Rajasthan High Court in R. S. Shekhawat’s case as noted above has permitted the contractor to approach the mining department for refund of the amount which was deducted from the bill in event they successfully prove that minerals used by them were minerals for which royalty was already paid. The aforesaid directions clearly protected the interest of the contractors and we are of the view that the appellant’s interests are amply protected with the aforesaid directions issued by Rajasthan High Court. 42. We, however, deem it appropriate to give liberty to the appellant to approach the mining engineer, Respondent No. 2 by a written representation giving details of amount deducted from its bills or amount withheld along with the details of minerals used by contractors with details of proof to establish that minerals used were minerals for which royalty was paid as per 1986 rules. The Mining Engineer/Assistant Mining Engineer, the Respondent No. 2 may consider the representation and take an appropriate and reasoned decision expeditiously preferably within three months of submission of the representation and, in event it is found that appellant is entitled to refund of any amount, appropriate consequential action may be taken. 43. The Civil Appeal is disposed of with the above directions.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11259 OF 2016
(Arising out of SLP(C)No. 12882 OF 2009)
MANBHAR DEVI AGARWAL …….PETITIONER(S)

VERSUS

THE STATE OF RAJASTHAN & ORS ……RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN, J.

Leave Granted.

2. This appeal has been filed against the judgment of the High Court of
Judicature for Rajasthan, Jaipur Bench, Jaipur dated 17.12.2008 in D.B.
Civil Special Appeal No. 231 of 2008 by which judgment, the Civil Special
Appeal filed by the appellant against judgment and order of Learned Single
Judge dated 20.02.2007 was dismissed. Brief facts necessary to be noted for
deciding the appeal are:-

The appellant, a contractor, licensed by Nagar Nigam, Jaipur has been
carrying out constructions of buildings, roads, drains, footpaths, etc..
The appellant for carrying out his construction work uses Bazri, stone,
grit, moram, etc. which is claimed to be purchased from an open market at
Jaipur.

3. State of Rajasthan has issued various Government Orders dated
20.02.1994, 08.11.1996 and 20.11.1996 by which provision of deduction of 2%
towards the royalty of minerals from bills of contractors of the
construction department was made. The State of Rajasthan modified the
scheme by issuing an order dated 13.11.2000 by which the earlier Government
Orders providing for deductions of 2% as royalty of minerals from the bill
was done away. A new scheme was enforced vide order dated 13.11.2000. Under
the new scheme, the copy of work order issued by Construction Department to
the contractors containing details of the quantity of the minerals used for
construction was required to be produced before the Mining Engineer/
Assistant Mining Engineer, who before the commencement of the mining work
were required to issue short term permission letter for use of mineral in
the construction.

4. Another Government Order was issued dated 03.10.2001 by which,
direction nos. 2 & 4 as contained in the circular dated 13.11.2000 were
modified.

5. Further, directions were issued on 25.01.2002. A letter dated
26.03.2002 was issued by the Government to the Chief Executive Engineer,
Commissioner, Jaipur Municipal Corporation referring to Government Orders
dated 03.10.2001 and 13.11.2000 and requesting the Jaipur Municipal
Corporation to ensure compliance of the aforesaid Government Orders. It was
further stated that until the No Dues certificate is issued in favour of
the contractors by the Department of Mining, payment against final bill of
the contractors be not made so that Department and State may not suffer any
kind of revenue loss. The appellant filed the writ petition being Writ
Petition No. 3191 of 2002 praying for the following reliefs:-

“a. By way of writ, order or direction the order dated 26.03.2002 Annexure-
5 passed by the respondent No. 3 may kindly be quashed and set aside.

b. by way of writ order or direction, the respondents may be restrained
not to collect royalty from the petitioners on purchase of Bazri, grit,
stone, moram etc from the open market.

c. by way of writ order or direction, the respondents may be restrained
to not to levy royalty from the running and final bills of the contractors
i.e. petitioners awarded prior to 26.03.2002.

d. any other appropriate writ, order or direction to which the
petitioner may be entitled to in the circumstances of the case may be
issued in his favour.

e. cost of the writ petition may be awarded in favour of the
petitioner.”

6. The Writ Petition filed by the appellant was disposed of by the
learned Single Judge on 20.02.2007. Learned Single Judge disposed of writ
petition in terms of an earlier judgment in SBCWP No. 359 of 1998,
R.S.Shekhawat & Others Vs. State of U.P. decided on 28.02.2001.

7. The appellant aggrieved by the decision of learned Single Judge dated
20.02.2007 filed DBCSA No. 231 of 2008. The Division Bench held that there
is no illegality in order passed by the learned Single Judge in
R.S.Shekhawat and others case (Supra), hence, the learned Single Judge
disposing of the writ petition of the appellant did not commit an error.
The appeal was accordingly dismissed. Aggrieved by the decision of the D.B.
dated 17.12.2008, the appellant has filed the present appeal.

8. Learned counsel for the appellant in support of the appeal contends
that both learned Single Judge and Division Bench of High Court did not
decide the issues raised by the appellant in the writ petition and have
disposed of the writ petition in terms of earlier judgment of learned
Single Judge, R.S.Shekhawat and others in which judgment no issues were
decided. He submits that Judgment in R.S.Shekhawat Case indicates that the
Court did not enter into the correctness or otherwise of the notification
dated 22.09.1994 & 03.07.1994 which were under challenge. The Court
noticing the new scheme as issued by Government Order dated 13.11.2000,
noted the request of the appellant that matter may be directed to be
examined by the Department of Mines on which request the writ petition was
disposed of.

9. It is submitted that the above judgment did not decide the issues
raised by the appellant which were required to be considered. It is further
submitted that the payment of royalty is to be made by lessees or licensees
who have been granted right of excavation of minerals i.e. a holder of
mining lease or license. The appellant who has been purchasing the minerals
from the open market cannot be saddled with the payment of royalty. The
appellant is not carrying out any mining operation so as to be asked to
make payment of royalty.

10. Learned counsel for the State disputing the submissions of counsel
for the appellant submits that the various Government Orders by the State
of Rajasthan have been issued to prevent the illegal mining i.e. use of the
minerals without payment of the royalty. It is submitted that the
Government Orders provide for a mechanism to check illegal mining and in
event minerals used are minerals which are royalty paid minerals, there is
no liability and the Government only requires verification of such facts
i.e. whether minerals used by the contractors are royalty paid or not.
It is submitted that direction for withholding the payment till the
verification of above facts are only for the purpose of ensuring that
minerals used are not illegally mined minerals without payment of royalty.
He submit that no error was committed by learned Single Judge and the
Division Bench in disposing of the writ petition giving liberty to the writ
petitioner to approach the competent authorities in the mining department
to prove that minerals used by them are all royalty paid.

11. We have considered the submission of learned counsel for the parties
and have perused the records.

12. The Parliament has enacted Mines and Minerals (Development and
Regulation) Act, 1957, for the development and regulation of mines and
minerals. The Union control on regulation of mines and development of
minerals has been declared by virtue of Section 2 of 1957 Act. Section 3(e)
defines ‘Minor Minerals’ which is to the following effect:-

“3(e). ‘Minor Minerals’ means building stones, gravel, ordinary clay,
ordinary sand other than sand used for prescribed purposes, and any other
mineral which the Central Government may, by notification in the Official
Gazette, declare to be a minor mineral;”

13. By Section 15 of the Act, the State Government has been empowered to
make rules on Minor minerals.

14. Section 9(2) provides for payment of royalty by the holder of mining
lease. Section 9(2) is as follows:-

“9(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 by 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.”

15. By Act 25 of 94, certain amendments have been incorporated in 1957
Act. One of the sections inserted by Amendment is Section 23C. Section
23C(1) is as follows:-

“23C. Power of State Government to make rules for preventing illegal
mining, transportation and storage of minerals:-

(1). The State Government may, by notification in the Official Gazette,
make rules for preventing illegal mining, transportation and storage of
minerals and for the purposes connected therewith.

(2) …………………………”

16. The State of Rajasthan has framed Rajasthan Mines and Minerals
Concession Rules, 1986, in exercise of power under Section 15. Section
3(2)(XX) defines ‘Royalty’ which is to the following effect:-

“Royalty means the charge payable to the Government in respect of the ore
or mineral excavated, removed or utilized from any land as prescribed in
Schedule-I.”

17. Rule 18 provides for conditions which are to be included in every
mining lease. According to Section 18(1)(b), the holder of a mining lease
granted on or after commencement of these rules shall pay royalty in
respect of any mineral removed by him from and/or consumed within the
leased area at the time being as specified in Schedule I in respect of that
mineral.

18. Rule 48 contains various provisions with regard to unauthorized
working. Various provisions regarding undertaking of mining operation not
in accordance with the mining lease have been contained in Rule 48 which
also includes seizure of illegally mined minerals and recovery of royalty
and tax chargeable as well as compounding charges.

19. Above statutory provisions clearly indicates that excavation of minor
minerals, as per mining lease or permit is subject to payment of royalty
and the rent as prescribed in the rules. The liability to make payment of
royalty is on the person who excavates the minerals under the lease or
license.

20. The provisions also indicate that in event of illegal mining or
excavation of minerals without payment of royalty, the rules empower
exercise of various powers including seizure of minerals, recovery of
royalty, taxes and compounding charges on such minerals.

21. The first submission which has been raised by learned counsel for
appellant is that learned Single Judge and Division Bench did not consider
the issues raised in the writ petition and disposed of the matter in terms
of earlier judgment of R.S.Shekhawat case in which case no issues were
decided. The judgment of R.S.Shekhawat is brought on record as Annexure P-
2.

22. The above judgment indicates that in writ petition, notification
dated 22.09.1994 and 03.07.1995 by which 2% deductions were made from
running bills submitted by petitioners to the Public Works Department and
other State Departments towards royalty of minerals was under challenge.
The petitioners of that case were engaged in business of constructing
roads, buildings and were using different varieties of minerals purchasing
it from the open market. However, when the writ petition came for hearing,
the court noticed the subsequent development by which the aforesaid two
notifications were substituted by a new scheme dated 13.11.2000.

23. The petitioner of that case, in view of the subsequent development
did not press for adjudication regarding the notification dated 22.04.1994
and 03.07.1994 but prayed for the refund of the royalty deducted from their
bills. The petitioner suggested that the matter may be examined by the
Department of Mines itself. It is useful to note following observation in
the judgment:-

“…as already stated the counsel for the petitioner as also other counsels
appearing in all these writ petitions, no longer consider it necessary to
insist for adjudication of the question as to whether the two notifications
dated 22.09.1994 and 03.07.1994 are legal or not in view of the fact that a
new scheme on 13th November 2000 referred to hereinbefore has been
implemented but insofar as deductions already made by the Public Works
Department and other Departments on behalf of the Mining Department is
concerned, the same requires adjudication by the Department of Mining to
ascertain whether the petitioners at any point of time prior to 13th
November 2000 had used minerals in their construction operations or not
which were not royalty paid and for this purpose the counsel for the
petitioners have themselves suggested that the matter be examined by the
Department of Mines in order to come to a just conclusion whether any
wrongful deduction had been made in the running bills by the Public Works
Department and other Departments or not in regard to the amount of royalty
for the minerals used…”

24. The aforesaid writ petition was thus disposed of giving liberty to
the petitioner to approach the Department of Mines with the relevant
records for assessment and explaining the position for whether the claim
for refund or adjustment is sustainable or not.

25. When the writ petition no. 3191 of 2002 filed by the appellant came
for consideration on 20.02.2007, the learned Single Judge after considering
the judgment in R.S.Shekhawat case, disposed of the writ petition with
following directions:-

“…Having perused the aforesaid judgment and considering the rival
arguments of the learned counsel for the parties, I am not persuaded to
take any other view of the matter than the one taken by the Co-ordinate
Bench in the aforesaid judgment.

The writ petition is accordingly disposed of in terms of the
aforesaid directions. The observations made and directions given in the
aforesaid judgment shall also apply to the present case.”

26. The Division Bench also affirmed the aforesaid judgment.

27. From the prayers as made in the writ petition, it is clear that
principle prayer made by the writ petitioners was challenge to D.O. letter
dated 26.03.2002 issued by the Office of Mining Engineer, Mines and
Geology, addressed to Commissioner, Jaipur Municipal Corporation, Jaipur.

28. The writ petition in R.S.Shekhawat case was decided on 28.02.2001 by
which date the letter dated 26.03.2002 was not even in existence. Letter
dated 26.03.2002 being subsequent in point of time from the judgment of
R.S.Shekhawat case, it was necessary to look into the content of the letter
and to take decision thereafter. We thus find substance in the submission
for the learned counsel for the appellant that letter dated 26.03.2002 was
also necessary to be looked into before deciding the writ petition of the
appellant and without referring to the letter dated 26.03.2002, the writ
petition of the appellant ought not to have been disposed of.

29. We thus, in view of the above, proceed to examine the contents of
D.O. letter dated 26.03.2002 and submissions made by the appellant in
support of the appeal.

30. The submission which has been pressed by the counsel of the appellant
is that payment of royalty is contemplated from holder of a mining lease or
permit. As noted above, the statutory scheme clearly indicates that the
royalty is required to be paid by mining lease holder or permit holder for
excavation of a minor mineral and no mineral is to be removed or excavated
without payment of the royalty. For mining of all minerals payment of
royalty is necessary.

31. It is however also relevant to note that where mineral is
excavated/transported/removed without payment of royalty, there are
specific provisions for seizure of such minerals, recovery of royalty, tax
and compounding charges. The statute thus takes care of payment of royalty
for even those minerals which have been illegally mined or excavated. The
lease holders or permit holders who excavate the minerals under the lease
or license are obliged to make payment of royalty and in event any such
mineral is found to be removed by lessee or their agents without payment of
royalty, statute contains ample provisions to ensure recovery of royalty
and fine etc.

32. As noted above, the earlier Government Orders dated 22.09.1994 &
03.07.1995 provided for 2% deductions from the running bills of the
contractors of public works department and other state departments towards
the royalty of minerals which were used by contractors in building of roads
etc. The Scheme as provided under the aforesaid Government Orders were
subsequently withdrawn and a new scheme was enforced by Government Order
dated 13.11.2000 and 03.01.2001. By Government Order 03.01.2001 modifying
earlier direction dated 13.11.2000, following was directed:-

“After carrying out amendment in the even numbered Circular dated
13.11.2000 related to guidance to recover the royalty against the minerals
used in various works by the Contractors of Government Works Department and
substituting the Paras 2 and 4 of the above Circular, following directions
are issued:-

“(2) Before commencement of mining work by the Contractor of Construction
Department, Short Term Permission Letter for mineral used in the
construction from the Mining Department shall be obtained and shall have to
deposit the fee fixed for it and cost of Khanna Book with the Department,
but amount of royalty payable on the quantity of the mineral mentioned in
the short term License will be deducted from the running bills of the
contractor by the concerned Construction Department on the basis of the
quantity of the mineral used in the construction.

(4) On completion of the construction work, complete details of the mineral
such as quantity of the mineral, source of receiving mineral and details of
the amount deducted from the bill etc. utilized by the Contractor duly
verified by the Executive Engineer of the concerned Construction Department
shall be submitted to Mining Engineer/Assistant Mining Engineer within 15
days and further a Certificate of Construction Department will also be
produced in which quantity of the mineral used in the construction has been
certified.”

33. A further Government Order was issued on 25.01.2002 which has been
brought on record as Annexure P-4 by which certain other directions were
issued for ensuring that the payment of royalty regarding all minerals used
is made and the mining engineer was required to keep all details and the
contractors were also to obtain short term permission for use of the
minerals as per work order.

34. A letter dated 26.03.2002 was issued by the Mining Engineer to the
Commissioner Municipal Corporation, Jaipur, whereunder the attention of
Commissioner, Jaipur Municipal Corporation, Jaipur was drawn towards
circular dated 03.10.2001 of the State Government and circular dated
13.11.2000, and the commissioner was informed that although the information
of the circular has been sent earlier to the Jaipur Municipal Corporation,
the amount of royalty has not been received. The Commissioner, Jaipur
Municipal Corporation was requested to arrange to send royalty on the basis
of the quantity of the minerals used in the contract of the construction
work given by to the contractor by subordinate offices of Jaipur Municipal
Corporation before end of the financial year.

35. The letter dated 26.03.2000 impressed upon Commissioner of Jaipur
Municipal Corporation to ensure compliance of Government Orders dated
13.11.2000 and 03.10.2001 which has been noted earlier. The appellant in
writ petition has only challenged the letter dated 26.03.2002 but has not
challenged the Government Circulars issued earlier which was sought to be
complied by the said letter.

36. Learned counsel for the State is right in his submissions that since
appellant did not challenge the aforesaid two circulars of the State
Government where scheme for realization of the royalty from the contractors
for use of the minerals was enforced, the state had no occasion to give all
relevant facts pertaining to two earlier circulars by which royalty was
sought to be recovered. In the present writ petition only prayer is to
quash the letter dated 26.03.2002, which is only a letter to Municipal
Commissioner Jaipur to ensure compliance of Circulars dated 13.11.2000 &
03.01.2001. There being no challenge to Circular’s 13.11.2000 & 03.01.2001
in the writ petition and the State had no opportunity to defend its above
policy it is not appropriate for this Court to embark upon the adjudication
of above Government Scheme. The letter dated 26.03.2002 being only a letter
to ensure compliance of Circulars dated 13.01.2000 & 03.01.2001, no fault
can be found in the said letter.

37. A Counter Affidavit has already been filed by the Respondent No. 1 &
2, the State of Rajasthan and Mining Engineer in the present appeal. In the
counter affidavit, State has come up with the case that the liabilities to
pay royalty rest with contractors/lease holders to whom mining lease are
bestowed. It is further pleaded that in case the minerals have been
procured from the legal source on which royalty have been paid, there is no
royalty payable subsequently. In sub-paragraph IV of the counter affidavit,
following was stated:-

“IV. That the contents of para IV of the questions of law are wrong, ill-
advised and are hence denied. It is submitted that the liability to pay
royalty rests with the contractors/lease holders to whom the mining leases
are bestowed but in order to prevent losses on account of rampant illegal
mining and subsequent usage of such illegally mined minerals in
construction work, the department of mines of the State of Rajasthan issued
circulars from time to time calling upon vendors/contractors registered
with Public Works Department of the State who carry out construction works
to place before it the records of the minerals having been purchased
legitimately and that such minerals have not been procured from illegal
mining to determine whether royalties on such minerals have been paid. In
case, the minerals have been procured by vendors/contractor from illegal
mining, the royalties due to the State can be recovered. The said circulars
categorically state that, in case minerals have been procured from legal
sources on which royalties have been paid, there is no royalties payable
subsequently. However, in case such minerals are procured from illegal
mining, then the royalties that have been usurped by the
vendors/contractors must be paid to the State. There is no infirmity or
illegality in such a circular which is intended to legitimately collect the
royalties due to the State and which have not been paid.”

38. It is further stated in the counter affidavit that in event appellant
has procured the minerals from open market, the appellant should have
presented the documents to prove that such minerals used in construction
work were purchased legitimately and then no royalty shall be paid to the
State by the appellant on such mineral in such a case.

39. It is submitted that in spite of department communication 18.02.2008
and 16.02.2009 calling upon the appellant to produce the records of
purchasing the minerals from open market, the appellant has failed to
produce any such record of such purchase. In paragraph VIII, following has
been stated:-

“VIII. That the contents of corresponding para no. VIII are wrong and
denied. It is submitted that as per the circular issued by the department
under Rule 63 of Rajasthan Minor Minerals Concession Rules, 1986, it is
mandatory for all contractors enlisted /registered with the Public Works
Department cited above to obtain ‘Short Terms Permit’ for the minerals to
be used in construction works. In case the petitioner purchased the
minerals from the open market, then the petitioner should have produced the
relevant documents to prove that such minerals used in construction works
was purchased legitimately. However, in spite of the communications from
the department dated 18.02.2008 and 16.02.2009 in this regard, the
petitioner has failed to produce any documents that proves that the
minerals have been purchased legitimately from the open market. It is clear
that the petitioner does not possess any documents that prove that such
minerals have been procured through legitimate means and hence it is clear
form the conduct of the petitioner that such minerals are procured
illegally and are illegally mined.”

40. The circulars issued by the State Government including the circular
dated 13.11.2000 as well as circular dated 03.10.2001 has to be interpreted
to mean that circular requires payment of royalty with regard to only those
minerals which have been used by the contractor for which no royalty was
paid. The circular cannot be interpreted to mean as requiring payment of
royalty for minerals used for which once royalty has already been paid. The
state has come up with the above mentioned Government Order only with
object to ensure that contractors do not use minerals which are not royalty
paid.

41. Rajasthan High Court in R. S. Shekhawat’s case as noted above has
permitted the contractor to approach the mining department for refund of
the amount which was deducted from the bill in event they successfully
prove that minerals used by them were minerals for which royalty was
already paid. The aforesaid directions clearly protected the interest of
the contractors and we are of the view that the appellant’s interests are
amply protected with the aforesaid directions issued by Rajasthan High
Court.

42. We, however, deem it appropriate to give liberty to the appellant to
approach the mining engineer, Respondent No. 2 by a written representation
giving details of amount deducted from its bills or amount withheld along
with the details of minerals used by contractors with details of proof to
establish that minerals used were minerals for which royalty was paid as
per 1986 rules. The Mining Engineer/Assistant Mining Engineer, the
Respondent No. 2 may consider the representation and take an appropriate
and reasoned decision expeditiously preferably within three months of
submission of the representation and, in event it is found that appellant
is entitled to refund of any amount, appropriate consequential action may
be taken.

43. The Civil Appeal is disposed of with the above directions.

………………………………………J.
(PINAKI CHANDRA GHOSE)

……………………………………J.
(ASHOK BHUSHAN)
NEW DELHI;
NOVEMBER 25, 2016.

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