Case: Orient Paper &amp; Industries Ltd.  Vs. Tahsildar-Cum-Irrigation Officer

Hirakud Dam was constructed in the year 1956. The maximum level of the reservoir of the said dam is stated to be 630 R.L. The Orissa Irrigation Act, 1959 (hereinafter referred to as "the Act") which came into force from 1st June, 1961 was enacted to consolidate and amend the laws relating to the irrigation, assessment and levy of water rate and cess in force in different parts of the State of Orissa. In March 1969, the Collector of Sambalpur addressed a letter to the Secretary of Revenue Divisional Commissioner, Northern Division, Orissa regarding the construction of the cross-bundhs by the appellant on the river Ib and drawing of water from the said river for its use at its mill. In the course of his letter, he adverted to permission to put up sand bundhs and also regarding payment of water rate. He suggested that the construction of the bundhs benefited the villagers in various ways and accumulated water was also utilised in some places for growing crops. He further suggested that the mill should pay Salami at the rate of Rs.1.000/- per bundh per year and thereby the proposal made to initiate action for encroachment appears to have been dropped. In the year 1967-68, permission was also granted to the appellant for construction of sand bundhs on payment of royalty of Rs.1, 000/- per year. This arrangement continued till 1975-76 when royalty was enhanced to Rs. 3, 000/- per bundh per year from the year 1976-77. The collector stated in his letter that the Revenue Divisional Commissioner had suggested that the appellant should pay a lump sum of Rs. 1, 000/- per year towards water rate and the amount so paid was to be adjusted against the water rate fixed under law. It is also indicated that on the construction of Hirakud dam in the year 1956, the appellant was using natural flow of the water for a part of the year where the level of the reservoir was below that level at which the pumping station was situated and when the level of the reservoir rose above that level during the months of September to December. the appellant Utilized the water of the reservoir. During the period from September to December, the appellant draws water from the artificial reservoir created by putting cross bundhs at their own cost and they are liable to pay water rate only for that period of the year. Taking average period during which the water rate was payable by the appellant to be four months and assuming that about six lacs gallons was to be used per hour, the water rate was roughly worked out at Rs. 12 per hour or Rs. 280/- per day or Rs. 8, 500/- per month. It is suggested that the Mill may have to pay about Rs. 34, 000/to Rs. 40, 000/- for four months depending upon the actual quantity of water used during a particular year. However, it was made clear that after coming into force of the Act from the year 1961-62, the appellant became legally liable to pay water rate so long as it draws water from the reservoir. The stand taken by the appellant in reply to the communication sent by the Collector on the lines as stated above is that even when the level of water rises above the level of the pump, it uses the flowing water of the said river Ib. Therefore, it is not liable to pay any levy under the Act. Thereafter proceedings were initiated in Irrigation Case No. 1 (IRR) of 1972 by the Irrigation Officer. A show cause notice was issued as to why water tax should not be charged. The appellant replied that the Act and the Rules framed thereunder did not apply to the case as the appellant was drawing water from the flowing stream of the river Ib and not from any irrigation work as defined under the statute and since it has been drawing water from the natural flow of river Ib since 1939, it had acquired rights to enjoy free flow of water from the river and the said right cannot be abridged under the law. By an order made on 27th April, 1974, the Irrigation Officer imposed water rate for the year 1961-62 to 1973-74 Rs. 1, 47, 168/on the basis that the Act and the Rules were applicable to the appellant as it was drawing water from the Hirakund reservoir. Water tax was calculated on the basis of consumption at 6 lacs gallons per hour.Aggrieved by the aforesaid order an appeal was preferred before the sub Divisional Officer, Sadar, Sambalpur to set aside the order made by the Irrigation Officer and to remand the matter for fresh disposal as in his view the proper inquiry had not been made to come to the conclusion whether the lifting of water was done within the point of Hirakud Reservoir. The matter was reconsidered by the Appellate Authority and when the appellant examined three witnesses and the Department examined one witness, certain documents were also produced. By an order made on 10th August, 1976, the appellate authority held that the appellant was liable to pay a sum of Rs. 1, 89.21, 600/- for the years 1976-77. Thus amounting to a total sum of Rs. 2.01, 83, 050/-, The finding recorded by the Appellate authority on remand is that the appellant was drawing water from the reservoir area and, therefore, it was liable to pay for the unauthorised use of water and further that the water discharged by the appellant was not purified before being discharged in the river. The assessment of the levy was made at the maximum rate applicable for unauthorised use of theappellant preferred an appeal against the order. The appeal was disposed of by the Appellate Authority upholding the findings of the Irrigation Officer. The Appellate Authority modified the calculations of the amount due from the appellant by deleting charges for the period prior to coming into force of the Act. Being dissatisfied by the order made by the appellant authority, the appellant preferred a Revision Petition under Section 48 of the Act before the Divisional Commissioner, Northern Division, Sambalpur who rejected the same with a modification to the extent that the rate of tax for the unauthorised use of water was reduced to four times the bulk rate instead of 6 times as imposed by the lower authorities. The Revisional Authority formulated nine questions for its consideration and they are asin the second enquiry the Tahsildar could go into the question of fresh assessment of water rate instead of restricting his finding out if the intake point is within the Hirakud Reservoir?ii)Whether the intake point of the mill is below 630 R.L.?iii)If so, whether this point is within the reservoir of Hirakud project?iv)Whether the definition of reservoir to include the bed of river Ib is valid?v)Whether the drawal of water is from an irrigation work as defined under the Act?iv)Whether drawal of water can be treated as supply on which water rate is payable?vii)Whether drawal of water can be held as unauthorised?viii)Whether water discharged is polluted; andix)Whether any levy is possible for unauthorised use under rule 47(2) within the frame work of the Orissa Irrigationthe questions were answered in the affirmative and against the appellant. The matter was, therefore, carried in a writ petition before the High Court. Before the High Court the contentions put forth by the appellants pertain toappellant does not use the water from the river Ib for the purpose of irrigation or domestic purpose and, therefore, the Act and the Rules do not apply.2)The water is drawn by the appellants at a point which is within the Hirakund reservoir area and as such the appellant do not draw arter for any irrigation work as defined under Section 4(9) of the Act.3)Even assuming that the appellants are liable to pay water rate for the use of water for their mill or supply of water to the residential colonies, levy at penal rates was uncalleddivision bench of the High Court considered the matter and held that the contentions raised in the matter are covered by a decision of the High Court in Titaghur Paper Mills Company Limited Vs. State of Orissa and Another reported in (Cuttack). The Court reflected the contention that the appellant had any riparian right to use water from the river and such user of the water was available free of charge. They also held that under Section 21(2) of the Act supply of water for purpose other than irrigation is also covered and therefore, the contention that they draw water for the purpose other than irrigation and therefore the statute has no application was held to be untenable. As long as the source of water from which supply is made is for irrigation as defined under Section 4(9) of the Act. the authorities under the Act were empowered to levy the water rate for cess. On the principal question as to whether the appellant draws water from the point which lies within the Hirakund reservoir the matter was enquired into by the Irrigation Officer. He had held that the point was within the reservoir area. The appellate Authority as well as the Revisional Authority had affirmed this view and therefore, the High Court held that these aspects were questions of fact and cannot be re-examined by the High Court.The High Court took the view that the appellants were using the water from the river Ib since 1939 and during lean months, i.e. from January to June, they were using the water by constructing sand bundhs on the river. There was a serious controversy between the parties that whether at the point at which the appellant had drawn water lie within the area of Hirakud reservoir and, therefore penal rates could not have been levied and thereby held that the appellants would be liable to pay water rate at the usual rate which is Rs.10/- per lac gallons and directed the Irrigation Officer to revise the demand accordingly. It is against this order that this appeal has beenAPPEAL NO. 1822 OFappeal arises out of order made on 3.4.1986 by the High Court of Orissa on an application for Review of its order made on 15.1.1986 in O.J.C. Nos. 609 and 1144 of 1980. Against the order in O.J.C. Nos. 609 and 1144 of 1980 a separate appeal by special leave has been preferred before this Court in C.A. No. 1798 of 1986.

Court's reasoning:
When the scope of enquiry after remand was not restricted by the appellate authority, it was certainly permissible by the irrigation Officer to examine all questions arising thereto. Therefore, we find absolutely no merit in the first contention urged on behalf of the appellant and it is accordingly rejisted.A more important point raised by Mr. Shanti Bhushan is that the irrigation work as defined under Section 4(9) would not cover the area in which reservoir lies, but only a reservoir, tank, anicuts, dams, weirs, canals, barrages, channels, pipes, wells, tube-wells and artesian wells constructed, maintained or controlled by the State or a local authority. In order to appreciate this contention, it is necessary to refer to the view taken by the authority. After examining certain documents produced by the authorities, it was held the point from which the water is lifted by the appellant from the river Ib is below 630 R.L. in the bed of river Ib and it was stated that it cannot be construed that such a point would not lie within the area of the irrigationwork is defined under Section 4(d) of the Act as to include all land occupied by Government for the purpose of reservoir, tanks etc. and other structures occupied by or on behalf of the State Government on such land. A reservoir cannot be understood merely to be a means to hold water in a stream. It is only by controlling the flowing stream in an area water can be stored in reservoir. Viewed thus, irrigation work would include land used for such purpose. In this case the finding recorded by the authorities is in accord with this view. Reservoir may not necessarily mean only the constructed part of the land but includes the area where the water is held by a dam constructed by the Government then if form such a point falling within that area water is drawn it must be held that the appellant is liable to pay the water rate. Therefore, there is no substance in the contention urged on behalf of the appellant that the point at which the water is drawn by the appellant does not lie within the reservoir area or water is not drawn from a Government source or a water work. Under Section 28 of the Act, the Irrigation Officer is empowered to fix the compulsory basic water rate for supply of water from a Government source as distinguished from a private source