Partly allowed

Victory Granite Metals v. State of Kerala

Kerala HC28 Oct 2016WP(C)/8136/2015

Case brief

AI extract

What is this about?

High Court challenged enhanced royalty rates in Kerala Minor Mineral Concession Rules. Court held amendment is prospective from 05.01.2015. Enhanced rates apply proportionately from that date. Rejected challenges on excessive rates and discrimination.

What did the court decide?

Enhanced consolidated royalty revised proportionately from 05.01.2015. Options to pay at enhanced rates or alternative computation provided.

Victory Granite Metals Vs State of Kerala — Land Acquisition | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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FRIDAY, THE 28TH DAY OF OCTOBER 2016/6TH KARTHIKA, 1938

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WP(C).No. 8136 of 2015 (N)

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PETITIONER(S) :

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1. VICTORY GRANITE METALS, MANNAMPETTA, VARAKKARA P.O, THRISSUR DISTRICT, KERALA STATE, PIN-680 302, REPRESENTED BY ITS MANAGING PARTNER, E.M.SUNNY.

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2. ST.BASIL GRANITES,

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POOVANCHIRA P.O, THRISSUR DISTRICT, KERALA, PIN-680 562, REPRESENTED BY ITS MANAGING PARTNER, LALY OUSEPH, W/O.K.P.OUSEPH, KAVANAKUDIYIL, PATTIKKAD P.O, THRISSUR DISTRICT - 680 652.

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3. CANON GRANITES PRIVATE LIMITED, P.O.PERUMBILAVU, NEAR OTTAPILAVU, THRISSUR DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR, JOSE K.FRANCIS.

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4. ST.JOSEPH GRANITES, ACHENKKUNNU, VALAKAVU P.O, MULAYAM, REPRESENTED BY ITS MANAGING PARTNER, JOSE K.FRANCIS.

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BY DR.K.B.MUHAMED KUTTY (SENIOR ADVOCATE)

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ADVS. SRI.K.M.FIROZ SMT.M.SHAJNA SRI.S.KANNAN

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RESPONDENT(S) :

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1. STATE OF KERALA, REPRESENTED BY ITS CHIEF SECRETARY, SECRETARIAT THIRUVANANTHAPURAM-695 001.

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2. THE PRINCIPAL SECRETARY, INDUSTRIES (A)DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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..2/-

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..2..

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WP(C).No. 8136 of 2015 (N)

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3. THE DIRECTOR OF MINING AND GEOLOGY, DIRECTORATE, KESAVADASAPURAM, PATTOM PALACE P.O, THIRUVANANTHAPURAM - 695 004.

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4. THE GEOLOGIST, THE DISTRICT OFFICE, DEPARTMENT OF MINING AND GEOLOGY, MINI CIVIL STATION, 1ST FLOOR, CHEMPOOKAVU, THRISSUR 680 020.

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BY SRI. RENJITH THAMPAN, ADDITIONAL ADVOCATE GENERAL BY SR. GOVERNMENT PLEADER SRI. MANURAJ K.J

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17-10-2016, ALONG WITH W.P(C).NO. 8300 OF 2015 AND CONNECTED CASES, THE COURT ON 28-10-2016 DELIVERED THE FOLLOWING:

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Msd.

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WP(C).No. 8136 of 2015 (N)

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APPENDIX

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PETITIONER(S)' EXHIBITS :

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EXT.P1:	A TRUE COPY OF THE NOTIFICATION SRO NO.18/2015 DATED 05-01-2015 AMENDING THE KERALA MINOR MINERAL CONCESSION RULES, 1967 ISSUED BY THE GOVERNMENT OF KERALA.
EXT.P2:	TRUE EXTRACT OF SCHEDULES I TO IV OF KERALA MINOR MINERAL CONCESSION RULES, 2015.
EXT.P3:	A TRUE EXTRACT OF FORM K PRESCRIBED BY THE KERALA MINOR MINERAL CONCESSION RULES, 2015.
EXT.P4:	A TRUE COPY OF THE REPRESENTATION (WITHOUT ANNEXURES) DATED 23-02-2015 SUBMITTED BY THE 1ST PETITIONER BEFORE THE GOVERNMENT OF KERALA THROUGH THE MINISTER OF INDUSTRIES.
EXT.P5:	A TRUE COPY OF THE COMPARATIVE TABLE/STATEMENT PREPARED BY THE PETITIONERS.
EXT.P6:	A TRUE COPY OF THE REQUEST FOR PUBLIC OPINION PUBLISHED IN THE WEBSITE OF THE DEPARTMENT OF MINING AND GEOLOGY (UPDATED ON 06.12-2014).
EXT.P7:	A TRUE COPY OF THE REPRESENTATION (WITHOUT ANNEXURES) DATED 31-12-2014 SUBMITTED BY THE 2ND PETITIONER THROUGH THE DIRECTOR OF MINING AND GEOLOGY.
EXT.P8:	A TRUE COPY OF THE REGISTRATION CERTIFICATE DATED 07.04.2015 ISSUED TO THE 1ST PETITIONER BY THE 3RD RESPONDENT.
EXT.P8(A):	A TRUE COPY OF THE REGISTRATION CERTIFICATE DATED 07.04.2015 ISSUED TO THE 2ND PETITIONER BY THE 3RD RESPONDENT.
EXT.P8(B):	A TRUE COPY OF THE REGISTRATION CERTIFICATE DATED 07.04.2015 ISSUED TO THE 3RD PETITIONER BY THE 3RD RESPONDENT.
EXT.P8(C):	A TRUE COPY OF THE REGISTRATION CERTIFICATE DATED 07.04.2015 ISSUED TO THE 4TH PETITIONER BY THE 3RD RESPONDENT.
EXT.P9:	TRUE COPY OF THE INTERIM ORDER DATED 30.06.2015 PASSED BY THE HIGH COURT OF KERALA IN I.A.NO. 8843/2015 IN W.P(C).NO. 8136/2015.

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WP(C).No. 8136 of 2015 (N)

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EXT.P10: TRUE COPY OF THE RENEWAL APPLICATION SUBMITTED BY THE 2ND WRIT PETITIONER/1ST PETITIONER HEREIN FOR REGISTRATION AS METAL CRUSHER UNIT IN FORM NO. K FOR THE YEAR 2016-2017 BEFORE THE 3RD RESPONDENT THROUGH THE 4TH RESPONDENT.

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EXT.P10(A): TRUE COPY OF THE AFFIDAVIT DATED 17.03.2016 SUBMITTED BY THE 2ND WRIT PETITIONER/1ST PETITIONER HEREIN BEFORE THE 3RD RESPONDENT THROUGH THE 4TH RESPONDENT.

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EXT.P10(B): TRUE COPY OF THE COVERING LETTER DATED 18.03.2016 SUBMITTED BY THE 2ND WRIT PETITIONER/1ST PETITIONER HEREIN BEFORE THE 3RD RESPONDENT THROUGH THE 4TH RESPONDENT.

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EXT.P11: TRUE COPY OF THE RENEWAL APPLICATION FOR REGISTRATION AS METAL CRUSHER UNIT IN FORM NO.K FOR THE YEAR 2016-2017 SUBMITTED BY THE 3RD WRIT PETITIONER/ 2ND PETITIONER HEREIN BEFORE THE 3RD RESPONDENT THROUGH THE 4TH RESPONDENT.

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EXT.P11(A): TRUE COPY OF THE AFFIDAVIT DATED 18.03.2016 SUBMITTED BY THE 3RD WRIT PETITIONER/2ND PETITIONER HEREIN BEFORE THE 3RD RESPONDENT THROUGH THE 4TH RESPONDENT.

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EXT.P11(B): TRUE COPY OF THE COVERING LETTER DATED 18.03.2016 SUBMITTED BY THE 3RD WRIT PETITIONER/2ND PETITIONER HEREIN BEFORE THE 3RD RESPONDENT THROUGH THE 4TH RESPONDENT.

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RESPONDENT(S)' EXHIBITS :

NIL

//TRUE COPY//

P.S.TO JUDGE.

Msd.

K. VINOD CHANDRAN, J.

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W.P.(C) Nos. 8136, 8300, 8707, 8876, 9596, 9825, 9850, 9859, 9885, 9928, 9961, 10015, 10039, 10292, 10301, 10302, 10303, 10304, 10429, 10600, 10705, 10709, 10738, 10779, 10788, 10789, 10844, 11302, 12068, 13058, 13512, 13551, 13848, 14557, 16204, 17402, 17487,17572, 17643,18454, 18464, 18699, 19504, 20454, 20455, 20821, 20824, 20312, 20317, 20321, 20322, 20993, 21718, 34404 and 34584 of 2015

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Dated: 28^th October, 2016

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J U D G M E N T

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The challenge raised in the above batch of writ petitions is against a notification, G.O.(P) No.01/2015/ID dated 05.01.2015, bringing in amendments to the Kerala Minor Mineral Concession Rules, 1967, ('Rules of 1967' for short) enhancing inter alia the rates of Royalty, Consolidated Royalty etc.

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The challenge raised in the various writ petitions are three fold. The significant challenge raised is on the implementation of the said amendment, giving retrospective effect to the same, for the financial

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year 2014-2015 and the demands raised for consolidated royalty under Schedule IV, at the enhanced rates for the said financial year. The amendment is also challenged on the ground of the rates being excessive and on grounds of discrimination insofar as the different rates prescribed for Cone Crushers and other metal crushers; based on the Horsepower with respect to the former and Jaw size for the other crushers.

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Essentially, the issues to be decided are:

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(i) Whether the amendments; brought in by S.R.O. No. 18/2015, which, even as per the notification, is to come into force at once, i.e, on 05.01.2015, are applicable for the financial year 2014-2015 and in making it so applicable, is not the levy imposed given retrospective application, which is not permissible in law;

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(ii) Whether the rates prescribed are excessive; and,

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(iii) Whether the grounds of discrimination can be up held.

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I have heard the various Counsel appearing for the petitioners including the learned Senior Counsel

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and the learned Additional Advocate General appearing for the State.

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The foremost contention urged is on the

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ground of retrospective operation. It is contended that the amendment itself was to be brought in force as on the date of the notification and in such circumstance, it cannot have an effect on the consolidated royalty payable by the petitioners for the financial year 2014-2015. Reference is made to the Kerala Minor Mineral Concession Rules, 1967, which, as of now, has

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been superseded by the Kerala Minor Mineral

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Concession Rules, 2015 ('Rules of 2015' for short); the latter of which need not be looked into, to decide the aspect of retrospective application; since the new rules were enforced only on 07.02.2015.

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Specific reference is made to Rule 4, which speaks of grant of quarrying permit and the payment of royalties on the basis of the rates specified in Schedule I. The present system of payment of consolidated royalty, based on the Jaw size of the Metal Crusher used, came into effect with introduction of Chapter VII B. Rule 48P speaks of such consolidated royalty being levied on application filed at the rates specified in Schedule IV instead of paying royalty at the rates prescribed in Schedule I.

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It is contended that in the year 2002, at the time of introduction, the consolidated royalty was at the rates of Rs.25,000/-, Rs.50,000/- and Rs.1 lakh, which

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was enhanced in the year 2008 to Rs.50,000/-, Rs.1 lakh and Rs.2 lakhs, and in the year 2015, by the impugned amendment, to Rs.2 lakhs, Rs.4 lakhs and Rs.6 lakhs; depending upon the jaw-size. The application for payment of consolidated royalty had to be made one month before the expiry of the license and the amounts had to be paid in two half yearly instalments, commencing from April and October respectively. The option exercised in the case of all the petitioners herein

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was one year prior to the commencement of the financial year or one month prior to the expiry of the license period; which was accepted by the Department prior to the amendment now made. The amounts too were deposited as stipulated, prior to the amendment and the demands raised now for payment of the enhanced rates would make the levy retrospective, which is not expressly provided for in the notification

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nor can it be so implied, argues petitioners.

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The petitioners rely on National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India - AIR 2003 SC 1229 and Commissioner of Income Tax (Central)-1, New Delhi v. Vatika Township Private Limited - (2015) 1 SCC 1 to urge their contention of the notification being prospective and not being applicable for the financial year 2014-2015. Government of Andhra Pradesh v. Corporation Bank - (2007) 9 SCC 55 is relied on to contend that when an amendment is made from a specified date there cannot be a retrospective application for the same. Specific reference is made to the Rule making power under the Mines and Minerals (Development and Regulation) Act, 1957 ('Act of 1957' for short) as provided in Section 15 to contend that it does not authorise a retrospective levy to be made by

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way of a subordinate legislation; to buttress which contention, reliance is placed on State of Rajasthan v. Basant Agrotech (India) Ltd - 2013 (15) SCC 1 . The rates are alleged to be excessive having no nexus with the object sought to be achieved and are also challenged as discriminatory for which contention, reliance is placed on Lokmanaya Mills Barsi Ltd. v. Barsi Borough Municipality, Barsi - AIR 1961 SC 1358 .

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The learned Additional Advocate General contends that there cannot be any challenge on retrospective application since the amendment came in the financial year 2014-2015 and the same would have to be applied in that year itself. In doing so there is no retrospective operation made. It is also contented that the petitioners had at the time of seeking extension of registration; specifically undertook to pay up the rates if

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enhanced. It is argued on behalf of the State that there can be no plea of excessive levy urged since the levy made is a compulsory levy and in exercising such statutory powers there need be no co-relation to any factors nor is there a necessity of quid pro quo. D.K. Trivedi and Sons v. State of Gujarat - AIR 1986 SC

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1323 is relied on to urge the said contention. It is also contended that the plea of discrimination cannot be countenanced for reason of the elbow room available to the State in making such classifications for extracting a compulsory levy permitted by statute. And finally, it is urged that, in any event, the scheme of payment of consolidated royalty is an option available to the quarry owners who also have crusher units, which they could refuse to exercise, in which event the necessary consequence would be payment of royalty at the rates prescribed in Schedule I.

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The ground of the levy being excessive, though urged in the memorandum of the writ petitions, none argued the issue from the side of the petitioners. The learned Additional Advocate General; all the same referred to the counter affidavit filed by the State in W.P.(C) No. 17487/2015, wherein, the revision of the levy of royalty per cubic metre/per tonne; over the years, have been listed out. The rate prescribed in 1985 was revised in 1989 and then in 1992 and 1997. After the revision in 1997 it is by the impugned amendment that the rates have been revised and it is contended that over a span of 48 years; from the advent of the Rules of 1967, there has been only a balanced hike of 50 paise per metric ton. The consolidated royalty, as provided in Schedule IV, introduced in 2002, underwent a revision only in 2008 and then in 2015. In that

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context, the ground of the levy being excessive cannot be sustained.

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The further ground of discrimination as to the different rates prescribed for cone crushers and other crushers also cannot be sustained, since, admittedly, the output of cone crushers is far higher than that of the other crushers. The higher rate prescribed has a direct nexus to the higher yield of mineral extracted. Further, the two equipments, though used to crush minerals and take up the very same activity, the size of the raw materials used drastically differ; with the cone crushers capable of accepting higher dimension boulders for crushing. In their functioning and output the two types of crushers are different and distinct; saving the classification made from the vice of discrimination.

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The reliance placed on Lokmanaya Mills is to advance the ground of disparity in a range of machines being levied with a consolidated royalty. The argument is that the varied jaw-size and Horsepower as applicable to the two types of machines, brings forth different results in the final product and the clubbing together results in hardship. This Court is not satisfied that the decision relied on is apposite. The Hon'ble Supreme Court was concerned with the assessment of lands and buildings, specifically with respect to mills, factories and buildings thereto; wherein the annual letting value was fixed at Rs. 40/-per 100 square feet. Such valuation, computed on the floor area of the structures and not on the capital value or the annual rent for which the buildings may reasonably be expected to be let; was found to be alien to the valuation as prescribed in the Act. In this context it was also observed that the

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vice of the Rule, which permitted valuation on the basis of the floor area, lies in the assumed uniformity of the return per square foot, for the different structures of different classes which are not by their very nature similar and may not reasonably fetch the very same rental. The law laid down has no application to the present case, though, there could be some disparity found in the consolidated royalty being made applicable to a specified range of jaw-size and Horsepower as applicable to the two distinct crushers. Minor disparities would not attract the vice of discrimination and a reasonable classification cannot be interfered with on grounds of more reasonable categorisation being possible.

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Further an option exercised can very well be withdrawn; at least as the provision exists in the Rules of 2015. This is so observed; since Rule 48P in the

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Rules of 1967, by the use of the words 'shall opt to pay' makes it mandatory while, Rule 89 of the Rules of 2015 makes payment of consolidated royalty optional by the use of the words 'may opt for their registration under the rules by paying a fee of one thousand rupees for each unit and opt for payment of consolidated royalty'; especially since the cone crushers were inducted into Schedule IV only by the impugned amendment of 2015.

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The question now to be addressed is whether the amendment made and the enhancement effected would apply to the financial year 2014-2015. The petitioners contend that if it is so applied, then it would lead to a retrospective amendment, which is not evident from the plain language of the notification. The learned Additional Advocate General, however, would urge that there is no question of any retrospective application since the amendment came in the financial

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year 2014-2015 and it would squarely apply to the consolidated royalty payable in that year. There are also arguments addressed on the basis of the agreements entered into between the Department and the various crusher owners. The contentions raised, is on words employed in the agreement, some of which speak of retrospective enhancement and the others only of an enhancement. The agreements are to the effect that if an enhancement is made, then the quarry owners undertake to pay the same without demur. This Court is of the opinion that there is no necessity to dwell upon the said contention based on agreements since the enhancement would depend upon the statutory amendment made and the effect thereof and not the undertaking made by the crusher owners; which cannot form the basis of the lien, if, on interpretation, the enhanced levy is found to be unsustainable.

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The learned Counsel for the petitioners refer to Section 48P of Chapter VII B of the Rules of 1967 to contend that the application for consolidated levy has to be made at the commencement of the financial year and the same has to be remitted in two half yearly installments commencing from April and October respectively. Hence, as per the provisions, the application is made and accepted by the department at the commencement of the financial year and the payments are also made before the amendment came into effect. There is a concluded contract entered into between the Department and Assessees and hence, there could be no variation made, is the contention. The words employed in the notification also speak of its effect to 'come into force at once', meaning prospectively from 05.01.2015. There could, hence, be no application made retrospectively, is the contention.

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There can be no doubt that the amendment does not have any retrospective effect for reason of it having come into force from the date of the notification, i.e., 05.01.2015. The decisions above referred are squarely applicable. In Vatika Township Private Limited the Hon'ble Supreme Court was concerned with an amendment made to the Income Tax Act, 1961, specifically to the chapter dealing with block assessments made on detection of undisclosed income, which provided for a surcharge in addition to the tax chargeable. The question was whether it would apply retrospectively to the block assessments for an earlier period ie: for periods prior to the introduction of the levy. The Hon'ble Supreme Court inter alia found that the 'Notes on Clauses' appended to the Finance Bill, 2002 while proposing insertion of the proviso categorically states that 'this amendment will take

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effect from 01.06.2002', which were found to be 'epigraphic' words in contradistinction to other amendments which were clarificatory, curative or retrospective depicting the clear intention of the legislature. In the present case also the notification dated 05.01.2015 bringing in the amendment by clause (2) specifically stated that 'they shall come into force at once', which, again is a graphic reflection of the intention to apply the enhancement only prospectively.

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One other contention, which has to be noted with approval is that Section 15 of the Act of 1957, which grants power to the State Governments to make rules in respect of mines and minerals, does not grant a power to give retrospective effect to a levy. As has been reiterated in Basant Agrotech (India) Ltd subordinate legislation can be given retrospective effect only if that power is conferred under the principal Act.

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The amendment, hence, has to be held to be prospective and only applicable from 05.01.2015.

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On the reasoning above, it also has to be held that it cannot be applied to the entire financial year of 2014-2015, specifically the period coming before 05.01.2015. There is no levy made on a financial year as per the rules and the levy is in accordance with the period of lease or permit, as per the Rules of 1967. A person who applies and obtains a lease in the midst of a financial year would not be liable for the consolidated levy for the entire year and the same has to be adjusted proportionately to the period or has to be applied to the year in which the permit or lease is valid. The application is to be made under Rule 48Q(c) one month before the license is due to expire and the remittance is from April and October and not in the said months. The concept of financial year is also alien to the Rules of

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1967 and the levy is also not for the financial year and is for a year of 12 months.

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As a corollary, it has to be held that the payments made as consolidated royalty, which, in effect, is a provision for compounding, absolving the quarry owners with crusher units from paying royalty in accordance with the extraction of mineral from the quarry, would have to be related to the extraction made in the whole of the year. The inevitable conclusion, hence, would be that the levy would stand enhanced from 05.01.2015, i.e., the date of the amendment. The procedure for making an application or the time prescribed for payment of instalments granted is a procedural aspect which cannot decide the nature of the levy. Such procedure prescribed cannot, in any manner, change the nature or even the form of the levy which has to be related to the entire period of one year

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(12 months), when there is a valid license. The mere fact of an application made at the commencement of the operations or in the commencement of the financial year, and the fact of remittance from April or October, would not detract from the levy being enhanced by a statutory amendment in the course of the year, in which the lease, license or permit is valid.

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The legislature or the subordinate authority cannot be deprived of such powers to make enhancements in the course of the period when such operations are carried on; for which period the operator has filed an application for payment of consolidated royalty under Schedule IV. The enhancement of royalty under Schedule I would be applicable to any extraction made on a valid lease or permit, covering even one year; if made in the course of the year of validity. It cannot be contended that the royalty prescribed at the

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commencement of the lease could be continued during its validity. Consolidated royalty is a device adopted to save the Department and the Assessee, the hassle of computation of the mineral extracted. When the royalty for the mineral gets enhanced, so does the rates of consolidated royalty. Hence, for the period commencing from 05.01.2015, the enhancement would apply proportionately and the crusher units would be liable to pay such amounts during the last quarter of the financial year 2014-2015; subject only to the validity period of the lease license or permit. The demands would be accordingly revised.

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It is to be noticed that not all of the writ petitions raise the grounds of discrimination, but, however, the excessive nature of the levy and the challenge against retrospectivity is common to all. This Court need not differentiate the writ petitions by their

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respective challenge for reason of the three questions formulated having been answered; applying in each of the cases and the major issue of retrospective application being significant for all the cases.

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The questions framed are answered as follows:

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(i) The enhancement of royalty and consolidated royalty as per the amendment made to the Schedules, by the impugned notification dated 05.01.2015, cannot be said to be excessive.

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(ii) There can be no successful challenge made as to the levy prescribed under Schedule IV being discriminatory.

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(iii) There can be no application of the enhancement prior to 05.01.2015, however,

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the same would apply to all crusher units from 05.01.2015, and their consolidated

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royalty would be revised proportionately, subject to the validity period of the individual licenses.

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In this context it is to be noticed that the Rules of 1967 does not provide for an option. However, the Rules of 2015, by Rule 89, provide for an option which the individual petitioners would be entitled to resile from and seek for computation of royalty payable on the basis of the mineral extracted, which is at the option of the individual petitioners and which option would have to be exercised at least within one month from the date of receipt of the certified copy of this judgment, failing which the demand would be made at the enhanced amounts, proportionately from 05.01.2015. Any amounts collected in excess of the actual levy as permitted hereunder would be liable to be refunded and could also be adjusted to the future levies at the option

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of the department. After the demands are issued, the

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petitioners shall be given three months time to satisfy the same.

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The writ petitions are partly allowed. The parties are left to suffer their respective costs.

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Sd/K.VINOD CHANDRAN, JUDGE