2000 (3) TMI 1107 - HC - Indian Laws

Court confirms validity of mineral rights cess rules, dismisses challenge, directs structured payment plan

The court upheld the validity of the 'Shaktinagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997,' confirming the State ... - Issues Involved:1. Validity of the 'Shaktinagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997'.2. Competence of the State Legislature to impose cess on mineral rights.3. Distinction between cess, fee, and tax.4. Recovery proceedings and payment of arrears.Detailed Analysis:1. Validity of the 'Shaktinagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997':The judgment addresses the challenge against the Cess Rules promulgated on February 24, 1997, which required petitioners to pay cess on mineral rights. The petitioners argued that the State Government lacked the competence to impose such cess, asserting that this power was preempted by the Mines and Minerals (Regulation and Development) Act, 1957 (M.M.R.D. Act). The court examined the Uttar Pradesh Special Area Development Authorities Act, 1986 (Special Area Act), under which the Cess Rules were framed, and found that the Act was within the competence of the State Legislature.2. Competence of the State Legislature to impose cess on mineral rights:The petitioners argued that the State Legislature was precluded from imposing cess on mineral rights due to the limitations imposed by the M.M.R.D. Act, which governs mineral development. They contended that the imposition of cess would effectively increase the royalty, which is beyond the State's power. The court, however, held that the Special Area Act, particularly Section 35, which allows the imposition of cess on mineral rights, does not conflict with the M.M.R.D. Act. The court emphasized that the cess is levied on mineral rights, not on the minerals themselves, and is intended for the development of the special area.3. Distinction between cess, fee, and tax:The court examined whether the cess should be categorized as a fee or a tax. It referred to multiple Supreme Court decisions, including India Cement Ltd. v. State of Tamil Nadu and Goodricke Group Ltd. v. State of West Bengal, to clarify that the measure of the tax is not determinative of its essential character. The court concluded that the cess on mineral rights, as imposed by the Special Area Act, is a permissible levy under Entry 5 of List II (State List) of the Seventh Schedule of the Constitution. The court did not find it necessary to explicitly categorize the cess as either a fee or a tax, instead focusing on its validity and purpose.4. Recovery proceedings and payment of arrears:The petitioners expressed concern about the hardship caused by the sudden demand for payment of arrears. The court acknowledged this concern and directed that the arrears be paid in four equal monthly installments. The recovery proceedings were stayed until June 29, 2000, to allow the petitioners to make these payments. The court specified that failure to pay any installment would result in the automatic renewal of recovery proceedings.Conclusion:The court dismissed all writ petitions, upholding the validity of the 'Shaktinagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997'. It confirmed the competence of the State Legislature to impose cess on mineral rights under the Special Area Act. The court provided a structured payment plan for the arrears to mitigate the immediate financial burden on the petitioners. The interim orders were vacated, and no costs were awarded.