Case: State Of Rajasthan  Vs. Hindustan Zinc Ltd.

The respondent-company had been leased land in the areas of District Bhilwara, Rajsamand and Udaipur for the purpose of extracting lead and zinc therefrom under the provisions of Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as ‘theSection 9 of the Act is the charging section, which enables the State to recover royalty in respect of the minerals extracted by the holder of a mining lease. The Mineral Concession Rules, 1960 (hereinafter referred to as ‘thehave been framed in exercise of the powers conferred under Section 13 of the Act. Rules 64A, 64B, 64C & 64D of the Rules are relevant Rules, which pertain to calculation of the amount of royalty payable by the holder of the lease in respect of the minerals extracted from the land leased to the holder of the mining lease.8. From time to time, the Government had issued Notifications determining the rate at which royalty was to be paid by the holder of the lease in respect of the minerals extracted. In the instant case, we are concerned with two minerals: lead and zinc. Two Notifications are relevant for the purpose of determining the issue involved in these appeals. Under Notification dated 11th April, 1997, by virtue of item nos. 22 and 41 incorporated in the said Notification, royalty in respect of the afore-stated two minerals was to be paid as under:Item No. 224% of London metalLead concentrateexchangemetal price on ad valorem basis Charge-able per tonne of concentrate produced.Item No. 413.5% of London metalZinc concentrateexchangemetal price on ad valorem basis Charge-able per tonne of concentrate produced.9. Thereafter, by virtue of another Notification dated 12th September, 2000, substituting the Notification dated 11th April, 1997, royalty in respect of the afore-stated two minerals was payable as under:Item No. 255% of London metalLeadexchangelead metal price chargeable on the contained lead metal in ore produced.Item No. 506.6% of London metalZincexchangeZinc metal price on ad valorem basis chargeable on contained zinc metal in ore produced.10. By virtue of the afore-stated Notification dated 12th September, 2000, the manner in which the royalty was to be calculated had been changed.11. Formerly the royalty was to be charged on the basis of mineral concentrate produced but by virtue of the Notification dated 12th September, 2000, royalty is now to be charged on ad valorem basis on the contents of metal found in the oreappellant-company is aggrieved by the afore-stated direction because it was never prayed by the State that the matter be remitted back to the mining engineer for re-computation of the royalty.

Reasoning:
23. Upon hearing the learned counsel at length and upon perusal of the relevant material and the impugned judgment and the judgments referred to by the learned counsel, we are of the view that the conclusion arrived at by the High Court is correct.24. It is pertinent to note that Section 9 of the Act enables the appellant-authority to charge royalty on the minerals extracted by the lease holder from the land given on lease for the purpose of mining. The methodology for calculating the amount of royalty is determined by the Rules and by the Notifications issued by the Central Government from time to time.25. It is also pertinent to note that prior to issuance of Notification dated 12th September, 2000, by virtue of Notification dated 11th April, 1997, royalty was to be calculated on the basis of metal concentrate produced by the lease holder whereas in pursuance of Notification dated 12th September, 2000, the method of calculating the royalty has been substantially changed and in pursuance of the said Notification, royalty is to be calculated on the contents of lead and zinc metal in the ore produced.26. Immediately after the aforestated Notification dated 12th September, 2000 was issued by the Central Government, provisions of Rule 64 of the Rules had also been amended. By virtue of the said amendment, Rule 64B and Rule 64C had been inserted with effect from 25th September, 2000, which read asCharging of royalty in case of minerals subjected to processing.- (1) In case processing of run-of-mine 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.64C. 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 tailings 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.In the instant case, we are more concerned with the provisions of Rule 64C of the Rules. Upon perusal of the said Rule, it is very clear that unless the tailings or rejects are used for sale or for consumption, such tailings or rejects would not be liable for payment of royalty.28. Moreover, provisions of Rule 64B of the Rules also make it clear that in case of processing of run-of-mine, royalty shall be charged only on the processed mineral removed from the leased area.29. The aforestated amendment and Notification dated 12th September, 2000 clearly denote intention of the Government with regard to the calculation of royalty on the contents of metal in the ore produced and not on tailings or rejects, which are not taken out of the leased area. The negligible contents of metal which remains in the mining area by way of tailings, slimes or rejects, which are returned to the mother earth cannot be said to be the part of metal content in the ore produced.30. This court in the case of National Mineral Development Corporation Limited (supra) has clearly observed asFrom the contents of what has been stated hereinabove by this Court, it is very clear that once a portion of the metal is returned back to the mother earth, it cannot be said to have been extracted or cannot be said to have been taken out of the leased area and when the metal which has not been taken out from the leased area or which is not contained in the ore produced, it cannot be made subject to payment of royalty because the lease holder never took out that portion of the metal from the earth and therefore, that cannot be said to be the part of metal contained in the ore produced.32. Though the learned counsel for the State referred to the forms in which information with regard to ore received from the mines and treated ore was required to be filled up and supplied to the concerned Government Authorities by the holder of the mining lease, in our opinion the said information and the averments are not much relevant because each and every information required by the Government may not be necessary for the purpose of calculating royalty. Possibly the information received from the holders of the mining lease would be for some other incidental purpose or for the purpose of cross checking the information given by the holder of the mining lease so as to find out whether the details given by the lease holder on the basis of which royalty is calculated is correct.33. For the afore-stated reasons, in our opinion, we need not refer to the submissions made in relation to the forms referred to in the Rules.34. Upon carefully going through the impugned judgment and the judgment delivered by the learned Single Judge of the High Court, we find that the courts below did not commit any mistake in arriving at the conclusion that the holder of the lease was not liable to pay the amount demanded under the impugned notices because, by virtue of Notification dated 12th September, 2000 read with the relevant Rules, the lease holder is supposed to pay royalty only on the contents of metal in ore produced and not on the metal contained in the tailings, rejects or slimes which had not been taken out of the leased area and which had been dumped into dumping ground of the leased area.35. For the afore-stated reasons, we do not find any substance in the appeal and therefore, the appeal is dismissed with no order as to costs.CIVIL APPEAL NO. 1526 OF 200836. So far as the present appeal is concerned, it has been filed by Hindustan Zinc Limited as it has been aggrieved by the directions whereby the matter has been ordered to be remitted to the mining engineer for re-computing the royalty payable on lead and zinc contained in the ore produced.37. Theappellant-company is aggrieved by the afore-stated direction because it was never prayed by the State that the matter be remitted back to the mining engineer for re-computation of the royalty.n on behalf of the appellant-company was to the effect that as the entire concentrate has been taken out of the leased area and as the quantity of concentrate of lead and zinc was very much known, it was not necessary to give such a direction because there is no question with regard to re-computation of royalty on the basis of metal contained in ore produced.We find substance in what has been submitted because the metal concentrate which had been taken out from the leased area is known to the parties and therefore, it is not necessary to have any further details regarding the ore produced by the appellant- company.