Case: State of Bihar and others  Vs.  Indian Aluminum Company and others

2. The facts which are essential for the decision of these appeals are similar and lie in a very narrow compass, therefore, it is not necessary to refer to the facts of each case. It will be sufficient to refer to the facts in the appeal pertaining to Indian Aluminium Company Ltd. The said company, like all the respondents, had been granted by the State of Bihar leases for different areas under the provisions of Mines and Minerals Regulation Act, 1957. These leases pertained to various tracts of land situated in different villages but all the said leases related to lands in the forest areas. These leases had been granted long prior to the promulgation of the Ordinance which led to the passing of the aforesaid Act. The respondents, on the basis of the leases which had been granted to them, worked on the said lands and extracted the minerals for which the leases had been granted3. As far as Steel Authority of India is concerned the State of Bihar became interested in setting up a steel plant in its State. Certain government land including forest land was given to the Hindustan Steel Ltd. (later renamed as Steel Authority of India) and a steel plant including a township was set up at Bokaro. The land which was made available to this plant included forest land in ten villages which was transferred to the respondent Company on. According to the respondents, and this is not disputed, it had paid compensation for the trees which it had acquired on the transfer of forest land, the amount paid being Rs. 28.5 lakhs. According to the respondents several lakhs of trees in various parts of the township have been planted and this process is still continuing2 the Governor of Bihar promulgated the Bihar Forest Restoration and Improvement of Degraded Forest Land Taxation Ordinance under Article 213 of the Constitution so as to take immediate action for the purpose of providing resources and restoration of degraded land and improvement of forest area. This Ordinance was subsequently replaced by the Act. Pursuant to the promulgation of the said Ordinance, rules were notified on. Consequent upon the promulgation of the Ordinance and the rules thereunder several writ petitions were filed, including those by the respondents herein, before the Patna High Court challenging the Ordinance and the rules, inter alia, on the ground that it was beyond the legislative competence of the State Legislature of Bihar, It was also contended that the said Act which replaced the Ordinance was repugnant to the Indian Forest Act, 1927 and the rules framed thereunder and that it was ultra vires Articles 14, 19, 240, 265 andA of the Constitution. With regard to the legislative competence it was contended by the respondents that in view of Entry 54 of List I providing for regulation of mines and mineral development, the State Government had no authority or jurisdiction to promulgate the Act, the field being occupied by Parliament alone5. On behalf of the State Government reliance was placed on the provisions of Entry 49 List II in support of its contention that the State Legislature had the legislative competence to enact this law. Shortly put, the case of the appellants herein was that what was now sought to be levied by the impugned Act was tax on land which was covered by Entry 49 List II and the tax was not on or in relation to any mining activity6. The High Court by a common judgment allowed the writ petitions and quashed the aforesaid Act by holding that the same was beyond the legislative competence of the State Legislature on the ground that in pith and substance it was not a tax on the land and building within the meaning of Entry 49 List II; that in view of the provisions of Mines and Minerals (Regulation and Development) Act, 1957 and the rules framed thereunder it was an occupied field and, therefore, the State Legislature was denuded of all its power to enact the said Act; that in view of the Forest Conservation Act, 1980 it was doubtful whether the impugned Act could impose the tax. It was also held by the High Court that the Act and the Ordinance were unconstitutional and void as they were vague and uncertain and conferred naked and arbitrary power; that no machinery was provided for the purpose of levy/imposition and assessment of the tax; Section 3(4) was in any event unconstitutional and void and the Act and the Ordinance were violative of Article 301 read with Article 30(b) of the Constitution. It was further declared by the High Court that all actions taken under the said Act, Ordinance and the rules framed thereunder were unconstitutional and void and writ of mandamus was issued restraining the respondents therein and its officers from giving effect to the Act or the Ordinance or the rules or any order or direction or instruction or notification which may have been issued in any manner whatsoever

Reasoning: The validity of the levy of cess on royalty charged for mining levied by the Cess Acts of the States of Orissa, Bihar, Bengal and Madhya Pradesh came up for consideration before this Court in the case of Orissa Cement Ltd. v. State of Orissa where again relying upon the earlier decisions, this Court held that tax on land envisaged by Entry 49 of List II must be one directly imposed on land, levied on land as a unit and bearing a direct relationship to it. The last authority which needs to be referred to in this connection is of State of Orissa v. Mahanadi Coalfields Ltd. where this Court was called upon to determine the competence of the State Legislature to levy tax ong lands levied under the Orissa Rural Employment, Education and Production Act, 1992. This Act had been promulgated with a view to provide additional resources for promotion of education and employment in rural areas and for implementing rural employment, education and production programmes. The Act sought to levy rural employment, education and production tax only ong land. The validity of the Act having been challenged, the High Court held that the State Legislature did not have the competence to levy tax on coal bearing land. In appeal the legislative competence was sought to be derived from Entry 49 of List II. Rejecting this contention and following the ratio of the earlier decisions of this Court, it was held that the levy in that case was in substance on minerals and mineral rights and not on land and was beyond the competence of the State Legislature and did not fall within Entry 49 of List II15. Applying the ratio of the aforesaid decisions to the facts of the present case we find that the position is no different. Entry 49 of List II has been interpreted to mean the levy of tax directly on land as a unit. The land has been regarded as meaning the land on surface and also below the surface. Therefore, in order that a tax can be levied under Entry 49 of List II it is essential that land as a unit must exist on which the tax is imposed. In the instant case the tax is, in effect, being levied not on land but on the absence of land. The levy is on the void which has been created. The forest land which is being used is not subjected to tax. The Schedule to the Act itself shows that the assessment of tax is on excavation and use of forest land fort purpose. The Schedule further says that the rate of tax to be levied, in the case of mining or excavation varies with the extent of the land voided. In case the land has been rehabilitated no tax is to be levied. The tax is levied in effect on the activity of the removal or excavation of land. In other words the tax is squarely on the activity of mining because it is under the mining lease that mechanized andd excavation as well as underground excavation takes place and this is what is referred to in column 1 of the Schedule to the Act while determining the amount of tax leviable. Levy in other words is on the activity of removal of earth and not on the land itself and is, therefore, outside the ambit of Entry 49 of List IIIn the present case, however, we do not find that the tax is on land. In fact what is sought to be taxed is in the absence of land. There being this fundamental difference the decision in Goodricke cases Can have no application merely because in that case the quantum of cess on the estate to be charged depended on the quantity of tea dispatched from the tea estate. The tax, in other words, was on the existing tea estate but, for the purpose of calculating the tax it was relatable to the quantum of the tea dispatched as a measure of the tax20. From the aforesaid discussion it is obvious that the present tax is one on the excavation and use of forest land and not on the forest land as such. Taxing of the undertaking of at activity in a forest land cannot be regarded as being covered by Entry 49 of the State List because what is sought to be taxed is not land but the tax is on absence of land or forest by reason of the activity of excavation and/or mining or use of forest land for at purpose. The High Court was, therefore, right in allowing the writ petitions filed by the respondents21. As, in our opinion, legislative competence was lacking in the enactment of this Act, it is not necessary for us to consider the other questions or issues which were raised and decided by the High Court