TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 899
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....he issue as to whether the Cess can be imposed on the royalty held that the royalty is a tax. The Five Judge Bench in case of Kesoram Industries (supra) clarifies the judgment of the India Cement that there is a typographical omission as the Seven Judge Bench intended that the Cess on royalty is a tax and because of the omission of the words "Cess On" before the word "royalty" is a tax. It has been brought to the notice of this Court that subsequently the Supreme Court in case of Mineral Area Development Authority -vs- Steel Authority of India reported in (2011) 4 SCC 450 have referred the matter to Nine Judge Bench because of the aforesaid two conflicting decisions operating in the field. In addition to the questions being the core issue, in the instant writ petition, the respondent nos. 1 to 5 agitates further points relating to the entertainment of the writ petition under Article 226 of the Constitution of India firstly, the issue involved is contractual in nature and the High Court should seldom interfere secondly, there is an alternative efficacious remedy by way of an arbitration provided under the contract. Before addressing the aforesaid issues, the salient admitted facts a....
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....nd from 1st March, 2013. On the basis of the aforesaid instruction, the respondent no.3 issued instruction to its official on 8.03.2013 to take steps to raise supplementary bills on word wise and party wise basis from the period of 01.03.2011 to 28.02.2013 for payment of the excise duty on the royalty and stowing excise duty component. It was further expressed therein that the said amount might be recoverable from the parties after adjusting the quantities in the future sales. The petitioners in the aforesaid writ petitions have assailed the aforesaid memo dated March 5, 2013 and March 8, 2013 on the plea that the said respondent-authorities cannot deduct any amount in respect of the past completed transactions with the future transactions and have further took a plea that the royalty is a tax and, therefore, cannot be included within the definition of a transaction value enshrined under Section 4 (3) (b) of the Central Excise Act. Mr. Kalyan Kumar Bandopadhyay and Mr. Bikash Ranjan Bhattacharya, the learned Advocates appearing for the writ petitioners in the aforesaid writ petitions submit that the action of the respondent nos. 1 to 5 to relies the excise duty on the royalty and ....
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....aid contention, the reliance is placed upon a judgment of the Supreme Court in case of Michigan Rubber(India) Ltd. -vs- State of Karnataka & Ors. reported in (2012) 8 SCC 216 and Jagdish Mandal -vs- State of Orissa & Ors., reported in (2007) 14 SCC 517 and National Highways Authority of India -vs- Ganga Enterprises & another reported in (2003) 7 SCC 410. It is further submitted that writ jurisdictions should not be allowed to be invoked for resolving the controversy relating to the interpretation of the terms of the contract by placing reliance upon a judgment of the Delhi High Court rendered in case of Innovative B2B Logistics Solutions Ltd -vs- Union of India & Another (w.p. no. 4814 of 2011 decided on 20.07.2011). Mr. Naganand further submits that the agreement contains an arbitration clause and the present controversy relates to the interpretation of a contract and, therefore, the Court should not exercise a writ jurisdiction because of the availability of the alternative efficacious remedy and placed reliance upon a division bench judgment of the Andhrapradesh High Court in case of NCC-IVRL-SMC -vs- Andhra Pradesh Industrial Infrastructure Corporation Ltd., reported in 2013 (2....
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.... In reply it is submitted that the Court should not wait for a decision of the larger bench and by keeping the issue in abeyance but should have proceeded to decide the same on the ratio which operates the field and placed reliance upon the judgment of the Supreme Court delivered in case of Harbhajan Singh & another -vs- State of Punjab & another reported in (2009) 13 SCC 608 and Ashok Sadarangani & anr. -vs- Union of India & ors., reported in AIR 2012 SC 1563. It is submitted that the writ petitions should not be thrown out on account of an arbitration clause and placed reliance upon a judgment of the Supreme Court in case of Union of India & others -vs- Tantia Construction Private Ltd. reported in (2011) 5 SCC 697. Lastly it is submitted that the decision of larger quorum still operates the field and the reference by a larger bench has not been answered as yet. Having considered the respective submissions as narrated herein above, there is no dispute that the entire price of the coal including all tax components are paid by the writ petitioners during the said relevant period. The aforesaid respondent did not charge the excise duty on the component of royalty and stowing excise ....
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.... and have adverse effect on the subsequent judicial pronouncements which would follow India Cement Ltd. case, feeling bound and rightly, by the said judgment having the force of pronouncement by a seven-Judge Bench. Para 34 of the Report reads as under: (SCC p. 30) "34. In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature because Section 9 of the Central Act covers the field and the State Legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land." 57. In the first sentence the word "royalty" occurring in the expression "royalty is a tax", is clearly an error. What the majority wished to say, and has in fact said, is "cess on royalty is a tax". The correct words to be printed in the judgment should have been "cess on royalty" in place of "royalty" only. The words "cess on" appear to have been inadvertently or erroneously omitted while ....
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....ench of three learned Judges) and Saurashtra Cement and Chemical Industries Ltd. v. Union of India (decision by a Bench of two learned Judges) para 34 (of SCC) in India Cement has been quoted verbatim and dealt with. In Mahalaxmi Fabric Mills Ltd. case the Court noticed several dictionaries defining royalty and also the decisions of High Courts available and stated that traditionally speaking, royalty is an amount which is paid under contract of lease by the lessee to the lessor, namely, the State Governments concerned and it is commensurate with the quality of minerals extracted. But then (vide para 12), the Court felt bound by the view taken in India Cement reiterated in Orissa Cement to hold that royalty is a tax. The point that there was apparently a "typographical error" in para 34 in India Cement was specifically raised but was rejected. In Saurashtra Cement and Chemical Industries too the Court felt itself bound by the decision in Mahalaxmi Fabric Mills Ltd. backed by India Cement and therefore held royalty to be a tax. 71. We have clearly pointed out the said error, as we are fully convinced in that regard and feel ourselves obliged constitutionally, legally and morally to....
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....hafi has been doubted by another Bench, the same would not mean that we should wait for the decision of the larger Bench, particularly when the same instead of assisting the appellants runs counter to their contention." The same view is reiterated in a later decision rendered in case of Ashok Sadnangani (supra) with following observation: "19. As was indicated in Harbhajan Singh's case (supra), the pendency of a reference to a larger Bench, does not mean that all other proceedings involving the same issue would remain stayed till a decision was rendered in the reference. The reference made in Gian Singh's case (AIR 2011 SC (Cri) 30: 2011 AIR SCW 305) (supra) need not, therefore, detain us. Till such time as the decisions cited at the Bar are not modified or altered in any way, they continue to hold the field" The Seven Judge Bench in India Cement was poised with the question whether the levy or cess on royalty is within the competence of the state legislature. The dispute in the said matter arose whether the imposition of cess as royalty under Section 115 of the Madras Panchayats' Act is within the competence of the State on the mining activities can be justified or sustained un....
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....nt types of taxes for instance, one being professional tax and entertainment tax. In the Western India Theatres Ltd. v. Cantonment Board, Poona Cantonment it was held that an entertainment tax is dependent upon whether there would or would not be a show in a cinema house. If there is no show, there is no tax. It cannot be a tax on profession or calling. Professional tax does not depend on the exercise of one's profession but only concerns itself with the right to practice. It appears that in the instant case also no tax can be levied or is leviable under the impugned Act if no mining activities are carried on. Hence, it is manifest that it is not related to land as a unit which is the only method of valuation of land under Entry 49 of List II, but is relatable to minerals extracted. Royalty is payable on a proportion of the minerals extracted. It may be mentioned that the Act does not use dead rent as a basis on which land is to be valued. Hence, there cannot be any doubt that the impugned legislation in its pith and substance is a tax on royalty and not a tax on land." The Apex Court held that the royalty is directly relatable to the mineral extracted and would be relatable to En....
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....ineral. It therefore is clear that royalty if is imposed by the Parliament it could only be a tax not only on land but on these three things stated above." It admits no quarrel to the proposition of law that in case of conflicting decisions operating in the field, the decision rendered by a larger quorum is binding on the High Court. The ratio laid down in case of Harbhajan Singh & Ashok Sadarangani can be aptly referred to the proposition that mere pendency of an issue before the larger bench does not deter the Court to decide the issue. The three Judge Bench in case of Mineral Area Development Authority (supra) faced with the similar question noticed the aforesaid two conflicting decisions rendered in case of India Cement Ltd (supra) and Kesoram Industries (supra) and made request to the Hon'ble Chief Justice of India to constitute a Nine Judge Bench to answer the reference, one of the reference referred thereto is whether the royalty is in the nature of a tax. The reference has not been answered as yet by the Nine Judge Bench and the answer whether the royalty is a tax has not been conclusively decided. Although in Hardeep Singh & Md. Shafi (supra), the Apex Court held that th....
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....ion bench judgment of the Andhrapradesh High Court in case of NCC-IVRL-SMC (supra) wherein the division bench refused to entertain the writ petition on the ground of alternative efficacious remedy by way of an arbitration. In the said report, an agreement was entered into between the Andhrapradesh Industrial Infrastructure Corporation Ltd; with the appellant therein for executing the work of Somasila Drinking Water Supply Scheme to be completed within 12 months. According to the appellant therein, the said respondent suspended the work during the month of December, 2009 by that time 34% of the total work was already executed. Out of the several running account bills, two of them were released and, thereafter, the said respondent did not make any payment. A writ petition was filed for direction upon the said respondent i.e. Andhrapradesh Industrial Infrastructure Corporation Ltd; to release the payments of the said R.A. Bills. The writ petition was dismissed by the single bench as Clause 73 thereof provides for an arbitration. It is sought to be argued at the instance of the said respondent that the said contract is in the realm of a private law and is not a statutory contract and, ....
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....ition would not be maintainable. The various decisions cited by Mr. Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution. We endorse the view of the High Court that notwithstanding the provisions relating to the Arbitration Clause contained in the agreement, the High Court was fully within its competence to entertain and dispose of the writ petition filed on behalf of the Respondent Company. 11. A perusal of the aforesaid para would show that a writ Court could reach the injustice where it lies unfairness, unreasonable, injustice and patent illegality (s) are various facets. There is no difficulty to exercise jurisdiction if principles of natural justice have not been followed or the conscious of the Court suffers a shock. In this case transaction is commercial in nature and there are allegations/counter allegations concerning breach of contract. In such cases functions of an arbitration clause is more prono....
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....ion on the ground of existence of an alternative efficacious remedy. The invocation of power of judicial review is a discretionary relief with certain self-imposed restrictions and/or limitations by the Court itself. Ordinarily the writ court does not go into the serious disputed questions on fact when the same is amenable to the other remedies provided either under the contract or under a relevant statute. The Apex Court in case of Tantia Construction Pvt. Ltd. clearly held that the existence of an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction by the High Court in these words: "33. Apart from the above, even on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, it is now well established that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such alternative remedy, a writ petition would not be maintainable. The various decisions cited by Mr Chakraborty would clearly indicate that the constitutional powers vested in the High Court or the Supreme Court c....