N.H. BHATT, S.H. SHETH

(1) The petitioner is a company engaged in the business of manufacturing cement. The Mines and Minerals (Regulation and Development) Act 1957 came into force on 1st June 1958. It provides for the regulation of mines and the development of minerals in the country. Sec. 9 provides for charging royalty when a mining lease is granted. The petitioner is a holder of a mining lease and is required to pay royalty. Entry 8 in THE SECOND SCHEDULE to the Act prescribes the rate of royalty in case of Limestone. Originally it was five per cent of the sale price at the pits head subject to a minimum of thirty seven Paise per tonne. Under sub-sec (3) of sec. 9 the Central Government has the power to enhance or reduce the rate of royalty in respect-of minerals specified tn the second Schedule. On 31st October 1962 the Central Government published a notification udder sec. 9 (3) of the Act whereby a new rate of royalty was substituted for the original one specified in the second Schedule in case of limestone. That notification came into force on 10th November 1962. The new rate was Re. 00.75 p. per tonne but subject to a rebate of Re. 00.38 P. per tonne to be given on limestone beneficiated by froth floatation method. On 29th June 1968 another notification was issued. By that notification a new rate was substituted for one which was made effective under the notification of 1962. The 1968 notification classified limestone into two categories. The first category consisted of superior grade with 45% or more of CaO. Royalty of one rupee and twenty five paise per tonne was prescribed for this grade. The second category of limestone was inferior grade with less than 45% of CaO. Seventy-five paise per tonne was the royalty prescribed for this grade. On 29th January 1970 the third notification was issued which became effective on 7th February 1970 By that notification the categorization of limestone was done away with and royalty at the flat rate of Rs. 1. 25 p. per tonne was levied. It is these notification against which this petition is principally directed.

(2) Mr. Patel who appears on behalf of the petitioner has raised the following five contentions for our consideration:

I. Thirty-Ninth constitutional amendment by virtue of which the Mines and Minerals (Regulation and Development) Act 1957 was inserted in the Ninth Schedule is violative of the rule of law laid down by the Supreme Court in Kesavananda Bharatis case (AIR 1973 S.C. 1461).

II. The notification issued in 1970 was ineffective and void because it was published within four years from the earlier notification issued in 1968.

III. The notifications of 1962 1968 and 1970 had been issued without authority and therefore void because sub-sec. (3) of sec. 9 of the Act does not empower the Central Government: (a) to revise the rates of royalty before a period of four years from the last revision; (b) to impose more than 20% of the sale price at the pits head as royalty; (c) to change the method of fixing the royalty by prescribing a fixed royalty; (d) to classify and split the mineral for the purpose of charging different rates of royalty; and (e) to give rebate.

IV. (a). No express power has been conferred upon the Central Government by the Act either: (i) to change the method of fixing royalty; (ii) to give rebate and; (iii) to split the minerals because these matters pertain to the field of legislative policy. (b) If such power is implied (i) no objective standards or norms have been provided in the Act and the-matter is left to the arbitrary will of the Government; (ii) the power has been unreasonably exercised; and (iii) the rates fixed on the basis of gradation are discriminatory. Sec. 9 of the Act is unconstitutional for want of legislative competence.

(3) Turning to the first contention which Mr. Patel has raised before us it is difficult to appreciate the contention which he faintly raised for being rejected. By Thirty-Ninth constitutional amendment the Mines and Minerals Regulation and Development Act 1957 has been inserted in the Ninth Schedule It is now at Entry No. 90. Acts specified in the Ninth Schedule are protected against infringement or abridgement of fundamental rights conferred by any of the provisions in Part III of the Constitution. Mr. Patel faintly and without substance tried to argue that Thirty-Ninth Constitutional amendment inasmuch as it pertains to the insertion of the Mines and Minerals (Regulation and Development) Act 1957 violates equality clause incorporated in Art. 14 of the Constitution. He did not make good that contention of his raising an argument in support thereof. Even otherwise it is difficult to think how a constitutional amendment by which protection under Article 31B is given to the said Act violates the concept of basic structure enunciated in Kasavananda Bharatis case AIR 1973 S.C. 1461 by the Supreme Court. In fact he has stated this contention for being rejected and it is not necessary for us to examine it any more; The first contention raised by Mr. Patel is therefore rejected.

(4) We now deal with the fifth contention raised by Mr. Patel. He has tried to argue that sec. 9 of the Act is unconstitutional because it is a taxing provision which falls under Entry 50 of the State List. Mr. Nanavaty on the other hand has tried to argue that it falls under Entry 54 of the Union List. Entry 50 in the State List reads:

"Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. Entry 54 in the Union List reads thus: 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".

There is no dispute about the fact that the Act has been enacted under Entry 54 of-the Union List. Mr. Patel has however contended that so far as section 9 is concerned it falls directly under Entry 50 of the State List. Entry 50-empowers the State Legislature to make law-imposing taxes on mineral rights subject indeed to any limitations which Parliament may impose by law in relation to mineral development. Entry 54 in the Union List empowers the parliament to enact a law regulating mines and mineral development in public interest after declaring that it is expedient in public interest to do so. Sec. 2 of the Act specifically declares that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent provided in the Act. Having made this declaration in sec. 2 of the Act the Parliament passed the Act. The questions therefore which has arisen for our consideration is whether royalty which the Union Govern ment is authorized to charge under sec. 9 is a tax on mineral rights within the meaning of Entry 50 of the State List. Mr. Patel has tried to argue that royalty is not a fee firstly because there is no service which is rendered to the holder of a mining lease or to the community of the holders of mining leases. Secondly it is not a fee because nothing is spent by the Central Government on the development of mines or minerals. He has next tried to show that the entire amount of royalty recovered by the Central Government from the holders of mining leases is appropriated to the Consolidated Fund of India and is spent for meeting the general purposes of the Union.

(5) He has next tried to show from the petition that the payment of royalty produces no particular benefit to the payers. He has next tried to argue that it is a compulsory exaction of money by public authority and is therefore a tax. In this context reference has been made to two decisions of the Supreme Court and one decision of Punjab and Haryana High Court. In H. R. S. Murthy v. The Collector of Chittoor and Another AIR 1965 S. C. 177 the meaning of the expression royalty used in sec. 79(1) of the Madras District Boards Act 1970 was considered by the Supreme Court. Sec. 79 which has been reproduced in the report provided the annual rent value shall for the purposes of sec. 78 be calculated in the following manner: (i) In the case of lands held direct from Government or ryotwari tenure or on lease or licence the assessment lease amount royalty or other sum payable to Government for the lands together with any water-rate which may be payable for their irrigation shall be taken to be the annual rent value. Sec. 79(1) therefore inter alia used in juxta- position the lease amount and royalty. It was contended in that case before the Supreme Court that since the impugned land cess was payable only in the event of a mining lease winning the mineral and so paying the royalty and not when no minerals were extracted it was in effect a tax on mineral won and therefore on mineral rights. The Supreme Court observed that when a question arises as to the precise head of legislative power under which a taxing statute has been passed the subject for enquiry is what in truth and in substance is the nature of the tax. It was further observed in that decision that in a very remote sense it has relationship to mining as also; to the mineral won from the mine under a contract by which royalty is payable on the quantity of mineral extracted. But it does not stamp it as a tax on either the extraction the mineral or on the mineral right. Royalty was construed to connote the payment made for the materials or minerals won from the land.

(6) The next decision to which reference has been made is in M. P. V. Sundarramier and Co. v. The State of Andhra Pradesh and another AIR 1958 S. C. 468. This decision has been pressed into service in order to show that in List I while entries 1 to 81 mention several matters over Which Parliament has authority to legislate Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. Similarly in List II Entries 1 to 44 mention matters on which the States can legislate Entries 45 to 63 enumerate taxes which the State legislatures can impose. in other words the scheme of the two Lists is to specify the subjects on which the Parliament or the State Legislatures as the case may be may legislate and then specifies the taxes in respect of which legislation can be passed by Parliament or the State Legislatures as the case may be for imposing them. It has been argued that neither the Union List nor the State List empowers the Union or the States to levy royalty. Secondly since royalty is a tax and since there is no legislative competence to levy it it cannot be levied. We are unable to uphold the contention that royalty is a tax. It may not be a fee but it is not a tax. Sec. 9 itself clearlyrates the nature of royalty which can be levied. It inter alia provides that the holder of a mining lease 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. This elaboration in sec. 9 It self clearly shows that royalty is a payment for the mineral which is removed or consumed by the holder of a mining lease. The sub-soil property ordinarily belongs to the Union. When mining lease is granted in favor of a person he wins minerals from a particular area by application of labour and by spending on winning the minerals. The minerals themselves the property beneath the soil belongs to the Union. When the holder of a mining lease removes these minerals or consumes them he can do so only on payment of its price or value. Therefore expression royalty used in sec. 9 appears to us to be a share which the Union claims in the minerals which have been won from the soil by the lessee and Which otherwise belong to it. No holder of a mining lease can say that what is lying beneath the soil becomes his own property merely by virtue of the fact that because of mining lease he has won those minerals. Basically and fundamentally it is the property of the Union which is brought on the surface from beneath the soil by the lessee. In consideration of the labour and the enterprise which the holder of a mining lease applies for winning those minerals from the sub-soil strata he takes away a part; while the Union the owner of those minerals takes away another part. Therefore in our opinion royalty is a share in such minerals and got a tax in the form of a compulsory exaction. It is not compulsory because any one who applies for a mining lease to win minerals for being remove or consumed must pay its price. If he does not want to pay the price he may not apply for a mining lease. Clause (28) of Art. 366 defines the expression taxation so as to include the imposition of any tax or impost whether general or local or special and states that tax shall be construed accordingly. Royalty which is a share of the owner of the minerals the Union won by the lessee from the soil with the authority of the Union can never be said to be an imposition the holder of a mining lease. In Dr. Shanti Saroop Sharma and Another v. State of Punjab and Others AIR 1969 PandH 79 the question as as the true nature and character of royalty arose in the context of this very Act and in the context of Rule 20 of Punjab Minor Mineral Concession Rules. the view which the Punjab High Court has taken in this behalf is that royalty is neither a tax nor a fee but is more akin to rent. In that decision several definitions of royalty have been examined by the punjab High Court. In Whartons Law Lexicon Fourteenth Edition royalty is stated to be payment to the owner of minerals for the right of working the same on every ton or other weight raised. In Strouds Judicial Dictionary of Words and Phrases Third Edition it has been stated to be the reddendum which is variable and which depends upon the quantity or minerals gotten. In Mozley and Whiteleys Law Dictionary (7th Edition) it has been stated A pro rata payment to a grantor or lessor on the working of the Property leased or otherwise on the profits of the grant or lease. In Corpus juris Secundum Volume 77 Royalty has been stated to be a payment made to the landowner by the lessee of a mine in return for the privilege of working it. It is therefore clear that royalty is the price paid for the privilege of exercising the right to explore the minerals. It may be the whole or a part of the consideration of a mining lease. In our opinion therefore royalty specified in sec. 9 is neither a tax nor a fee but is a payment made by the lessee to the lesson (in case of mining tease) 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 sec. 9 is rot 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. Sec. 9 therefore is not ultra vires the legislative competence of Parliament. The fifth contention raised by Mr. Patel therefore fails and is rejected.

(7) The second contention which Mr. Patel has raised is that the notification of 1970 was issued by the Central Government without autority and in violation of the limitations imposed by the section itself upon the Central Government. In this behalf Mr. Patel has placed reliance upon proviso (b) to sec. 9 which reads as under:

"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".

Now in this case the second Schedule to the Act with Entry 8 pertaining to Limestone came into force on 1st June 1958. Sec. 9 of the Act empowers the Central Government to enhance or reduce the rates specified in the Schedule. The first notification was issued by the Central Government after the Act came into force and it became effective on 10th November 1962. Obviously therefore it was issued after the expiry of four years. The second notification was issued in 1968 and it came into force on 1st July 1968. The second notification was also issued after the expiry of four years from the date of coming into effect of the first notification. So far as proviso (b) to sec. 9 was concerned it was not violated by the Central Government while issuing these two notifications. However the third notification was issued within four years from the date of coming into force of the second notification. Whereas the second notification came into force on 1st July 1968 the third notification came into force on 27th February 1970. It is clear therefore that it was issued within a period of four years and that therefore it violated proviso (b) to sec. 9 of the Act. It was therefore unlawful. This notification on account of this reason has been struck down by the High Court of Delhi the High Court of Mysore Rajasthan High Court and this High Court. In Special Civil Application No. 244 of 1971 decided on 14th December 1976 a Division Bench of this Court following the decision of the High Court of Delhi in Writ Petition No. 1343 of 1970 struck down the notification of 1970 because it was issued in violation of the provisions contained in proviso (b) to sec. 9. In our opinion therefore notification of 1970 is liable to be struck down as it is violative of proviso (b) to sec. 9.

(8) The next aspect which arises in this context relates to the effect of substitution. It has been argued that with the issuance of notification of 1970 the notification of 1968 stood canceled and with the issuance of the latter-mentioned notification notification of 1962 stood canceled and that therefore with the striking down of notification of 1970 there is nothing which is left in the field and that vacuum is created. We will presently consider the effect of substitution. However so far as liability to pay is concerned it accrued with the coming into force of the Act on 1 June 1958 and it continued to accrue on that basis until the 1962 notification was issued. With the issuance of 1962 notification the liability to pay royalty accrued thereunder and continued to be in force until 1968 notification was issued. With the issuance of 1968 notification the liability to pay royalty accrued under that notification and remained operative until 1970 notification was issued. When a Court of Law strikes down an Act a section a rule or a notification it takes effect from the date of its issuance and makes it completely non est. The judicial declaration of invalidity of a notification is as if it was not issued and did not exist. Therefore so far as the liability to pay royalty was concerned in any case it remained effective until 1970 notification was issued. In our opinion on this ground the liability to pay royalty which accrued by virtue of notification of 1962 and 1968 cannot be called in question.

(9) Now what is the effect of striking down of notification of 1970 Does it leave a void in the field or does 1968 notification continue to operate 7 This takes us to the consideration of the question of substitution of one notification for another. Quite a few decisions have been shown to us in this context. Mr. Patel has invited our Attention to the decision of the Supreme Court in Firm A.T.B. Mehtab Majid and Co. v. State of Madras and Another A.I.R. 1963 S.C. 928. In that case Rule 16 of Madras General Sales Tax Act (Turnover and Assessment) Rules 1939 was substituted by another rule made in 1955. The substituted rule was declared invalid. The question which arose was whether the old rule continued to occupy the field. The principle which the Supreme Court laid down is that once the old rule has been substituted by the new rule the old rule ceases to exist and does not get automatically revived when the new rule is held to be invalid. The next decision is in Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. A.I.R. 1969 S. C. 504. In that case a prohibition order was issued by the Government of Travancore Cochin which continued to be in force ripht upto 30th March 1958. The Act as originally passed continued the Prohibition Order of 1119 with the qualification that it was to remain in force unless it was superseded or modified by the competent authority under the provisions of the Act. When the Prohibition Order of 1950 was issued on 8th March 1950 it was not laid down that it was being issued so as to supersede the earlier Prohibition Order of 1119. The question which arose for the consideration of the Supreme Court was whether on the issuance of Prohibition Order of 1950 the Prohibition Order of 1119 ceased to exist and whether it got revived when the Prohibition Order of 1950 was struck down. The Supreme Court followed the principle laid down in the earlier decision to which we have just referred that once the old rule has been substituted by the new rule it ceases to exist and it does not automatically get revived when the new rule is held to be invalid. Ex facie these two decisions support the proposition which Mr. Patel has raised before us.

(10) Mr. Nanavaty has invited our attention to two more decisions on the subject. In State of Maharashtra v. The Central Provinces Manganese Ore Co. Ltd. AIR 1977 S. C. 879 a similar question arose. Adverting to the connotation of the word substitution the Supreme Court observed that substitution does not necessarily and always connote two severable steps that is to say one of repeal and another of a fresh enactment even if it implies two steps. The natural meaning of the word substitution is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails it is totally ineffective so as to leave intact what was sought to be displaced. In that decision it has been further stated: It could not be inferred that what was intended was that in case the substitution failed or proved ineffective some repeal not mentioned at all was brought about and remained effective so as to create what may be described as a vacuum in the statutory law on the subject-matter. In the opinion of the Supreme Court Primarily the question is one of gathering the intent from the use of words in the enacting provisions seen in the light of the procedure gone through. Here no intention to repeal without a substitution is deducible. In other words there could be no repeal if substitution failed. The two were a part and parcel of a single indivisible process and not bits of a disjointed operation.

(11) the next decision to which our attention has been invited is in Shri Mulchand Odhavji v. RaJkot Borough Municipality AIR 1970 S. C 685 A similar question in that case arose under the Saurashtra Terminal Tax and Octroi Ordinance 1949 In that case under Octroi Rules framed by the Government the Municipality could collect octroi duty. The municipality could also frame independent rules on the coming into force of which the rules made by the Government would stand withdrawn. Under that Ordinance the Government issued the octroi rules. Thereafter the Rajkot municipality made its octroi rules and promulgated them. Ex facie on the promulgation of the octroi rules made by Rajkot Municipality Government rules stood withdrawn. The rules made by the Rajkot Municipality were later held to be invalid. The question which arose was whether the octroi rules made by the Government continued to be in force on account of the fact that the octroi rules made by Rajkot Municipality were declared to be invalid. The question was whether Rajkot Municipality could levy and recover octroi duty under the rules made by the Government because the Municipal rules had been held to be illegal. It was submitted in that case that the Government rules which were withdrawn on the coming into force of the octroi rules made by the Municipality could not be revived and that no octroi duty could be levied or recovered thereunder with effect from the date on which the Municipal rules declared illegal were brought into force. The Supreme Court turned down that submission and observed as follows. When the octroi rulesmade by the Government were withdrawn the intention obviously was that once the Municipal rules came into operation the Government rules in so far as they pertained to that municipality would cease to operate. The Government rules in fact provided that they would cease to operate from the date the said Municipality put into force their independent bylaws. Therefore the Government rules could cease to apply from the day the municipality brought into force its own bye-laws and the rules under which it could validly impose levy and recover the octroi duty. The withdrawal of the octroi rules made by the Government never intended a hiatus when neither the Government rules nor the municipal rules would be in the field. Therefore if the bye-laws made by the municipality could not be legally enforced for some reason or the other the Government rules continued to operate because the municipality could not be said to have put into force their independent bye-laws. In reply to these two decisions upon which Mr. Nanavaty has placed reliance two more decisions have been referred to by Mr. Patel.

(12) The first decision is in B. N. Tewari v. Union of India and Others AIR 1965 S. C. 1430. In that case it was held that the carryforward rule made in respect of communal representation in central services for scheduled castes and tribes became non est by substitution Thereof by a new carry-forward rule. The first carry-forward rule was made in 1952. It was later on substituted by a new carry-forward rule in 1955. On coming into force of the new carry-forward rule of 1955 the carry-forward rule of 1952 ceased to exist because its place was taken by a new rule. Thus by promulgating the new rule in 1955 the Government of India itself cancelled the carry forward rule of 1952 When therefore the Supreme Court struck down thecarry-forward rule of 1955 it did not mean that the carry-forward rule of 1952 which had already ceased to exist because the Government of India had cancelled it and had substituted a modified rule in its place was automatically revived. It was a case of substitution of carry-forward rule of of 1952 by the new carry-for ward rule of 1955. The promulgation of the new carry-forward rule which was later on struck down by the Supreme Court was interpreted by the Supreme Court as having the effect of cancelling the earlier carry-forward rule of 1952.

(13) The last decision to which reference has been made is in Premchand Jechand v. K G. Sanghrani Assistant Director Office of the textile Commissioner and Ors... In that case clause 14A of the Cotton Control Order 1955 made under the Essential Commodities Act 1955 was substituted by new Clause 14A. This Court held that the effect of substituting new Clause 14A for the original Clause 14A was that the original clause ceased to exist and that therefore delegation of power under original Clause 14A did not continue to operate so as to comprise delegation of power under new Clause 14A. It may be stated that new Clause 14A became ineffective on account of the finding recorded by this Court that it violated Articles 19 (1)(f) and 19 (1) (g).

(14) On a cumulative consideration of these decisions to which our attention has been invited we are of the opinion that the latest view of the Supreme Court in the matter comprises within its ambit two constituent elements. The first principle is that when a new provision is substituted for the old provision the old provision does not necessarily cease to operate if the new provision is found to be invalid because what is unlawful or invalid cannot Have the force of law and cannot therefore substitute the old provision. The second principle which we deduce is whether there is substitution of the old by the new leading to the final cancellation or abrogation of the old depends upon the intention. In the instant case the judicial declaration that the 1970 notification was invalid because it was issued in violation of the proviso (b) to sec. 9 means that 1970 notification had never come into existence lawfully and that therefore it was non est in law. Therefore in law it could not have the effect of substituting itself for the 1968 notification. Obviously therefore 1968 notification continued to be in force even after the 1970 notification was issued because the judicial declaration of invalidity of 1970 notification relates back to the date of its issuance as a judicial declaration always does. Secondly the intention of the Central Government while issuing 1970 notification was not to exempt mining leases in respect of limestones from payment of royalty but its intention was to net in more royalty from the holders of mining leases. It is clear therefore that if 1970 notification was held to be invalid or unlawful there was no intention to cancel the 1968 notification. The position which therefore emerges can be stated thus: Between the date of coming into force of the Act with Schedule appended to it and the date of coming into force of the 1962 notification the petitioner was required to pay royalty in terms of the provisions relating to limestone made in the original schedule as enacted by Parliament. Between the date of coming into operation of 1962 notification and the date of coming into operation of the 1968 notification the petitioner rendered himself liable to pay royalty in terms of the provisions made in the Schedule by 1962 notification. From the date of coming into force of the 1968 notification the petitioner became liable to pay royalty in terms of the provision made in respect of limestone by 1968 notification. His liability to pay in terms of 1968 notification continues without in any way being affected by 1970 notification. The contention raised by Mr. Patel that by the declaration of invalidity of 1970 notification the liability of the petitioner to pay royalty under the earlier notifications ceased to exist does not have any force and is therefore rejected.

(15) We now turn to the third contention which Mr. Patel has raised before us. The first part of his contention is that all the three notifications issued in 1962 1968 and 1970 were bad in law because sub-sec. (3) of sec. 9 did not empower the Central Government to revise the rates of royalty before the expire of a period of four years from the last revision. We have already stated that this contention holds good only in respect of 1970 notification but not in respect of 1962 and 1968 notifications.

(16) The next part of his contention is that these notifications were bad because under sec. 9 (3) the Central Government had no power to impose by way of royalty more than twenty percent of the sale price of mineral at the pits head. This contention in our opinion is based upon the misreading of proviso (a) to sec. 9. Proviso (a) lays down that the Central Government shall not fix the rate of royalty in respect of any mineral so as to exceed twenty percent of the sale price of the mineral at the pits head. Proviso (a) places the limitation upon the power of the Central Government to fix the rate of royalty in respect of any mineral. It does not deal with the actual liability which a holder of a mining lease may incur from time to time under the Act by virtue of fluctuating price of the mineral. The expression shall not fix the rate of royalty clearly suggests that whenever the rate of royalty is fixed by the Central Government in exercise of the powers conferred upon it by sec. 9 it has to take into account all the factors obtaining then and to so fix the royalty that it does not exceed twenty percent of the sale price of the mineral at the pits head. To accede to the argument that it deals with limitation in respect of the accrual of actual liability is to take the view that the rate of royalty fixed by the Central Government from time to time may be at least during the four years. which would elapse between the two notifications be valid in those cases where it did not exceed twenty percent of the sale price and would be invalid in respect of cases where it exceeded twenty percent of the sale price depending upon the fluctuating market price of the commodity or the mineral. The Parliament has steered clear of this difficulty by using appropriate language in the proviso (a) which limits the power of the Central Government while issuing a notification to fix the royalty at twenty percent or less of the sale price of the mineral at the pits head.

(17) It has next been argued that while proviso (a) to sec. 9 contemplates fixation of royalty in terms of percentage of the sale price the Central Government has fixed it otherwise. In other words a fixed amount of royalty introduced by the Central Government militates against the concept of royalty in terms of percentages contemplated by proviso (a) to sec. 9. Therefore it is contended that what the Central Government has done by 1962 and 1958 notifications is bad in law and is ultra vires proviso (a) to sec. 9. It cannot be gainsaid that if the Parliament or a Legislature has adopted one method then the subordinate authority which has been given power to modify the Schedule cannot introduce a new method. The argument is based upon the proposition that a subordinate emending authority cannot in exercise of power of amendment given to it by the Parliament do something which derogates from the legislative policy or is contrary to it. In this context our attention has been invited to the decision of the Supreme Court in Rajnarain Singh v. The Chairman Patna Administration Committee Patna and another (1955) I SCR 290. The principle which has been laid down in the matter of delegation of legislative power in the context of Patna Administration Act 1915 is as follows: An executive authority can be authorised by a statute to modify either existing or future laws but not in any essential feature. It has also been observed in that decision:

"Exactly what constitutes an essential feature cannot be enunciated in general terms but it is clear that modification cannot include a change of policy. Essential legislative function consists in the determination of the legislative policy and its formulation as a binding rule of conduct. Modifications which are authorised are limited to local adjustments or changes of minor character and do not mean or involve any change of policy or change in the Act".

(18) The question which has therefore been canvassed before us is whether by issuing 1962 and 1968 notifications the Central Government acted against the legislative policy in so far as the method and mode of levying royalty in case of mining leases were concerned. So far as proviso (a) to sec. 9 as it was at the material time was concerned the Central Government was authorized to enhance or reduce the rate at which royalty shall be payable in respect of any mineral subject to two conditions specified in the proviso. The principal part of sub-sec. (3) of sec. 9 did not specify the mode and method of levying royalty. However it was proviso (a) which stated in negative terms that the rate of royalty in respect of any mineral exceeding twenty percent of the sale price of the mineral at the pits head shall not be fixed. Does language of proviso (a) show that the Parliament had adopted as a matter of legislative policy the method of levying royalty in terms of percentages In order to answer the question we cannot look merely to the proviso as it was at the material time but we must read the proviso in light of the Schedule which Parliament originally enacted. Entry 8 in the Second Schedule relating to limestone as originally enacted by Parliament read thus:

"Five percent of the sale price at the pits mouth subject to a minimum of 00.37 p. per tonne".

When the language of Proviso (a) which places a limitation upon the power of the Central Government is read in light of the original Entry 8 in the Second Schedule no doubt is left in our minds that the Parliament had adopted the method of fixing royalty on the basis of percentage of sale price subject to a certain minimum. By the 1962 notification it was fixed at 00.75 P. per tonne which was subject to a rebate of 00.38 P. per tonne in case of a certain quality of limestone specified therein. 1968 notification splits limestone into two grades and fixed for one grade royalty at the rate of Re. 1.20 P. per tonne and in case of another at 00.70 P. per tonne. It is not necessary for us to deal with 1970 notification in this respect because it has already been declared to be invalid.

(19) Now the legislative policy in the matter of fixing royalty as disclosed by Entry 8 in the Second Schedule is two-fold. Firstly the royalty is to be computed at five percent of the sale price at the pits mouth. Secondly it is to be computed at the rate of 00.37 P. per tonne and the holder of a mining lease becomes liable to pay whichever is higher. It is wrong therefore to contend that the Legislature enacted the policy of charging royalty on the basis of a certain percentage of the sale price only. The 1962 notification adopted one of these two modes only and laid down that royalty shall be payable at the rate of 00.75 P. Per tonne subject to a certain rebate in case of a certain quality of limestone with which we are not concerned in this case at the stage. The 1968 notification also disclosed the same policy namely charging royalty at a certain rate per tonne of limestone. What therefore the Central Government did by issuing 1962 and 1968 notifications was to adopt one of the two methods prescribed by the Parliament in Entry 8 in the Second Schedule. It is difficult to say therefore that the Central Government by adopting one of the two formulae specified by Parliament originally in Entry 8 in the Second Schedule militated against the legislative policy of Parliament and derogated from it. In other words what the Parliament did by enacting Entry 8 in the Second Schedule was to adopt the yardstick of value as well weight in the matter of levying royalty. By 1962 and 1968 notifications the Central Government adopted the yardstick of weight alone and gave up the yardstick of value. We therefore do not think that the Central Government by adopting one of the two yardsticks acted against the legislative policy enunciated by Parliament. Assuming that such a selection left some weakness then in our opinion it was cured by sec. 28. Sec. 28 inter alia provides that all rules made and notification issued by the Central Government under the Act shall be laid for not less than thirty days before each House of Parliament while it is in session as soon as may be after they are made and issued and shall be subject to such modifications as the Parliament may make in the same session or the session following. It is clear therefore that subject to the modifications if any which the Parliament may make in a notification which after its issuance will be laid before it at least for thirty days the notification issued by the Central Government would stand approved by the Parliament. Logically therefore it would mean that the Parliament approved the selection of one of the two methods adopted by the Central Government while amending or modifying an Entry in the Second Schedule. Once such a notification received the concurrence or the approval of the Parliament it cannot be said that the Central Government did something contrary to the legislative policy of Parliament. Therefore the contention raised by Mr. Patel that notifications of 1962 and 1968 were bad in law because they militated against the legislative policy of Parliament disclosed by the statute is without any substance and must fail.

(20) He has next argued that the power of the Central Government under sub-sec. (3) of sec. 9 extends to amending the Schedule for the purpose of enhancing or reducing the rate of royalty and does not extend to splitting up of the mineral into two as the Central Government did by 1968 notification. The 1962 notification treated all limestones as one commodity for the purpose of levying royalty. The 1968 notification splits limestone into two categories: (i) Superior Grade with 45% or more of CaO (ii) Inferior Grade with less than 45% CaO and prescribed different rates of royalty for them. In 1970 (we state it for the purpose of completing the narrative) limestone was again treated as one single commodity without any distinction between its grades. The question therefore which we are required to consider is whether under sub-sec. (3) of sec. 9 of the Act the Central Government had the power to split limestone into different grades for the purpose of levying royalty at different rates. Our attention in this connection has been invited by Mr. Nanavaty to the decision in V. Venugopala Ravi Varma Rajah v. Union of India and another AIR 1969: S.C. 1094. It was a decision under the Expenditure Tax Act 1957 The principle which has been laid down is that it is open to the Legislature to select persons properties transactions and objects and apply different methods and even rates for tax if the Legislature does so reasonably. It has been also laid down that if the classification is rational the Legislature is free to choose objects of taxation impose different rates exempt classes of property from taxation subject different classes of property to tax in different ways and adopt different modes of assessment. In such a case a taxing statute does not contravene Art. 14 of the Constitution. That decision turns upon the competence of the Legislature to draw distinction between different classes of persons or different types of objects consistent with the equality clause enshrined in Art 14. It does not turn upon the exercise of power by a subordinate authority which has been empowered by the Legislature to amend certain provisions of the Act.

(21) The next decision to which our attention has been invited is in M/s. Hiralal Ratan Lal v. The Sales Tax Officer Section III Kanpur and another AIR 1973 S. C. 1034. It was a case under the U. P. Sales Tax Act 1948 The State Government was given power by the Legislature to select any transaction in respect of such goods or class of goods as the Government might choose to levy a single point sales tax or purchase tax. In that context it has been laid down by the Supreme Court It is open to the legislature to define the nature of the goods the sale or purchase of which should be brought to tax. However if such a commodity or goods was separated in two parts such as the processed or split pulses from the unsplit or unprocessed pulses and treat the two as separate and independent goods for the purpose of levying tax it could not be called in question under law. The next decision to which our attention has been invited is in Secretary to Government of Home Department Tamil Nadu and others v. Salem Dharmapuri Omnibus Association and Others AIR 1975 S. C. 1006. It was a case of levying higher tax on contract carriages under the Madras Motor Vehicles Taxation Act 1931 There is nothing useful in that decision to which reference needs be made. It is clear therefore that when Parliament has treated a particular mineral as one commodity for the purpose of taxation in order to earn more royalty it is open to the Central Government to classify it into two grades and to specify different rates of royalty for them. In our opinion the power to modify the rates of royalty conferred upon the Central Government carries with it the power to charge royalty at different rates on different kinds of the same mineral. The contention raised by Mr. Patel that sec. 9 (3) of the Act does not empower the Central Government to classify them and treat them as different commodities is therefore without any substance and is rejected.

(22) The next contention which he has raised under this head is that by 1962 notification the Central Government permitted a rebate at the specified rate on the royalty collected on the limestone. 1962 notification shows that the Central Government for the purpose of allowing rebate excluded from the category of limestone beneficiated by froth floatation method. The policy of granting rebate can hardly be called in question because to grant rebate is to give some concession. Indeed the concession must be founded on some rational basis. By 1962 notification what the Central Government did wag to give a certain rebate on a particular quality of limestone in order to encourage its development. The primary object of the Act is the development of minerals. In order to carry into effect that policy if the Central Government in exercise of their power to amend the rates of royalty prescribed a particular rate for the limestone and allowed rebate on a particular kind of limestone at a prescribed rate all that it did was to exercise its power of fixing the rate of royalty. To fix a rate of royalty does not mean one rate on a single commodity or on different kinds of its quality. Different rates may be fixed and rebate may be given in case of certain kind and quality. These are different facets of power conferred upon the Central Government to alter the rate of royalty. We do not think therefore that by allowing rebate upon the particular quality of limestone the Central Government exceeded its amending power under sec. 9 (3). In any case the Parliament under sec. 28 had approved that notification. Therefore no infirmity in the exercise of that power by the Central Government existed. We are unable to uphold the third contention raised by Mr. Patel in its several aspects and it is therefore rejected.

(23) The last contention is that no express power has been conferred upon the Central Government by the Act either to change the method of fixing royalty to give rebate and to split the mineral because they are the matters which pertain to the policy of the Legislature. We have found in the foregoing paragraphs of this judgment that the power which the Central Government has exercised under the two notifications is fully implicit in its power to amend the rates of royalty in regard to limestone. Therefore nothing turns upon whether express power has been conferred or not. Mr. Patel has further tried to argue that if power to do all these things is implied in sec. 9 (3) then it is excessive delegation of power because no objective standards or norms have been provided in the Act and its exercise is left to the arbitrary will of the Government. He has also tried to argue that the Central Government may exercise its power unreasonably and unduly discriminatory rates may be prescribed for different grades of limestone. If as we have found the power to do all these things is implicit in the amending power conferred upon the Central Government by sec. 9 (3) then we cannot assume that the Central Government will exercise its power capriciously and arbitrarily in all cases. If there are norms which can be deduced from the Parliamentary enactment it is always better. But if no norms can be deduced then the Court assumes that the Central Government will exercise its powers reasonably and in public interest. That the Central Government will exercise its powers reasonably and not capriciously is ensured by the enactment of sec. 28 which subjects the exercise of such a power to Parliamentary check and review. Therefore we do not find that there is any excessive delegation of power in this behalf. However in actual exercise of its power if the Central Government acts capriciously or arbitrarily in any given case it is open to the aggrieved person to call that action in question. However merely because the Central Government may exercise the power capriciously or arbitrarily in some cases it cannot be said that the power which is implicit in sec. 9 (3) of the Act has been delegated to the Central Government in excessive form. The last contention raised by Mr. Patel also fails and is rejected.

(24) Except that 1970 notification is ultra vires sec. 9 (3) all the contentions which Mr. Patel has raised fail. In the result the petition is partly allowed and it is declared that the 1970 notification is void and unenforceable at law. Rule is made absolute to the above extent with no order as to costs in the circumstances of the case.