2004 (5) TMI 575 - SC - Indian Laws

Supreme Court: Slimes in mining not subject to royalty charges

The Supreme Court ruled that 'slimes' are distinct from 'fines' and 'concentrates' in mining, considered waste material, and not subject to royalty ... Whether 'slimes' exigible to charge of royalty, as forming part and parcel of iron ore? Whether 'Slime' or 'slimes' cannot be included in 'fines' or 'concentrates' for the purpose of charging royalty under Section 9(1) read with Entry-23 of the Second Schedule of the Mines and Minerals (Regulation and Development) Act, 1957 ? Issues Involved:1. Definition and classification of 'slimes' in the context of mining.2. Whether 'slimes' are included in 'fines' or 'concentrates' under Entry 23 of the Second Schedule for the purpose of charging royalty.3. Applicability of Section 9 of the Mines and Minerals (Regulation and Development) Act, 1957, in conjunction with Entry 23 of the Second Schedule.4. Impact of the amendments in the Mineral Concession Rules, 1960 (Rules 64-B and 64-C) on the charging of royalty.Detailed Analysis:1. Definition and Classification of 'Slimes':The Supreme Court analyzed the term 'slimes' based on various scientific and technical definitions. It was concluded that 'slimes' refer to extremely fine particles of ore that settle very slowly in water and are typically regarded as waste material. The term 'slimes' is distinct from 'fines' and 'concentrates' in mining terminology. The Court referenced multiple authoritative sources, including Encyclopaedia Britannica and technical dictionaries, to establish that slimes are a byproduct of the beneficiation process and are considered waste with no commercial value.2. Inclusion of 'Slimes' in 'Fines' or 'Concentrates' for Royalty:The Court held that 'slimes' cannot be included in 'fines' or 'concentrates' within the meaning of Entry 23 of the Second Schedule. The High Court's interpretation that slimes should be treated as part of fines was rejected. The Court emphasized that in the mining industry, 'fines' and 'slimes' are understood as two different entities, and the legislative intent was clear in excluding slimes from the definition of fines and concentrates for royalty purposes.3. Applicability of Section 9 and Entry 23 of the Second Schedule:Section 9 of the Act mandates the payment of royalty on minerals removed or consumed from the leased area. However, the quantification and rate of royalty are specified in the Second Schedule. The Court noted that Entry 23 specifically provides for royalty on lumps, fines, and concentrates, but not on slimes. This deliberate omission indicates that slimes were not intended to be subject to royalty. The Court clarified that the charging and computation provisions must be read together, and in this case, the Second Schedule excludes slimes from royalty charges.4. Impact of Amendments in the Mineral Concession Rules (Rules 64-B and 64-C):The Court discussed the amendments introduced by GSR 743(E) dated 25.9.2000, which clarified that royalty is chargeable on processed minerals removed from the leased area and that tailings or rejects (including slimes) are not liable for royalty unless sold or consumed. Although these rules were not applied retrospectively, they reinforced the Court's conclusion that slimes are not subject to royalty under the existing legislative framework.Conclusion:The Supreme Court allowed the appeals, setting aside the High Court's judgment. It was concluded that:1. 'Slimes' are distinct from 'fines' and 'concentrates' in mining terminology and are considered waste material.2. 'Slimes' cannot be included in 'fines' or 'concentrates' for the purpose of charging royalty under Section 9(1) read with Entry 23 of the Second Schedule.3. The legislative intent and the structure of the Second Schedule exclude slimes from the scope of royalty charges.4. The amendments in the Mineral Concession Rules further support the exclusion of slimes from royalty unless they are sold or consumed.A writ was issued in favor of the appellant, directing the respondents not to charge royalty on the quantity of slimes. No order as to costs was made.