Case Summary: India Cement Ltd. & Others vs State of Tamil Nadu & Others (1989)
Citation Stats: (1989) 10 SC CK 0021 | AIR 1990 SC 85 | (1990) 2 GLR 764 | (1991) 188 ITR 690 | (1989) 4 JT 190 | (1989) 2 SCALE 953 | (1990) 1 SCC 12 | (1989) 1 SCR 692 Supp
Court: Supreme Court of India
Bench: Full Bench – E. S. Venkataramiah, C.J.; Sabyasachi Mukherjee, J.; S. Natarajan, J.; Ranganath Misra, J.; K. N. Singh, J.; G. L. Oza, J.; B. C. Ray, J.
Date of Decision: 25-10-1989
Final Decision: Disposed Of
[Judgment Source]
https://www.courtkutchehry.com/Judgement/Search/AdvancedV2?docid=275697
Facts of the Case
India Cement Ltd., engaged in cement manufacturing, held a mining lease in Tamil Nadu for limestone and kankar. The lease, granted under the Mineral Concession Rules, 1960, required payment of royalty, dead rent, and other charges. Following amendments to Section 115 of the Madras Panchayats Act, 1958, the State sought to levy a local cess at 45 paise per rupee on the royalty paid, with retrospective effect. The company challenged this levy, arguing that cess on royalty was beyond the State's legislative competence under the Constitution.
Law Points Raised
1. Whether cess on royalty constitutes a tax on land under Entry 49 of List II.
2. Whether the State Legislature is competent to impose cess on royalty under Article 246.
3. Whether royalty payable under mining leases can be equated to land revenue for the purposes of local cess.
4. Scope of the term 'land revenue' as expanded by the Explanation to Section 115.
5. Validity of retrospective imposition of cess on royalty.
Acts / Provisions / Articles Referred
• Constitution of India – Articles 245, 246, 265.
• Tamil Nadu Panchayats Act, 1958 – Section 115, Section 116.
• Mineral Concession Rules, 1960.
Judgements Referred
• Earlier Supreme Court ruling in Hingir-Rampur Coal Co. Ltd. vs State of Orissa – defining legislative competence in mineral taxation.
• Precedents distinguishing royalty from tax on land revenue.
Obiter Dicta
The expansion of 'land revenue' to include royalty under Section 115 must be interpreted in light of constitutional limitations on State legislative power over mineral development.
Ratio Decidendi
Royalty on minerals is not a tax on land under Entry 49 of List II; it is a payment for the right to extract minerals, and mineral development falls within Union jurisdiction under the Mines and Minerals (Development and Regulation) Act. Therefore, the State Legislature lacks competence to impose cess on royalty.
Final Ruling
The Supreme Court held that the levy of cess on royalty under Section 115 of the Tamil Nadu Panchayats Act was beyond the State's legislative competence and struck it down as unconstitutional.
Relevant Paragraph Numbers
Paras: 3, 4, 5, 6, 7, 8.
Summary
This case settled that royalty on minerals cannot be treated as land revenue for the purpose of local cess under State law. It reinforced the principle that mineral development is a Union subject, and States cannot impose taxes or cesses on royalty beyond the powers conferred by the Constitution.
[Judgment Source]
https://www.courtkutchehry.com/Judgement/Search/AdvancedV2?docid=275697