- Bookmark
- Share
- CaseIQ
Central Coalfields Limited v. State Of Jharkhand And Others
Factual and Procedural Background
The appeals arise from LPA No. 288 of 2001 decided by a Division Bench of the Jharkhand High Court. The dispute concerns calculation of royalty payable under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 in respect of coal extracted by the appellant-lessee. The appellant contended that royalty is payable only on the quantity of coal finally removed from the leased area after it is processed and non-coal material is separated. The State Government asserted that royalty must be levied on the entire quantity of material removed from the mine, irrespective of later processing.
The High Court agreed in principle with the appellant’s distinction between “removal from the mine” and “removal from the leased area,” but felt constrained by the Supreme Court decision in State of Orissa v. SAIL (1998) 6 SCC 476 and therefore denied relief. The appellant challenged that decision before the Supreme Court, leading to the present order.
Legal Issues Presented
- Whether, under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957, royalty is chargeable on the total quantity of mineral extracted from the mine or only on the quantity of mineral actually removed from the leased area after processing.
- Whether the precedent set in State of Orissa v. SAIL (1998) 6 SCC 476 correctly interprets Section 9 with respect to the above distinction.
Arguments of the Parties
Appellant's Arguments
- Royalty should be computed only on the quantity of coal that remains after processing and is physically removed from the leased area.
- The decision in SAIL offers no substantive reasoning for treating processing as “consumption” and for levying royalty on unprocessed material; hence it requires reconsideration.
State's Arguments
- Royalty is payable on the entire quantity extracted from the mine, regardless of subsequent processing or segregation.
- The SAIL judgment upholds this interpretation and binds the courts until overruled.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State of Orissa v. SAIL, (1998) 6 SCC 476 | Processing amounts to consumption; royalty is leviable on the entire mineral extracted, not merely on processed output. | The High Court considered itself bound by SAIL. The Supreme Court found the reasoning in SAIL inadequate, expressed inability to accept it, and referred the issue to a larger Bench for authoritative reconsideration. |
Court's Reasoning and Analysis
The Supreme Court examined the earlier decision in SAIL and noted that it contained “practically no reason” explaining why the distinction between removal from the mine and removal from the leased area was rejected. Observing that this distinction is “certainly of relevance,” the Court indicated its disagreement with the rationale, or lack thereof, in SAIL. Because the existing two-judge decision could not be summarily departed from, the Court exercised its power to refer the matter to a larger Bench for an authoritative determination on the proper construction of Section 9.
Holding and Implications
ORDER OF REFERENCE: The questions concerning levy of royalty under Section 9 are referred to a larger Bench of the Supreme Court. Records are to be placed before the Hon’ble Chief Justice of India for appropriate directions. Connected Civil Appeals Nos. 5650-51 of 2005 are to be listed after disposal of the reference.
Implications: The present order does not resolve the substantive royalty dispute but keeps the High Court’s decision in abeyance. The larger Bench’s future ruling will determine whether royalty is payable on gross extraction or on processed output, potentially impacting all mineral-based royalty assessments. No new binding precedent is set at this stage.
Order
Civil Appeals Nos. 5908-10 of 2004
1. Heard. Challenge in these appeals is to the judgment LPA No. 288 of 2001 passed by a Division Bench of the Jharkhand High Court. The basic issue related to the scope and ambit of Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (in short “the Act”). The stand of the appellant before the High Court was that it is liable to pay royalty only on the minerals (in the instant case “coal”) removed by it from the leased area after segregating minerals and other non-minerals from it. The stand of the State on the other hand was that royalty has to be calculated on what is removed from the mines and not what is ultimately removed from the leased area.
2. Though the High Court found substance in the plea of the appellant, yet it was noted that in view of the decision of this Court in State of Orissa v. SAIL (1998) 6 SCC 476 it was not in a position to grant relief to the appellant.
3. The learned counsel for the appellant submitted that there is practically no discussion in SAIL case (1998) 6 SCC 476 as to why this Court accepted the stand of the appellant State in that case to hold that processing amounts to consumption and therefore the entire mineral is to be subjected to levy of royalty. View of the High Court was that royalty can be levied on the calculated area mainly obtained after processing. The High Court was of the further view that quantity of mineral which has undergone certain process alone was liable to levy of royalty and it can only be after it is removed from the leased area. The distinction made was to the effect that there was a distinction between the removal from mines and removal from leased area, the same was held to be not a correct view.
4. A bare reading of this Court's judgment in SAIL case (1998) 6 SCC 476 indicates that there is practically no reason indicated as to why the distinction made by the High Court was found to be unacceptable. As was noticed by the High Court in the impugned judgment in the said case the distinction is certainly of relevance. As we are unable to subscribe to the view expressed in SAIL case (1998) 6 SCC 476, we refer the matter to a larger Bench. Records may be placed before the Hon'ble the Chief Justice of India for necessary directions.
Civil Appeals Nos. 5650-51 of 2005
5. Place these matters after the disposal of the matters which have been referred to a larger Bench i.e Civil Appeals Nos. 5908-10 of 2004.
Court Masters
Alert