issuing such circular was to avoid pilferage/leakage of revenue because royalty can be very conveniently evaded by the contractors either by not purchasing the material from the mining leaseholders or obtaining it from unauthorized excavators. In case, if the contractor purchases the material from unauthorized person who has not paid royalty, there would be loss to the public exchequer and the circular was issued to check evasion or loss to the public exchequer. Such condition cannot be said to be unreasonable and arbitrary and therefore no prejudice could be said to have been caused to thecircular only provides the procedure for payment of royalty for the minerals used by the contractors who have been given the works contract by the government department. The High Court did not keep in view the object of the circular and erred in quashing the impugned circular.