TaxTMI 
TaxTMI 
TaxTMI 
1988 (2) TMI 480
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....called 'the Central Act') read with the Mineral Concession Rules, 1960. Under the terms of the lease deed, specimen copy whereof is produced at Annexure 'B' in Special Civil Application No. 2298 of 1986, the petitioners have a right to mine limestone and/or calcareous sand from the leased area. The indenture of lease, Annexure 'B' between the Governor of Gujarat and the concerned lessee is essentially in Form 'K' prescribed by Rule 31 of the Mineral Concession Rules, 1960, except for the removal of a few existing clauses and the insertion of some new ones. The lease deed is divided into IX parts. It is a lengthy document containing several terms and conditions but it would be sufficient here to indicate the essential terms only to bring out the true nature of the contractual relationship between the State and the concerned lessees. The area of the land for which the mining lease is granted is indicated in Part I; the lease is to mine a named mineral only; if any other mineral is found, the lessee is under an obligation to give intimation to the State Government and with its permission and on stated terms only the lessee can mine the said mineral. Sin....
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.... means mineral specified in the Schedule: and (f) the words 'mineral' and 'mining lease' shall have the meanings respectively assigned to them in the Mines and Mineral (Development and Regulation) Act, 1957. Under the Central Act referred to, the term 'minerals' includes all minerals except mineral oils while the term 'mining lease' means a lease granted for the purpose of undertaking mining operations, and includes a sub-lease granted for such purpose. The expression 'mining operations' means any operation undertaken for the purpose of winning any mineral. We may now notice Section 3 which is the charging Section. It reads as under: 3. On and from the commencement of this Act, there shall be levied and collected a tax on mineral rights at such rates not exceeding the maximum specified in column 2 of the Schedule against minerals specified in column 1 of that Schedule, as the State Government may, from time to time by notification in the Official Gazette, fix. Section 4 provides that the tax shall be leviable on the holder of the mining lease in respect of a specified mineral for which he holds such mining lease. Sections 5 to 10 relate t....
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.... Act and the Rules made there under. Section 23 empowers the State Government to make Rules. The impugned Act provides for the levy and collection of a tax on mineral rights at such rates not exceeding the maximum specified in column 2 of the Schedule against minerals specified in column 1 thereof. The Schedule to the Act reads as under: It is evident from the Scheme of the impugned Act set out above that the State legislature enacted the law to impose a tax on mineral rights of holders of mining leases in respect of certain minerals only specified in the Schedule which includes limestone and Calcareous sand. By Section 3 the State Government is empowered to specify the rates of mineral tax provided the same does not exceed the maximum rate specified in column 2 of the Schedule against each mineral. The impugned Act provides a complete code for the levy, assessment and collection of the tax. 5. In exercise of the power conferred by Section 3 of the Impugned Act, the State Government issued the following notification dated 29th October, 1985: No. GHU - 85 - 62MCR -2185- 3378(ii) CHH - In exercise of powers conferred by Section 3 of the Gujarat Mineral Rights Tax Act, 1985 (Gujara....
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....Legislature cannot trench on the same subject matter, to do so would be in contravention of Article 246 itself. Besides, contend the petitioners, the levy of royalty under Section 9 of the Central Act being on minerals won from the leased area is tax on minerals and therefore mineral rights referred to in Entry 50 of State List and since the power conferred on the State Legislature under Entry 50 in List II is subject to limitation imposed by Parliament by law relating to mineral development, the State Legislature was not competent to enter the field which was already occupied by the Central Act. Though we do not find a specific averment in the pleadings it was urged that since the measure of tax was dependant on the quantity of mineral removed or consumed, it was in substance a tax on manufacture or production under Entry 84 of Union List and therefore beyond the legislative competence of the State Legislature. So far as the impugned notification dated 29th October, 1985 issued under Section 3 is concerned, it is averred, as pointed out earlier, that it is ultra vires Section 3 as the said provision does not empower the fixing of different rates for the same mineral and is even ot....
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....itrary or unreasonable. So far as other industrial units using limestone and/or calcareous sand are concerned it was felt that the additional burden being negligible could be easily passed on to the consumers. In the above premises different rates of tax were fixed for the said two minerals for lessees having captive mines and for other lessees as also for new cement units and existing cement units. The State Government contends that the notification is consistent with Section 3 of the impugned Act and is not opposed to Article 14 of the Constitution. 8. The grounds of challenge to the impugned Act and the Notification issued under Section 3 thereof were formulated by Mr. S.B. Vakil, who led the arguments on behalf of the petitioners, as under: 1. The tax is invalid as the impugned Act is outside the legislative competence of the State Legislature because (i) the impugned tax is not a tax on mineral rights (ii) it is in fact a tax on production covered by Entry 84 of Union List, and/ or (iii) it is a tax on mining rights and not mineral rights. 2. The legislative field of Entry 50 of State List to impose the impugned tax was occupied by the Central Act enacted under Entry 54 ....
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....ned Act as the field was fully occupied by the Central Act. In this connection our attention was invited to Entry 54 in Union List and Entry 23 in State List which may be reproduced at this stage. Entry 54 List I Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. Entry 23, List 11 Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. According to the petitioners, since limitations referred to in Entry 50 in the State List were imposed by the Central Act, it was not open to the State Legislature to enact the impugned Act. It would, therefore, be necessary to keep in mind the limitations, if any, imposed by the Central Act while examining the scheme of that statute. 10. We now proceed to examine the provisions of the Central Act. Section 2 makes the declaration contemplated by Entry 54 in Union List in the following words: 2. Declaration as to expediency of Union control: It is hereby declared that it is expedient in the public ....
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....ontractor or sublessee from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral. (2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral. (3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification; Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of four years. The rates of royalty for limestone and calcareous sand have been set out at Serial Nos. 8 and 14, respectively, in the Second Schedule to the Act. Section 9A introduced by Amendment Act 56 of 1972 requires the holder of a mining lease to pay to the State Government, every year, dead-rent at such ra....
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....ed therewith. Section 16 concerns mining leases granted before 25th October, 1949. Section 17 confers special powers on the Central Government to undertake prospecting or mining operations in land in which the mineral vests in the State Government or any other person. Section 18 enjoins upon the Central Government to take all such steps as may be necessary for the conservation and development of minerals in India, for that purpose the Central Government may, by notification in the Official Gazette, make such rules as it thinks fit. Section 18A empowers the Central Government to authorise the Geological Survey of India, or such other authority or agency; to make investigations to collect precise information with regard to any mineral available in or under any land. Section 19 makes any prospecting licence or mining lease granted, renewed or acquired in contravention of the provisions of the Act or any Rules or Orders made thereunder void and of no effect. Under Section 20 the renewal of any prospecting licence or mining lease granted before the commencement of the Act must be in accordance with the provisions of the Act and the Rules made thereunder. Section 21 prescribes penalties;....
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.... grant of mining leases in respect of land in which the minerals vest in the Government. Rules 22 to 24 deal with the making of an application for a mining lease in the prescribed form and its disposal within the prescribed period. Rules 25 and 26 deals with the refusal of the requisition for the grant or renewal of a mining lease. Rule 27 sets out the conditions to which every mining lease will be subject. In addition to the conditions set out in the various clauses of Sub-rule (1), Sub-rule (2) of Rule 27 empowers the State Government to impose such other conditions in regard to matters detailed in the clauses catalogued thereunder as it may deem necessary. Rule 28 provides for renewal of a mining lease. Rule 29 lays down that a lessee shall not determine the lease except after notice in writing of not less than twelve calendar months is served on the State Government. Rule 30 lays down the rights of a lessee and Rule 31 prescribes the form in which the lease shall be executed. It lays down that the lease deed shall be executed in Form K or in Form as near thereto as the circumstances may require. The specimen lease deed, Annexure 'B', is in Form K with suitable changes. ....
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....cting licence or a mining lease may be granted or renewed have been set out in Sections 7 and 8 respectively. Sections 9 and 9A. oblige holders of mining leases to pay royalty or dead-rent, whichever is higher. The next group of Sections 10 to 12 lay down the procedure for obtaining a prospecting licence or a mining lease in respect of land in which the mineral rights vest in the Government. Section 13 empowers the Central Government to make rules for regulating the grant of prospecting licences and mining leases in respect of minerals and for purposes connected therewith. On a conjoint reading of this group of Sections it becomes obvious that control is sought to be exercised in the matter of exploring, locating proving and winning of minerals. 14. The second objective of the Central Act is development of minerals. Section 18 imposes a duty on the Central Government to take all such steps as are necessary for the conservation and development of minerals in India and to make rules in that behalf providing inter alia for opening new mines and regulation of mining operations, excavation or collection of minerals from mines, storage of minerals and generally for the development of mi....
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....om the land. In Shanti Swaroop Sharma v. State, the Court after taking into consideration several definitions of 'royalty', came to the conclusion that 'royalty' was neither a tax nor a fee but was more akin to rent This is how the Court approached the matter: Royalty thus has its basis in the contract between the grantor and the holder of a mining lease, and it is not a compulsory charge for holding such lease but payment to the owner of the minerals for the privilege of extracting the minor minerals computed on the basis of the quantity actually extracted and removed from the leased area. Accordingly royalty is not of the same nature as a tax or a fee.... It is in essence the consideration which the owner of a property may receive from those whom be allows the use of his property or entrusts his property for exploitation of the mineral resources contained therein. In that view of the matter, it is more akin to rent or compensation payable to an owner by the occupier or lessee of land for its use or exploitation of the resources contained therein. The Full Bench of the Orissa High Court in Laxmi Narayan v. State AIR1983Ori210 , was dealing with the contention th....
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....xamine the constitutional validity of Section 9 of the Central Act on the plea that it was a taxing provision which fell within the ambit of Entry 50, List II, and not Entry 54, List I. The Court was therefore required to consider whether royalty charged under Section 9 of the Central Act was tax. Repelling the contention that royalty was tax, this Court observed as under: In our opinion, therefore, royalty specified in Section 9 is neither a tax nor a fee but is a payment made by the lessee to the lessor (in case of mining lease) for removing or consuming the sub-soil property which the lessee has won by the application of his labour and enterprise. Therefore, since royalty is not a tax. the subject-matter of Section 9 is not covered by Entry 50 in the State List. It falls squarely under Entry 54 of the Union List because a lessee, who is authorized to operate a mine and win minerals therefrom, pays price of that property as prescribed by Parliament, to the lessor or the owner of the minerals, the Union of India. Section 9, therefore, is not ultra vires the legislative competence of Parliament. It is, therefore, clear from the above decision that royalty is a payment for the min....
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....ly centralised in the Secretary of States but under the reforms introduced later, greater independence was conferred on the provinces in provincial matters, vide Government of India Act, 1919. The newly inserted Section 45A provided for classification of subjects as Central and Provincial in relation to governmental functions. Under the Government of India Act, 1935 legislative functions came to be clearly demarcated in the Seventh Schedule between the Central and Provincial Governments, Lists I and II, respectively. List III setting out the concurrent powers. Thus the unitary system of Government yielded in favour of the federal system. Our constitution broadly adopts the same scheme of distribution of legislative powers with suitable changes. One such significant change is the conferment of residual powers on the Central Government, vide Article 248 read with Entry 97, List I, Seventh Schedule to the Constitution. In the Seventh Schedule of our Constitution various subjects have been elaborately classified under three different Lists and with respect to them the legislative powers between the Union and the States are carefully distributed. On a close examination of the relevant p....
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....in view of the declaration under Section 2 read with the levy of royalty under Section 9 of the Central Act, the State Legislature was incompetent to enact the impugned Law under Entry 50 of List II, an argument which we have already negatived for reasons stated earlier. 21. The plenary power conferred on our legislatures is, however, controlled by the limitations imposed by the Constitution and can be exercised within the fields earmarked for the Parliament and the State Legislatures by the three Lists in the Seventh Schedule to the Constitution. If any legislature strays out of the earmarked zone allotted to it, its action would be ultra vires the Constitution. Therefore, when the validity of any legislation is challenged on the ground of lack of legislative competence, the first and the foremost thing for the Court is to examine whether the statute in question is with respect to one of the subjects assigned to that Legislature by the Constitution. However, the legislative power conferred by Clause (1) of Article 245 being 'subject to the provisions of the Constitution', the power to legislate must not only be within the competence of the concerned legislature but must a....
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....ll not strengthen, but only derogate from, its position, if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution of Government is a living and organic thing, which of all instruments has the greatest claim to be construed ut res magis valeat quam pereat. Therefore, although the words of the Constitution are required to be interpreted on the same principles as apply to interpretation of other statutes, when it comes to the interpretation of legislative entries, a broad and liberal interpretation is called for since the Constitution, the source of all other laws, cannot be rendered inflexible by a narrow and pedantic approach. This, however, must not be misunderstood to mean that only entries in the Union List must be broadly construed when there is a conflict between two entries, one in the Union List and the other in the State List. Since the Constitution is a living and organic document, it must be so interpreted as to be capable of absorbing new situations and developments that are likely to take place in a developing country. A rigid construction of constitutional provisions would frustrate new developments which are bound to take place de....
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....competing provisions irreconcilable, the Central law must prevail over the State Law. For the above principles see: In Re. C.P. Motor Spirit Act; Subrahmanyan Chettiar v. Muttuswami Goundan; Prafulla Kumar v. Bank of Commerce Khulna: AIR 1947 PC 60; State of Bombay v. Narottamdas Jethabhai and Anr. 1951 SCR 51; the State of Bombay and Anr. v. F.N. Balsara; Municipal Corporation v. Gordhandas: AIR1954Bom188 (Paragraph 5); Sri Venkataramana Devaru v. The State of Mysore @ 918; Assistant Commissioner, Madras v. Buckingham and Carnatic Co. Ltd: [1970]75ITR603(SC) (para 7); and Second Gift Tax Officer, Mangalore v. D.H. Hazareth: AIR 1970 SC 999. 24. We may now pass on to the language of Entry 50 in List II which we have reproduced earlier. It speaks of taxes on 'mineral rights. In the Union List there is no entry dealing with imposition of taxes on mineral rights. The State Legislature is clearly entitled to impose a tax on mineral rights subject of course to any limitation imposed by Parliament by law relating to mineral development. We have already pointed out earlier that no such limitation is imposed by the Central Act which relates to the subject of mineral development. It is....
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....rohibits the removal of any other mineral without the express permission of the State Government. Thus under the lease deeds executed in favour of the petitioners-leases, a right to extract limestone and of calcareous sand is conferred on the lessees. Is it this mineral right which the State Legislature seeks to tax under the impugned Legislation? The preamble of the impugned Legislation posits that it is an Act to provide for levy and collection of tax on mineral rights of holders of mining leases in respect of certain minerals specified in the Schedule. Even the definition of 'tax' in Section 2(5) speaks of tax on mineral rights levied under Section 3. Section 3 in turn speaks of levy and collection of tax on mineral rights at such rates not exceeding the maximum specified in the Schedule against minerals named therein. Section 4 provides that the tax shall be leviable on the holder of the mining lease in respect of the specified mineral for which such mining lease is held. It is, therefore clear from the aforesaid provisions of the impugned Legislation that tax is levied on mineral rights of holders of mining leases. Ex facie, therefore, the State Legislature has sought ....
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....ant Taxation Act (supra), the power to make laws with respect to duties of excise is to impose duties of excise on the manufacturer or producer of excisable goods at the stage of, or in connection with, manufacture or production, and it extends no further. It was, therefore, held that the Provincial Legislature was entitled to levy tax on sales, the event of such levy being post-manufacture or post-production. Sulaiman, J. at Page 22, column 2, points out as under: There is a fine distinction between taxes on the sale of goods and taxes on the goods themselves. The essence of a tax on goods manufactured or produced is that the right to levy it accrues by virtue of their manufacture or production.... If duty is imposed on the goods manufactured or produced when they issue from the manufactory, then the duty becomes leviable independently of the purpose for which they leave it and irrespective of what happens to them later. It is evident from the above that the taxable event in respect of excise duty is the manufacture or production of excisable goods or articles. As held in R.C. Jall v. Union of India AIR1962SC1281 , once the levy is relatable to manufacture or production of excis....
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....some kind of annual value the basis of the tax without intending to tax income. As pointed out earlier, the Supreme Court in R.C. Jail's case (supra) stated in no uncertain terms that the method of collection cannot affect the essence of the duty. In Sudhir Chandra v. Wealth-tax Officer, Calcutta: [1969]68ITR897(SC) , while considering the validity of the Wealth-tax Act enacted by Parliament under Entry 86 of Union List, the Supreme Court was required to consider if it trenched the field covered by Entry 49 of State List as the incidence of tax was related to the value of the assets. Dealing with this contention the Supreme Court observed that the adoption of the annual or capital value of lands and buildings which may be adopted for levying tax under Entry 49, List II, will not make the fields of legislation under the two entries overlapping. The same is the view expressed in the case of Assistant Commissioner of Urban Land Taxes v. Buckingham and Carnatic Co. Ltd. [1970]75ITR603(SC) , wherein a tax on urban land was imposed by the State Legislature at a percentage of the market value of the land. Dealing with the contention that the impugned Legislation trenched upon the fiel....
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.... issue in this case is one of characterisation of the law. In pith and substance is the subject matter of law bearing on mineral rights or is it on production of minerals? In other words, is it in its true nature and character levying a tax on mineral rights of holders of mining leases falling within the ambit of Entry 50, List II, or a tax or duty on production of minerals attracting Entry 84, List I? We have already pointed out earlier that to resolve controversy, the Court must look to the nature and character of the impugned Legislation, the pith and substance of it, with a view to ascertaining the true subject matter of the legislation. If on an over all view of the law it is possible to ascertain its true and real subject matter, it would not be difficult to assign it to one or the other entry in the Union List or the State List and on the basis there of determine its validity. If in pith and substance the legislation belongs to a State subject, its incidental trenching on the Union field will not render it invalid or unconstitutional. Now to gather the real object of the impugned Legislation, the Court must first look to the charging section to identify the subject matter of....
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....herefore. emphasised that if the pith and substance of the impugned Legislation is explored to ascertain its true nature and character, it becomes evident that a duty is sought to be levied and collected on minerals produced by the holders of mining leases and the impost clearly falls within the scope of Entry 84 of the Union List as Entry 51 of the State List is admittedly not attracted. The learned Advocate General, on the other hand, submitted that the preamble and the charging section unmistakably convey that the State Legislature has sought to tax mineral rights and since the measure of tax cannot be on something abstract, it had to be related to the quantity of minerals removed or consumed. Since the measure of tax cannot determine the character of the tax, the learned Advocate General argued that the submission made by the learned Counsel for the petitioners was clearly misconceived. He further contended that mining of minerals cannot be equated to production within the meaning of Entry 84, List I, as that word must take colour from the preceding word 'manufactured' and so read, extraction of minerals which exist below the surface cannot tantamount to production. Mr.....
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....the meaning of Entry 84, Union List. 29. Although the word 'cess' does not find a mention in any of the legislative entries in the Seventh Schedule to the Constitution, Article 277 refers to it as one of the levies imposed by the State Government or the local authority. There cannot be any doubt that a cess is a tax and this is obvious from the aforesaid statutes which levy a duty of excise as a cess to be collected and applied for the welfare of labour employed in the concerned industries. There can also be no doubt that the levy and collection of cess is related to the production of minerals. as for example, limestone and dolomite, from a mine. We will, therefore, assume for the sake of argument that removal of mineral from a mine after it is won amounts to production. But does that mean that in all cases where the measure of tax is related to the quantum of mineral removed or consumed, it necessarily renders the impost a duty of excise within the meaning of Entry 84 in the Union List? A duty of excise can certainly be levied on goods manufactured or produced in India but that does not mean that where a taxing statute uses the quantum production of an article for the lim....
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.... good for the simple reason that the mode of assessment of tax cannot determine the essence or true character of the subject matter of the tax. In our view, therefore, the promise on which Mr. Vakil has sought to build his edifice is not strong enough to bear its weight. We, therefore, reject the submission as misconceived. 30. It was next argued that the impugned levy was on mining rights and not on mineral rights since the mineral rights belong to the State Government which own the mines. We have already pointed out, the difference between a mining right and a mineral right by reference to the relevant statement on page 39 of 58 Corpus Juris Secundum extracted earlier. According to the note, a mining right is a right to enter upon and occupy land for the purpose of working it with a view to obtaining the minerals deposited therein whereas a mineral right is a right or title to all or to certain specified minerals in a given tract. It is, therefore, clear that a person having a mining right is entitled to work the mine with a view to winning the mineral deposited therein but unless he is given a right to remove or consume the mineral, he cannot do so. It is the latter right which....
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....as raised for submission but as averments in that behalf are found in some of the petitions, we think it proper to deal with the same. The contention raised is that the impugned Legislation is ultra vires Article 19(1)(g) inasmuch as it imposes an unreasonable restriction on the petitioners fundamental right to carry on trade or business. It is nobody's case that the tax imposed is confiscatory. Every tax imposes some burden or restriction upon a citizen but so long as it is not shown to be confiscatory or wholly unreasonable, it cannot be struck down as violative of Article 19(1)(g) of the Constitution. See: S. Kodar v. The State of Kerala [1975]1SCR121 . In the case of M/s. K.M. Mohamad Abdul Kader v. State of Tamil Nadu [1985]1SCR980 , a similar contention was rejected even though the dealer was prohibited from passing on the incidence of tax to the purchaser. In the present case there is no such prohibition and as is clear from the averments in the counter the burden thrown by the impost is minimal. We are therefore unable to appreciate how the levy can be said to be violative of Article 19(1)(g) of the Constitution. As to the contention that the legislation seeks to depriv....
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.... calcareous sand in the Schedule is ₹ 25 per tonne. The question then is, whether the prescription of different rates is ultra vires Section 3 of the impugned Act and/or Article 14 of the Constitution of India? 34. We may at the outset mention that the validity of the charging section, namely Section 3, of the impugned Legislation is not challenged on any ground whatsoever. We are, therefore, not called upon to examine the validity of the said provision. The challenge is limited to the notification fixing different rates of duty in respect of mineral rights concerning limestone and calcareous sand. Section 3, the charging section, permits the levy of tax at such 'rates' not exceeding the maximum as the State Government may from time to time prescribe. The use of the plural 'rates' clearly suggests that the rate of tax need not be uniform. Different maximum rates have been prescribed for different minerals which is indicative of the fact that the rate of tax for mineral rights is expected to vary for different minerals. Section 3, therefore, envisages different rates of tax on mineral rights depending on the mineral removed or consumed, subject of course to th....
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....arded, consideration that the overall rise in price of finished goods should be marginal; that impact on actual user of the end product is minimal and relatable to the quantity of production and the total revenue it might fetch. Proceeding further, in paragraph 4 of the counter, the deponent states as under: Before issuing the notification under Section 3 of the Act the State Government has examined the matter thoroughly, with reference to its original proposal to levy tax at the flat rate of ₹ 12.50 per metric tonne of limestone and calcareous sand and had discussions with the Gujarat Mineral Industry Association and some the lessees. Detailed representations were received from captive mine lessee particularly cement units and more particularly from new cement units. Some of the representations particularly from cement industry and more particularly from new cement units were considered as genuine. Large existing cement units as well as new cement units were giving cement on levy to Government. The ratio of levy quota to free sale quota was 40: 60. It was noted that profitability of the cement units in the country had gone down substantially with increased capacity in the ....
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....r Section 3 on 29th October, 1985. It is, therefore, obvious that before the impugned notification was issued, the State Government bestowed its careful consideration to all the factors relevant to the fixation of rates for different mineral rights. It also took care to see that the tax burden was minimal particularly insofar as new cement units were concerned. It is, therefore, difficult to contend that the State Government acted arbitrarily or unreasonably in fixing the rates of tax for limestone and calcareous sands. 35. Now Section 3 of the impugned Act empowers the State Government to levy and collect a tax on mineral rights at such rates not exceeding the maximum specified in the Schedule. So long as the rate does not exceed the maximum the State Government is free to fix such rate as it considers proper. The use of the word 'rates' is clearly indicative of the fact that different rates may be prescribed for different minerals. Although the section does not in so many word state that different rates may be fixed for different mineral rights, the use of the plural 'rates' conveys the same meaning. Since the maximum rates of tax set out in the Schedule is not u....
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....ould be a violation of Article 14. In S.Kodar's case [1975]1SCR121 (supra) the Supreme Court while dealing with the contention that the provisions of the Act imposing different rates of tax on different dealers depending on their turnover was ultra vires Article 14, observed through Mathew, J. as under; Classification of dealers on the basis of their respective turnover for the purpose of graded imposition so long as it is based on differential criteria relevant to the legislative object to be achieved is not unconstitutional. A classification, depending upon the quantum of the turnover for the purpose of exemption from tax has been upheld in several decided cases. By parity of reasoning, it can be said that a legislative classification making the burden of the tax heavier in proportion to the increase in turnover would be reasonable. The basis is that just as in taxes upon income or upon transfer at death, so also in imposts upon business, the little man, by reason of inferior capacity to pay. should bear a lighter load of taxes relatively as well as absolutely, than is borne by the big one. The flat rate is thought to be less efficient than the graded one as an instrument o....
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....d with reference to the user of the specified mineral. The tax could not be assessed on an abstract right and, therefore, the measure of assessment of tax had per force to be linked with the extent of mineral removed or consumed. It would have been unfair and unreasonable to levy the tax without regard to the exercise of the right which could only be measured in terms of the quantity of minerals removed or consumed. The impugned Legislation seeks to recover a tax, on the holder of a mining lease putting to use his mineral right by the actual removal or consumption of the specified mineral in respect whereof he has a contractual right. The right is acquired under the lease deed but until it is actually exercised it is not taxed. That is why the measure of tax is related to the actual user but that does not mean that it ceases to be a tax on mineral rights. Since the capacity of the holders of mining leases to pay the tax must differ from mineral to mineral, the legislature has fixed the maxima in respect of each mineral in the Schedule to the Act. The capacity to pay must necessarily depend on the income derived by the use of the minerals. The income would vary from time to time dep....
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.... units for tax purposes. As observed by the Supreme Court in Hoechst's case (supra), the equality clause in Article 14 does not deprive the State of the power to classify a class of persons who must bear the heavier burden of tax. If it is manifest, as indeed it is, that the intention of the State Government was to classify the tax payers with a view to adjusting the tax burden in a fair and reasonable manner, the new cement units taking the lighter burden according to their in fancy as compared to established or existing units which can bear a heavier burden, we think that would satisfy the equality clause in the Constitution rather than infringe it. We are, therefore, of the view that when the legislature left it to the State Government to fix the rates of tax not exceeding the maximum prescribed by it, it conferred a wide discretion on the State Government to fix the rates having regard to all the relevant facts, such as, the standing of the industry, cost of production, profitability, other tax burdens, price structure of the commodity vis-a-vis the prices prevailing in the neighbouring States, the demand and supply forces, etc. We have noticed from the facts stated in the ....
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....teable value as the Corporation shall deem reasonable for providing a water supply for the City; (b) a conservancy tax at such percentage of their rateable value as will, in the opinion of the Corporation suffice to provide for the collection, removal and disposal, by municipal agency, of all excrementitious and polluted matter from privies, urinals are cess-pools and for efficiently maintaining and repairing the municipal drains constructed or used for the reception or conveyance of such matter, subject however to the provisos that the minimum amount of such tax to be levied in respect of any one separate holding of land or of any one building or of any one portion of a building which is let as a separate building shall be eight annas per mensem and that the amount of such tax to be levied in respect of any hotel, club, industrial premises or other large premises may be specially fixed under Section 137; and (c) a general tax of not less than twelve per cent of their rateable value which may be levied, if the Corporation so determines, on a graduated scale. Then appears the proviso on which considerable reliance was placed. It reads as under: Provided that the Corporation may, wh....
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....ent rates for different classes of properties, the absence of such prohibition was not decisive of the question because the scheme of taxation embodied in the Act, particularly Sections 129 and 137, makes it clear that only one rate of conservancy tax can be fixed by the Corporation and not different rates for different classes of properties. In taking this view considerable emphasis was laid on the fact that property taxes were imposed on the basis of rateable value which was fixed after taking into consideration factors such as the size of the property its location, its utility, etc. It was pointed out that once the rental value is arrived at, the difference based on these factors gets reflected in the rental value and thereafter they cannot once again be made the basis of differential treatment in the matter of rates because if these factors are taken into account over again, the tax would cease to be a tax based on rateable value; it would be a tax levied with reference to these factors. Referring to Section 129, Clause (b), it was pointed out that the percentage of rateable value at which conservancy tax can be levied has to be fixed having regard to the total cost of conserva....