Case: The Hingir-Rampur Coal Co., Ltd. And Others Vs. The State Of Orissa And Others

The first petitioner is a public limited company which has its registered office at Bombay. A large majority of its shareholders are citizens of India; some of them are themselves companies incorporated under the Indian Companies Act. Petitioners Nos. 2 to 7 are the Directors of Petitioner No. 1, the second petitioner being the Chairman of its Board of Directors. These petitioners are all citizens of India. At all material times the first petitioner carried on and still carries on the business of producing and selling coal excavated from its collieries at Rampur in the State of Orissa. Two leases have been executed in its favour; the first was executed on October 17, 1941, by the Governor of Orissa whereby all that piece or parcel of land in the registration district of Sambalpur admeasuring about 3341.79 acres has been demised for a period of 30 years commencing from September 1, 1939, in consideration of the rent reserved thereby and subject to the covenants and conditions prescribed thereunder; and the second is a surface lease executed in its favour by Mr. Mohan Brijraj Singh Deo; on April 19, 1951, in relation to a land admeasuring approximately 211.94 acres for a like period of 30 years commencing from February 4, 1939, in consideration of the rent and subject to the terms and conditions prescribed by it2. Pursuant to S. 5 of the Orissa Estates Abolition Act, 1951, all the right, title and interest of the Zamindar of Rampur in the lands demised to the first petitioner under the second lease vested in respondent 1, the State of Orissa. Since then the first petitioner has duly paid the rent reserved by the said lease to the appropriate authorities appointed by respondent 1, and has observed and performed all the conditions and covenants of the said lease. In exercise of its rights under the said two leases the first petitioner entered upon the lands demised and has been carrying on the business of excavating and producing coal at its collieries at Rampur3. In December, 1952, the Legislature of the State of Orissa passed the impugned Act; and it received the assent of the Governor of Orissa on December 10, 1952. It was, however, not reserved for the consideration of the president of India nor has it received his assent. In pursuance of the rule-making power conferred on it by the impugned Act respondent 1 has purported to make rules called the Orissa Mining Areas Development Act Rules, 1955; these rules have been duly notified in the State Gazette on January 25, 19554. Subsequently, the Administrator, respondent 2, appointed under the impugned Act issued a notification of June 24, 1958, whereby the first petitioners Rampur colliery has been notified for the purpose of liability for the payment of cess under the impugned Act. The area of this colliery has been determined at 3341.79 acres. In its appeal filed under Rule 3 before the Director of Mines the first petitioner objected to the issue of the said notification, inter alia, on the ground that the impugned Act and the rules framed under it were ultra vires and invalid; no action has, however, been taken on the said appeal presumably because the authority concerned could not entertain or deal with the objections about the vires of the Act and the rules5. Thereafter on March 26, 1959, the Assistant Administrative Officer, respondent 3, called upon the first petitioner to submit monthly returns for the assessment of the cess. The first petitioner then represented that it had filed an appeal setting forth its objections against the notification, and added that until the said appeal was disposed of no returns would be filed by it. In spite of this representation respondent 3, by his letter of May 6, 1959 called upon the first petitioner to submit monthly returns in the prescribed form and issued the warning that failing compliance the first petitioner would be prosecuted under S. 9 of the impugned Act. A similar demand was made and a similar warning issued by respondent 3 by his letter dated June 6, 1959. It is under these circumstances that the present petition has been filed.

Court's reasoning:
Therefore none of the decisions on which Mr. Amin has relied can assist his caseFor the present it is enough to state that regulation of mines and mineral development is within the competence of the State Legislature. Entry 66 provides that fees in respect of any of the matters in the said List can be imposed by the State Legislature subject of course to the exception of fees taken in any Court20. This argument is based on two considerations. The first relates to the form in which the levy is imposed, and the second relates to the extent of the levy authorised. The extent of the levy authorised would always depend upon the nature of the services intended to be rendered and the financial obligations incurred thereby. If the services intended to be rendered to the notified mineral areas require that a fairly large cess should be collected and co-relation can be definitely established between the proposed services and the impost levied, then it would be unreasonable to suggest that because the rate of the levy is high it is not a fee but a duty of excise. In the present case, if the development of the mining areas involves considerable expenditure which necessitates the levy of the prescribed rate it only means that the services being rendered to the mining areas are very valuable and the ratepayer in substance is compensating the State for the services rendered by it to him. It is significant that the petitioners do not seriously suggest that the services intended to be rendered are a cloak and not genuine, or that the taxes levied have no relation to the said services, or that they are unreasonable and excessive. Therefore, in our opinion, the extent of the rate allowed to be imposed by S. 4(2) cannot by itself alter the character of the levy from a fee into that of a duty of excise. If the co-relation between the levy and the services was not genuine or real, or if the levy was disproportionately higher than the requirements of the services intended to be rendered it would have been another matterTherefore, in our opinion, the mere fact that the levy imposed by the impugned Act has adopted the method of determining the rate of the levy by reference to the minerals produced by the mines would not by itself makes the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances. In this connection it is always necessary to bear in mind that where an impugned statute passed by a State Legislature is relatable to an Entry in List II it is not permissible to challenge its vires only on the ground that the method adopted by it for the recovery of the impost can be and is generally adopted in levying a duty of excise. Thus considered the conclusion is inevitable that the cess levied by the impugned Act is neither a tax nor a duty of excise but is a feeIt is true that no rules have in fact been framed by the Central Government in regard to the levy and collection of any fees; but, in our opinion, that would not make any difference. If it is held that this Act contains the declaration referred to in Entry 23 there would be no difficulty in holding that the declaration covers the field of conservation and development of minerals, and the said field is indistinguishable from the field covered by the impugned Act. What Entry 23 provides is that the legislative competence of the State Legislature is subject to the provisions of List I with respect to regulation and development under the control of the Union, and Entry 54 in List I requires a declaration by Parliament by law that regulation and development of mines should be under the control of the Union in public interest. Therefore, if a Central Act has been passed for the purpose of providing for the conservation and development of minerals, and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject-matter covered by the said declaration. In order that the declaration should be effective it is not necessary that rules should be made or enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the regulation and development of mines under the control of the Union. In such a case the test must be whether the legislative declaration covers the field or not. Judged by this test there can be no doubt that the field covered by the impugned Act is covered by the Central Act LIII of 1948It would be noticed that the declaration required by Entry 36 is a declaration by Dominion law. Reverting then to S. 2 of the said Act it is clear that the declaration contained in the said section is put in the passive voice; but in the context there would be no difficulty in holding that the said declaration by necessary implication has been made by Dominion law. It is a declaration contained in a section passed by the Dominion Legislature, and so it is obvious that it is a declaration by a Dominion lawPrima facie the reference to authority would not include reference to a Legislature; in this connection it may be relevant to point out that Art. 372 (1) refers to a competent Legislature as distinguished from other competent authorities. That is the first difficulty in holding that Cl. 16 refers to the Dominion Legislature and purports to equate it with the ParliamentIt is impossible to hold that the Dominion Legislature is an authority which was competent to exercise any power or to discharge any function under the existing law. Competent to exercise power or to discharge functions to which the clause refers must inevitably be related to the existing law and not to the Constitution Act of 1935 which would be necessary if Dominion Legislature was to be included as an authority under this clause. The Constitution Act of 1935 had been repealed by the Constitution and it was not, and could not obviously be, the object of the Adaptation of Laws Order to make any adaptation in regard to the said Act. Therefore, the competence of the Dominion Legislature which flowed from the relevant provisions of the Constitution Act of 1935 is wholly outside this clause. We have carefully considered the arguments urged before us by the learned Additional Solicitor-General and Mr. Amin but we are unable to hold that Cl. 16 can be pressed into service for the purpose of supporting the conclusion that the declaration by the Dominion Legislature implied in S. 2 of Act LIII of 1948 can, by virtue of Cl. 16, be held to be a declaration by Parliament within the meaning of the relevant Entries in the Constitution. If that be the true position then the alternative challenge to the vires of the Act based on Cl. 16 of the Adaptation of Laws Order must failUnless a declaration is made by Parliament after the Constitution came into force it will not satisfy the requirements of Entry 54, and that inevitably would mean that the impugned Act is validly enacted under Entry 23 in List II of the Seventh Schedule. If that be the true position then it would follow that even on the assumption that Cl. 16 of the Adaptation of Laws Order and Art. 372 can be construed as suggested by the petitioners the impugned Act would be validTherefore, we reach this position that the field covered by Act LIII of 1948 is substantially the same as the field covered by the impugned Act but the declaration made by S. 2 of the said Act does not constitutionally amount to the requisite declaration by Parliament, and so the limitation imposed by Entry 54 does not come into operation in the present case. Act LIII of 1948 continues in operation under Art. 372, with this modification that so far as the State of Orissa is concerned it is the impugned Act that governs and not the Central Act. Article 372(1) in fact provides for the continuance of the existing law until it is altered, repealed or amended by a competent Legislature or other competent authority. In the absence of the requisite parliamentary declaration the legislative competence of the Orissa Legislature under Entry 23 read with Entry 66 is not impaired, and so the said Legislature is competent either to repeal, alter or amend the existing law which is the Central Act LIII of 1948; in effect, after the impugned Act was passed, so far as Orissa is concerned the Central Act must be deemed to be repealed. This position is fully consistent with the provisions of Art. 372. The result is that the material words used in Cls. 16 and 21 being unambiguous and explicit, it is difficult to give effect to the two general considerations on which reliance has been placed by the petitioners. Incidentally the present case discloses that in regard to the requisite parliamentary declaration prescribed by Entry 54 in List I in its application to the pre-Constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the adaptation of Laws Order; that, however, is a matter for Parliament to considerThese objects include the promotion of scientific and industrial research, of improvements in design and quality, and the provision for the training of technicians and labour in such industry or group of industries. It would thus be seen that the object of the Act is to regulate the scheduled industries with a view to improvement and development of the service that they may render to the society, and thus assist the solution of the larger problem of national economy. It is difficult to hold that the field covered by the declaration made by S. 2 of this Act, considered in the light of its several provisions, is the same as the field covered by the impugned Act. That being so, it cannot be said that as a result of Entry 52 read with Act LXV of 1951 the vires of the impugned Act can be successfully challenged36. Our conclusion, therefore, is that the impugned Act is relatable to Entries 23 and 66 in List II of the Seventh Schedule, and its validity is not impaired or affected by Entries 52 and 54 in List I read with Act LXV of 1951 and Act LIII of 1948 respectively. In view of this conclusion it is unnecessary to consider whether the impugned Act can be justified under Entry 50 in List II, or whether it is relatable to Entry 24 in List III and as such suffers from the vice of repugnancy with the Central Act XXXII of 1947.