HINDUSTAN ZINC LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The facts leading to the filing of this writ petition are that the petitioner is a company incorporated under the Companies Act, 1956 and is engaged inter alia in the business of mining of zinc and lead. The material excavated from the mines by the petitioner is processed in Beneficiation Plants situated within the leased area taken on lease by the petitioner-company from the State. Beneficiation is a process under which the ore excavated is treated so as to increase the percentage of one or other metals, in the instant case, zinc and lead. In this process, zinc and lead are removed from ore leaving behind waste which is termed as tailings or rejects. The tailings and rejects are dumped by the petitioner in a tailing dam situated within the leased area itself. According to the petitioner zinc and lead that are found in the form of zinc and lead sulphite in the run-of-mine ore do not change their chemical composition at the end of the beneficiation. The material that remains after beneficiation is known as metal concentrate. It is the concentrate that is removed from the leased area for sale or use by the petitioner and it is only the said concentrate that is a usable material. The rest is the waste and is of no use.

(2.) The Central Government notified the rates of royalty to be charged on different minerals removed or consumed from the mining lease area under Section 9(3) of the Mines and Minerals (Development and Regulation) Act, 1957 (for short "the Act of 1957"). These rates are listed in the Second Schedule to the Act of 1957. Royalty rates are prescribed for different minerals on ad valorem basis or per tonne basis or on the basis of the metal contained in the ore or concentrate. In the case of some minerals this Schedule prescribes royalty on pure minerals and in the case of others on concentrates. On 11-4-1997, respondent No. 1 issued a notification where under royalty was stated to be chargeable on lead concentrate at 4% of the London Metal Exchange metal price on ad valorem basis chargeable per tonne of concentrate produce and on zinc concentrate at 3.5% of the London Metal Exchange metal price on ad valorem basis chargeable per tonne of concentrate produced. On 12- 9-2000, a new notification was issued by the Union of India under Section 9(3) of the Act substituting the earlier notification. As per the new notification, the royalty chargeable in respect of "Lead" would be 5% of London Metal Exchange lead metal price chargeable on the contained lead metal in ore produced. At No. 50 in Second Schedule, it is provided that the royalty chargeable in respect of "zinc" would be 6.6% of London Metal Exchange zinc metal price chargeable on contained zinc metal in ore produced. After the notification dated 12-9-2000, the petitioner's leases were renewed on 15-9-2000. A further notification was issued by respondent- Union of India on 25-9-2000 inserting new rules in the Minerals Concession Rules, 1960 (for short "the Rules of 1960"), which are Rules 64B, 64C and 64D and some guidelines. Rule 64B provides that in case of run-of-mine is carried out within the leased area then royalty shall be chargeable on the processed mineral removed from the leased area and in case of run-of-mine mineral is removed from the leased area to a processing plant which is located outside the leased area then royalty shall be chargeable on the unprocessed run-of-mine mineral and not on the processed product. Rule 64C makes the position further clear which says that royalty on tailings or rejects from the leased area for dumping and not for sale or consumption out side leased area, such tailing or rejects shall not be liable for payment of royalty, Rule 64C further provides that even if the dumped tailing or rejects are used for sale or consumption on any later date after the date of such dumping then such tailings or rejects shall be liable for payment of royalty.

(3.) On 22-12-2001, the Mining Engineer, Mines and Geology Department, Government of Rajasthan, Bhilwara issued a notice to the petitioner inter alia stating that it was not paying royalty in respect of its Rampura Agucha Mine in accordance with the new provisions of the Mineral Concession Rules, 1960. The Mining Engineer, therefore, demanded payment of short-fall in royalty paid by the petitioner. The Mining Engineer, Mines and Geology Department, Government of Rajasthan, Udaipur issued a notice to the petitioner on 24-12-2001, that too stating that the petitioner was not paying royalty in respect of its mine at ZAWAR in accordance with the new Rules 64-B, 64C and 64D of the Minerals Concession Rules, 1960. The Mining Engineer, Udaipur also demanded short-fall in royalty paid by the petitioner. The Mining Engineer, Mines and Geology Department, Government of Rajasthan, Rajsamand also issued demand notice of same nature on 3-1-2002 to the petitioner in respect of the mines at ZAWAR, Rajpura-Dariba and Rampura-Agucha and stated in the notice that the petitioner has wrongly calculated royalty on the metal in concentrate whereas under the new Rules, royalty should be paid on the metal content in the run-of-mine mineral. The respondent No. 4, Mining Engineer, Rajsamand further issued notice on 4-1-2002 stating that in respect of its mines at Rajpura-Dariba, the petitioner wrongly calculated royalty on the metal in concentrate. On 19-10-2002, the petitioner received yet another notice from the Mining Engineer, Bhilwara by which said Mining Engineer rejected the petitioner's pleas and informed the petitioner that the petitioner should now send the demand draft of Rs. 24,85,57,164/-. In the revision petitions, comments were filed by the respondents. Then rejoinder was filed by the petitioner. According to the petitioner, the revision petitions were filed in the morning of 6-3-2003 whereas in the afternoon of the same day, the petitioner Bank informed that the bank account of the petitioner had been attached against the demand of Rs. 1,14,336,633/- and the bank has been directed against releasing money from the said account without permission of respondent No. 4. The petitioner being aggrieved against the action of the respondent, preferred S. B. Civil Writ Petition No. 1186/2003 before this Court against the demand notices dated 22- 12-2001, 23-12-2001 and 4-1-2002 respectively and for declaration that the royalty is to be calculated under the Act and the Rules on the metal in concentrate and for refund of money paid as royalty by the petitioner under protest on tailings which were stored in the mining lease area. The petitioner also filed two revision petitions under Rules 54 and 55 of the Rules of 1960. The petitioner in these revision petitions challenged demand raised against the petitioner.