Coal royalty liability shifted from pit-head run-of-mine coal to processed mineral under amended mining rules.

Coal royalty was governed first by the pre-25 September 2000 statutory position under Section 9 of the Mines and Minerals (Development and Regulation) Act, read with the Second Schedule, under which royalty was payable on run-of-mine coal at the pit-head. After insertion of Rules 64B and 64C of the Mineral Concession Rules, royalty became chargeable on processed mineral removed from the leased area, or on unprocessed mineral where run-of-mine mineral was sent to an outside processing plant, with separate treatment for tailings and rejects. Excess royalty collected for the period from 10 August 1998 to 25 September 2000 was refundable by adjustment against future payments, while no refund arose for the later period.

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Issues: (i) whether royalty on coal was chargeable on raw or run-of-mine coal at the pit-head or on beneficiated coal removed from the leased area for the period prior to 25 September 2000; (ii) whether, after insertion of Rule 64B and Rule 64C of the Mineral Concession Rules, royalty became chargeable on the processed mineral removed from the leased area; (iii) whether the assessee was entitled to refund or adjustment of excess royalty paid for the period from 10 August 1998 to 25 September 2000.

Issue (i): whether royalty on coal was chargeable on raw or run-of-mine coal at the pit-head or on beneficiated coal removed from the leased area for the period prior to 25 September 2000

Analysis: The charging provision in Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 had to be read with the Second Schedule. For coal, run-of-mine coal could generally be used in raw form, and beneficiation was not inherently necessary. The earlier decision in SAIL was confined to its facts involving consumption of dolomite and limestone within the leased area and did not control the coal cases. The earlier coal decisions, including the unreported Central Coalfields decision, recognised that removal of coal from the seam and extraction through the pit-head satisfied the requirement of Section 9. For the period before 25 September 2000, therefore, the charge depended on the stage recognised by the coal law as then understood.

Conclusion: Royalty on coal was payable on run-of-mine coal at the pit-head for the period from 10 August 1998 to 25 September 2000, and the assessee's contrary contention failed for that period.

Issue (ii): whether, after insertion of Rule 64B and Rule 64C of the Mineral Concession Rules, royalty became chargeable on the processed mineral removed from the leased area

Analysis: Rule 64B expressly provided that where processing of run-of-mine mineral was carried out within the leased area, royalty was chargeable on the processed mineral removed from the leased area, and where run-of-mine mineral was removed to an outside processing plant, royalty was chargeable on the unprocessed mineral. Rule 64C further dealt with tailings or rejects and made royalty payable when such material was later sold or consumed. The rules were treated as applicable to minerals including coal and as simplifying the levy with effect from 25 September 2000.

Conclusion: After 25 September 2000, royalty on coal was chargeable in accordance with Rule 64B and Rule 64C of the Mineral Concession Rules, 1960, and the assessee's challenge to levy on processed coal failed.

Issue (iii): whether the assessee was entitled to refund or adjustment of excess royalty paid for the period from 10 August 1998 to 25 September 2000

Analysis: Since the levy for that period was held to be on run-of-mine coal at the pit-head, the royalty collected on the basis adopted by the State for the later period could not be retained for the earlier period. The earlier denial of refund by the High Court was not supported by reasons. At the same time, royalty paid after 25 September 2000 was held to be correctly paid under the amended rules.

Conclusion: The assessee was entitled to refund of excess royalty for 10 August 1998 to 25 September 2000, to be adjusted pro rata against future royalty payments, but no refund was due for the period after 25 September 2000.

Final Conclusion: The appeals were disposed of by holding that coal royalty for the relevant statutory periods was governed first by the earlier coal-law position and thereafter by Rule 64B and Rule 64C, with partial monetary relief confined to the pre-25 September 2000 period and no adjudication on the constitutional validity of the rules.

Ratio Decidendi: For coal, royalty is governed by the stage of removal fixed by the statutory scheme read with the Second Schedule, and once Rule 64B and Rule 64C came into force, royalty became chargeable on the mineral removed from the leased area in the manner specified by those rules.

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