Case: Panyam Cements &amp; Mineral Industries Ltd Vs. Union Of India

1. The appellant manufactures cements at its factory in Kurnool District, Andhra Pradesh. The mainused for the manufacture of cement is limestone. The land on which the factory is situated is owned by the appellant. In 1957 and 1959 the appellant was granted two mining leases by the State Government for extracting limestone covering a total area of 3597 acres and 85 cents. Under the lease deeds the appellant was liable to pay royalty in respect of the limestone quarried from the mines in the leased areas at "5% of the sale value at themouth subject to a minimum of 0.37 paise per tonne of limestone". The rate of royalty payable under the lease deeds was revisable under sub sections (1) and (3) of Section 9 of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter referred to as ‘thewhich as they then stoodThe holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed by him from the leased area after such commencement, at the rate of the time being specified in the Second Schedule in respect of that mineral.9(2) xxx xxx xxx9(3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification.Provided that the Central Government shallfix the rate of royalty in respect of any mineral so as to exceed twenty per cent of the sale price of the mineral at thehead, or(b) enhance the rate of royalty in respect of any mineral more than once during any period of four years".Sub Section 3 of Section 9 has since been amended by the Mines and Minerals (Regulation and Development Amendment) Act, 1972, (Act 56 of Section 1972) by which inter alia the proviso to sub section 3 was deleted and the only limit at present on the Centralpower to enhance or reduce the rate of royalty is that the enhancement cannot be made more than once during any period of four years.

Court's reasoning:
12. Strictly speaking, therefore, since the substratum of theclaim in the suit was the Highdecision in WP 3276 of 1970, and since that decision is clearly not good law in view of the decision in Saurashtra Chemicals, the suit is liable to be dismissed. However, since the respondents had not impugned either the decision in WP 3276 of 1970 nor the decision of the High Court partly directing the appellants suit, we cannot follow what would otherwise have been the legal course. However, having regard to the decision of this Court in Saurashtra Chemicals (supra) thesubmission that the words ‘pitsin proviso (a) of Section 9(3) of the Act must be construed to mean the mouth of a particular excavation in a particular leased area is entirely unacceptable. When this Court has allowed the calculation of royalty on limestone on the basis of a national average pit head sale price, the decision of the Trial Court and High Court to reject theplea that the ‘saleat the pit head must mean the price of limestone at the opening of each excavation within the leased area cannot be held to be erroneous.Therefore, both in law and as matter of fact the fixation of Rs. 1.25 per tonne by the 1970 Notification was held to be valid and in accordance with proviso (a) of Section 9(3) of the Act.