Case: State of Orissa Vs. M/s Steel Authority of India Ltd

2. The respondent, a manufacturer of iron, steel and allied products, entered into an agreement of lease in respect of land measuring 569.6 acres with the State Government in order to meet its own requirements of raw material, namely, limestone and dolomite. Under the agreement, it was agreed that the respondent was liable to pay royalty on the minerals extracted. However, the dispute that arises for consideration out of the two judgments of the High Court is whether the respondent is liable to pay royalty on the quantity of mineral extracted as it is or on the quantity arrived at after the said mineral had undergone a processing to remove waste and foreign matters. It was the case of the appellants that the respondent was liable to pay royalty on the mineral extracted while the case of the respondent was that the liability was on the quantity of mineral obtained after it had undergone the process.3. The process adopted by the respondent is given in the SLP paper book at page 11, which reads as follows:-"In the Mechanised Section of the respondents quarry, after blasting, the blasted materials containing Limestone and other foreign materials are loaded by mechanical shovels and are brought to the crushing Plant by dumpers. These are called "Run of Mines", for short R.O.M. The R.O.M. are fed into the crusher, and when necessary stockpile is made, the same is fed into the primary crusher whereafter it goes to the secondary crusher mechanically. In between the secondary crusher and the screening Plant is affixed the Weighto- meter. From the secondary crusher the Limestone is moved into the screening Plant and from the screening Plant to the stockpile. The stockpile is then transported and loaded into the railway wagons.The Weighto-meter recording mentioned hereinabove, is done as the workmen are paid their incentives on the basis of production. This figure recorded by the Weighto-meter is duly recorded in he books kept by the respondent-company in the regular course of business as "production".The Senior Mining Officer is duly intimated of the weight recorded in the manner as aforesaid.The High Court, after referring to Section 9(1) of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter called "the Act") and also clause 3 of Part V of the Lease Deed, held as followsdistinction has to be made between removal from the mine and removal from the leased area. If after the mineral is extracted from the mine, it undergoes some processing and during processing a part of the mineral is wasted and the wastage remains on the leased area and is not removed therefrom, the lessee cannot be asked to pay royalty on that portion of thethat view of the matter, the High Court quashed the demands, which were levied on the quantity of unprocessed minerals.4. Aggrieved by the order of the High Court, the present appeals are filed by special leave.

Reasoning:
7. Another Division Bench of the Orissa High Court in National Coal Development Corporation case (supra), while considering the question whether the coal extracted by the workmen for their own domestic consumption is exigible levy of royalty, accepting the contention of the Revenue, held that removal from the seam in the mine and extracting the same through the pits mouth to the surface satisfy the requirement of Section 9 in order to give rise to liability for royalty". This view of the High Court found approval by this Court in Civil Appeal No. 807/76 and this Court held that the lessee in that case was liable to pay royalty for the coal supplied to its workmen for consumption.For the reasons stated above, we hold that the High Court was not right in quashing the demand, which were rightly calculated and levied.