Judgment:
Ranjan Gogoi, J.
1. The challenge projected being identical both the writ petitions were heard together and are being disposed of by this common judgment and order.
2. Both the writ petitioners are public sector undertakings engaged, inter alia, in the exploration of hydrocarbons from which the petitioners extract crude oil and natural gas. Crude oil and natural gas bearing land having been brought within the definition of 'specified land' by the Assam Taxation (on Specified Lands) (Amendment) Act, 2004 and such land having been made exigible to payment of tax under the provisions of the principal Act, i.e., the Assam Taxation (on Specified Lands) Act, 1990, it is the validity of the aforesaid amendment Act that is the subject-matter of challenge in both the writ applications under consideration.
3. The Assam Taxation (on Specified Lands) Act, 1990 was enacted by the State Legislature of Assam with a view to providing additional revenue to the State by imposing a tax on certain categories of land. The Act, as originally enacted, defines specified lands to mean any land used or intended to be used for growing tea and for purposes ancillary thereto as well as any land held for the purposes of obtaining or extracting coal. Section 3, which is the charging section, empowers and authorises the levy of a tax in respect of specified lands calculated on the annual productivity of such land. Section 4 of the Act lays down the principles for determination of annual productivity of the land whereas Section 5 provides for the rate of tax. Under Section 6 it is the owner of the specified land, as defined, who has been made liable to pay the tax. By Assam Ordinance II of 1994 and subsequently by Assam Act XXIV of 1994 amendments were carried out which had the effect of excluding coal bearing land from the purview of the provisions of the Act. Thereafter, by the impugned Amendment Act of 2004 elaborate amendments were carried out so as to include coal, once again, and crude oil and natural gas bearing land within the meaning of the definition of specified land so as to make such coal, crude oil and natural gas bearing land exigible to tax under the Act by determination of the annual productivity as laid down in Section 4 and at the rate specified in Section 5. It is the validity of the aforesaid amendment insofar as crude oil and natural gas bearing land is concerned, that is the subject-matter of the present challenge, such challenge, primarily, being on* the ground that the amendment Act of 2004 is beyond the power of the State legislature, as the Act, in pith and substances, imposes a tax on crude oil and natural gas.
4. The arguments advanced on behalf of the petitioners, though has been long and elaborate, has projected a simple issue. Regulation and development of oil fields and mineral oil resources; petroleum and petroleum products has been made an exclusive subject for the Union Parliament to legislate and over which the State Legislatures have no legislative power. The attempted levy by the Amendment Act of 2004, though it purports to be a tax on land and hence covered by Entry No. 49 of List II, has in essence imposed a tax on crude oil and natural gas which are species of petroleum and petroleum products. The impugned levy, therefore, is contended to be ultra vires the powers of the State Legislature. This, in essence, is the conclusion that the elaborate arguments advanced on behalf of the petitioners seeks to make out which argument is sought to be countered by the State by contending that the tax levied by the amendment, in pith and substance, is a tax on land and hence covered by Entry 49 of List II of the Seventh Schedule to the Constitution. The arguments and counter arguments advanced on behalf of the rival parties being by a detail reference to the relevant provisions to the Seventh Schedule to the Constitution and the peri materia provisions contained under the Government of India Act, 1935 and the several legislations framed in this regard from time to time as well as several leading pronouncements of the Apex Court while answering similar challenges, the Court will have to proceed to understand the arguments of the parties by referring to all that has been cited and placed before the Court in the course of the lengthy hearing of the cases.
5. Under the Seventh Schedule to the Government of India Act, 1935, regulation of mines and oil fields and mineral development to the extent to which such regulation and development under dominion control is declared by dominion law to be expedient in public interest was included in Item 36 of List I. Such regulation of mines and oil fields and mineral development subject to the provisions of List I was also made a provincial subject by Item 23 of List II. Regulation of oil fields, therefore, was both a federal and provincial subject, the power of provincial Legislatures being subject to the power of the federal Legislature. With the coming into force of the Constitution a change in the aforesaid position had occurred and regulation and development of oil fields and mineral oil resources; petroleum and petroleum products were made exclusive Central subjects covered by Entry 53 of List I of the Seventh Schedule to that Constitution. The States under the Union were denuded of any power to legislate on the said subjects in contradistinction to what was prevailing under the Government of India Act, 1935. However, insofar as regulation of mines and mineral development is concerned, the said subject was covered by Entry 54 of List I and Entry 23 of List II, the power of the State Legislature being subject to the power of the Union Legislature under Entry 54.
The Mines and Minerals (Regulation and Development) Act, 1948 for regulations of mines and oil fields and for the development of minerals was enacted by the Federal Legislature in exercise of powers under Entry 36 of the Seventh Schedule to the Government of India Act, 1935. The 1948 Act covered mines, minerals as well as oil fields and by virtue of the definition clause contained in Section 3, mine was defined to mean any excavation for the purpose of searching over or obtaining minerals and included an oil well. Minerals included, inter alia, gas and petroleum whereas an oil field was defined to mean any area where any operation for the purposes of obtaining, inter alia, gas and petroleum, crude oil, refined oil, partially refined oil or any of the products of petroleum in a liquid or solid state is to be or being carried on. Section 5 of 1948 Act empowered the Central Government to make Rules for regulating the grant of mining leases and the rule making power empowered the authority to lay down the terms on which and the conditions subject to which mining leases may be granted. It also authorised the Central Government to frame rules to fix the maximum or minimum area as well as the period for which a mining lease may be granted as well as the maximum and minimum rent payable by a lessee whether the mine is worked or not. Section 6 of the Act of 1948 further empowered the Central Government to make rules regulating mineral development after a mining lease is granted. Section 6(2)(i) specifically empowered the Central Government to frame rules with regard to levy and collection of royalties, fees or taxes in respect of minerals mined, quarried, excavated or collected.
6. With the coming into force of the Constitution and the changes in the Seventh Schedule insofar as oil fields and petroleum products on the one hand and mines and minerals on the other hand is concerned, i.e., making the former an exclusive Union subject and the latter a Union as well as a State subject, the powers of the State being subject to the powers of the Union, the Mines and Minerals (Regulation and Development) Act, 1957 was enacted. Minerals was defined to include all minerals except mineral oils whereas mineral oils was defined to include natural gas and petroleum. As the provisions of the 1957 Act would indicate, the provisions of the Act dealt with the regulation and development of minerals as defined in Section 3(a) which excluded mineral oils, i.e., natural gas and petroleum. By Section 32F of 1957 Act the Mines and Minerals (Regulation and Development) Act, 1948 was amended as specified in the Third Schedule. The net result of the amendment carried out by the Third Schedule is that the Mines and Minerals (Regulation and Development) Act, 1948 stood altered as the Oil Fields (Regulation and Development) Act, 1948 and the regulatory provisions contained in the Act dealt with oil fields and mineral oil resources. In other words, while the 1948 Act stood confined only to mineral oils which included natural gas and petroleum, the 1957 Act dealt with all other minerals except mineral oils. In exercise of the powers conferred by Sections 5 and 6 of the 1948 Act, the Central Government framed the Petroleum and Natural Gas Rules, 1959. The 1959 Rules provides for grant or exploration licences and mining leases as well as licence fee, rent, dead rent, surface rent and royalty. Under Rule 4, for exploration and mining of petroleum which has been defined by Section 3(k) to mean hydrocarbons in a free state whether in the form of natural gas or in the liquid viscous or solid form, a prospecting or exploration licence or a mining lease, as may be, granted in accordance with the provisions of the Rules has been made a mandatory requirement. Such licences and leases are to be granted by the Central Government where the land or the mineral is vested in the Union and by the State Government where the land is vested in it. Section 6 counterplots grant of licence fee and lease fee to the Central Government or the State Government, as the case may be, prior to the grant of the licence or lease as well as security for due observance of the terms of such a licence or lease apart from licence/case fee. Rule 13 contemplates payment of dead rent at the rate prescribed which is to be worked out per hectare. The dead rent under Rule 13 is to be paid instead of royalty as payable under the 1948 Act only if the royalty amount is less than the dead rent that may be worked out. In addition to dead rent, surface rent is payable to the State Government at the rates prescribed. In addition to the above, under the provisions of the Oil Industry (Development) Act, 1974 a duty of excise by way of a cess is levied on crude oil and natural gas. What is noticeable from the above is that under the provisions of the 1948 Act and the Rules framed thereunder royalty, fees, rent on exploration and mining of mineral oils and petroleum products has been exclusively dealt with by Central Legislation and under such legislations the share of the States with regard to royalties, fees, rents, etc., has been specifically stipulated. These are the broad features of the statutory provisions that must be kept in mine while proceeding to consider the question of constitutional validity of the Assam Taxation (on Specified Lands) (Amendment) Act, 2004 as raised by the parties to the present proceedings.
7. Having noticed the broad features of the various legislations relevant to the question arising in the writ petitions we may now proceed to analyse the several judgments of the Apex Court reliance on which has been placed at the Bar. In this regard, it must be made clear at this stage that it is only those judgment which have a direct bearing on the issues arising that are being considered by the Court in view of the long list of pronouncements that have been relied upon. In India Cement Ltd. v. State of Tamil Nadu : [1991]188ITR690(SC) and Orissa Cement Ltd. v. State of Orissa (1991) Supp (1) SCC 430 the Constitutional validity of the relevant State legislations imposing a cess on royalty payable on the extraction of coal was considered by the Apex Court. Orissa Cement Ltd. (supra) having followed the decision in India Cement Ltd. (supra), perhaps, it will not be necessary to specifically note the views of the Apex Court in the said case inasmuch as those expressed in India Cement Ltd. (supra) will suffice. The Apex Court in India Cement Ltd. (supra) took the view that royalty being payable on the extraction of minerals from the land and tax on royalty being an additional charge, such a levy could not be considered to be a tax on land. In this regard the Apex Court pointed out the clear distinction between a tax directly on land and tax on income arising from land. The Apex Court further took the view that a levy to be one on land must be imposed on land as a unit and such an impost must be directly on land and bear a definite relationship to land. Finding the impugned levy to be one on royalty payable on extraction from the land and not on the land directly, the Apex Court took the view that the levy would not be covered by Entry 49 of List II so as to make it legislatively competent for the State to impose. The alternative argument advanced that the levy would be within the power of the State by virtue of Entry 50 of List II was also negated by the Apex Court by holding that as the power of the State to legislate under Entry 50 of List II is subject to the power of the Union under Entry 54 in List I and as the Mines and Minerals (Regulation and Development) Act, 1957, particularly, Section 9, had covered the subject of royalty, the State would be denuded of any such power under Entry 50 of List II. The argument that the power to levy tax on royalty could be traceable to Entry 45 of List II was also negated by the Apex Court by drawing a clear distinction between the concept of land revenue payable to the State and royalty payable on extraction of minerals. Having noticed the views of the Apex Court in India Cement Ltd. (supra) it must further be noticed at this stage that on behalf of the petitioners specific reliance was placed on the distinction drawn by the Apex Court between a tax on land and tax on income arising from land. Similar emphasis was also placed on behalf of the petitioners on the observations of the Apex Court to the effect that to be a tax on land a levy must be imposed on land as a unit in a direct manner and having a definite relationship with the land.
8. The next case which would require the consideration of the Court is Goodricke Group Ltd. v. State of West Bengal (1995) Supp. (1) SCC 707. By the West Bengal Primary Education Act, 1973 and the West Bengal Rural Employment of Production Act, 1976 cesses were sought to be levied upon certain lands for raising funds for the purposes of providing primary education and employment in rural areas. Tea estates were carved out as a separate category of land under the aforesaid two enactments and cess was levied on despatches from a tea estate. The Constitutional validity of the aforesaid enactments insofar as levy of tax on tea estate is concerned, was successfully challenged in Buxa Dooars Tea Co. Ltd. v. State of West Bengal : [1989]179ITR91(SC) . The basis of the aforesaid decision, it will suffice to notice, was that the levy being on despatch(es) had the effect of violating Article 301 of the Constitution though in the aforesaid judgment the question of legislative competence the State Legislature by reference to Entry 49 in List II was also incidentally answered in the negative. The levy of cess having been struck down and the various schemes initiated on such projections having come under a cloud the West Bengal Taxation Laws (2nd Amendment) Act, 1989 was enacted. The cess, this time, was imposed on each kilogram of green leaf produced in the tea estate. The arguments advanced in support of the challenge must be carefully noted as the said arguments have a fair amount of resemblance to what has been contended on behalf of the petitioners in the present case. Firstly, it was submitted that to bring the levy within the field of Entry 49 of List II, it must be directly upon land whereas the levy in question was, in the ultimate resort, on production of tea. Secondly, it was argued that the levy did not amount to a tax on land at all, inasmuch as in a given year if there is no production of tea leaves the cess would not be leviable at all. Thirdly, it was contended that a tea estate comprises of land not covered by tea bushes producing green leaves yet it is the entire of the tea estate that has been made liable which would go to show that there was no nexus between the levy and the land.
None of the arguments advanced on behalf of the petitioners in Goodricke Group Ltd. (supra) found favour of the Apex Court and the following conclusions from the judgment in Goodricke's case which have been summarised in a subsequent judgment of the Supreme Court in the State of West Bengal v. Kesoram Industries Ltd. : [2004]266ITR721(SC) would amply sum up the views of the Apex Court.
(i) a financial levy must have a mode of assessment but the mode of assessment does not determine the character of a tax. The nature of machinery for assessment is often complicated and is not of much assistance except insofar as it may throw light on the general character of the tax. The annual value is not necessarily an actual income but only a standard by which income may be measured. Merely because the same standard or mechanism of assessment has been adopted in a legislation covered by an entry under the Union List and also by a legislation covered by an entry on the State List, the latter legislation cannot be said to have encroached upon the field meant for the former ;
(ii) the subject of tax is different from the measure of the levy ;
(iii) merely because a tax on land or building is imposed by reference to its income or yield, it does not cease to be a tax on land or building. The income or yield of the land/building is taken merely as a measure of the tax it does not alter the nature or character of the levy. It still remains a tax on land or building. No one can say that a tax under a particular entry must to levied only in a particular manner. The Legislature is free to adopt such method of levy as it chooses. So long as the essential character of levy is not departed from within the four corners of the particular entry, the manner of levying the tax would not have any vitiating effect;
(iv) ample authority is available to hold that a tax on land within the meaning of Entry 49 of List II can be levied with reference to the yield or income. Whether an agricultural land or an orchard or a tea estate, they do require some capital and labor make them yield or to produce income which yield or income can without difficulty be taken as a measure for quantifying the tax which would undoubtedly be a levy on the land ;
(v) it is not an essence of a tax, nor a condition of its validity, that the tax must be constant and uniform for all the years or for a particular number of years. The tax on land or building can be levied and assessed by reference to previous year's income or yield. In short, it is open to the State Legislature to adopt such formula as it thinks appropriate for levying the tax and so long as the character of the tax remains the same as contemplated by the entry, it does not matter how the tax is calculated measured or assessed ;
(vi) it is permissible to classify land by reference to its user as a separate unit for the purpose of levy of cess. Tea estate, as a separate category of land, is a valid classification;
(vii) the fact that the Tea Act, 1953 empowers the Central Government to levy a duty or cess upon tea or tea leaves for the purposes of that Act, can be in no manner deprive the State Legislature of its power to tax the land comprised in a tea estate. By levying the cess the State Legislature is not seeking to control the cultivation of tea but only to levy the tax on land comprised in a tea estate. The fact that ultimately the tax may have to be borne by the tea industry is no ground for holding that the said levy is upon the tea industry. The State Legislature is not denuded of its power to levy a tax upon the land or upon a building merely because such land or building is held or owned by an industry which is governed by a Central Legislation.
It must be noted at this stage that in Goodricke's case the constitutional validity of the levy was upheld as being a levy; on land as a unit and, therefore, within the purview of the field of legislation enumerated under Entry 49 of List II,
9. The next case which would require some in depth consideration of the Court is State of Orissa v. Mahanadi Coalfields Ltd. (1995) Supp (2) SCC 686. In the aforesaid case a levy imposed by the State Legislature at the rate of Rs. 32,000 per acre of coal bearing land was challenged to be beyond the competence of the State Legislature. The levy was defended as falling under Entry 49 or alternatively under Entry 23 or Entry 50 of List II of the Seventh Schedule to the Constitution; whereas the challenge against the levy was primarily on the ground that the field was entirely covered by the provisions of the Mines and Minerals (Regulation and Development) Act, 1957. The levy imposed by the State enactment was set aside by the Apex Court on the finding that it amounted to a tax on minerals and mineral rights which the State Legislature was not competent to impose as the field was occupied by the Mine and Minerals (Regulation and Development) Act, 1957. A reading of the judgment in Mahanadi Coalfields Ltd. (supra) would seem to suggest that one of the principal grounds on which the levy was held not to be a tax on land but a tax on minerals and mineral rights is that all non-mineral bearing lands were left out of the purview of the levy. The decision of the Apex Court in Mahanadi Coalfields Ltd. (supra) was subsequently over-ruled in State of West Bengal v. Kesoram Industries Ltd. (supra) and the basis for such overruling will be noticed in the discussion with regard the judgment in State of West Bengal v. Kesoram Industries Ltd. to which occasion the attention of the Court must now be focused.
10. In State of West Bengal v. Kesoram Industries Ltd. and Ors. (supra) the Apex Court considered the validity of certain levies by way of cess, inter alia, on coal, tea, minor minerals, etc. bearing lands imposed by Legislations made by the State Legislature of West Bengal as well as by the legislatures of certain other States. The discussion that will follow will, however, deal with the levy of cess by the State Legislature of West Bengal. Specifically, the levies insofar as coal is concerned was imposed by the provisions of the Cess Act, 1860, West Bengal Primary Education Act, 1973, (as amended) and West Bengal Rural Employment and Production Act, 1976 (as amended) whereas the levy insofar as tea is concerned, was imposed by the provisions of the West Bengal Primary Education Act, 1973 and the West Bengal Rural Employment and Production Act, 1976. The Calcutta High Court having struck down the levy imposed on coal bearing lands the matter was taken in appeal to the Apex Court. Insofar as the levy on tea is concerned, notwithstanding the decision of the Apex Court in Goodricke Group Ltd. (supra) writ petition under Article 32 of the Constitution was filed challenging the constitutional validity of the same provisions which were the subject-matter in Goodricke Group Ltd. (supra). The point taken in the aforesaid writ petition, inter alia, was that the subsequent decision in Mahanadi Coalfields Ltd. (supra) had eroded the authority of the decision in Goodricke Group Ltd. (supra). Both the coal and tea matters were considered by the Apex Court together along with other similar matters. The need for a reconciliation of the decisions in Goodricke Group Ltd. and Mahanadi Coalfields Ltd. having been perceived the matter was referred to the Constitution Bench of the Apex Court.
11. The Apex Court after a complete and exhaustive consideration of the entire range of judicial pronouncements holding the field took the view that the provisions of the West Bengal enactments levying a cess on coal bearing land was within the competence of the West Bengal State Legislature having regard to Entries 49 and 50 of List II. Accordingly, the levy of cess on coal bearing land was upheld. Insofar as levy of cess on tea is concerned, the Apex Court in State of West Bengal v. Kesoram Industries Ltd. (supra) took the view that Goodricke Group Ltd. (supra) was rightly decided whereas Mahanadi Coalfields Ltd. was not. Accordingly, the decision in Mahanadi Coalfields Ltd. was overruled and the levy of cess on tea was re-affirmed.
12. Before entering into a discussion of the various issuers dealt with in Kesoram Industries Ltd. (supra) it must be kept in mind that it is only the applicability of certain observations and principles laid own in the aforesaid judgment that would be relevant for the purposes of the present adjudication inasmuch as there is one fundamental difference between Kesoram Industries Ltd. and the present cases. The aforesaid difference emanates from the fact that in the writ petitions presently under consideration the levy imposed by the State Legislature is contended, by the petitioners, to be on mineral oils, petroleum and petroleum products which are exclusive Central subjects by virtue of Entry 53 of List I. In Kesoram Industries Ltd. (supra), the levy on coal was challenged, inter alia, on the ground that the State Legislature, by enacting the impugned legislation, had trenched upon the power of the Union Parliament inasmuch as the power of the State legislature under Entries 23 and 50 of List II was subject to any Central legislation that may be occupying the field and that the Parliament having enacted the Mines and Minerals (Development and Regulation) Act, 1957, had denuded the State Legislature of any such power. After noticing the aforesaid basic difference, the commonness of the issue arising out of the claim of the State that the impugned levy was a tax on land and hence covered by Entry 49 of List II, must also be noticed. With the above background, the Court may now proceed to understand the principles laid down by the Apex Court in Kesoram Industries Ltd. (supra) which would have a relevant bearing to the present case.
13. In Kesoram Industries Ltd. the Apex Court on a complete consideration of the judicial pronouncements holding the yield took the view that the various entries in the three Lists are not 'powers' but are fields of legislation. The Apex Court further took the view that there is a distinction between the subjects of legislation and subjects of taxation. The power to tax cannot be deduced from a general legislative entry as an ancillary power. The entries in the three Lists being fields of legislation each entry must receive a liberal construction. The second significant aspect of the decision of the Apex Court in Kesoram Industries Ltd., that must be noticed, is the principles that the Court must bear in mind while interpreting legislations in the field of taxation and economic activities. A broad approach and a reasonable latitude must be allowed by the Courts to the Legislature keeping in mind the complex problems that the Legislature may be required to deal with in a given situation. The Apex Court after noticing a distinct Constitutional 'bias' towards the Centre vis-a-vis the States further laid down the essential difference between the subject of a tax and the measure thereof and held that though the measure of the tax may be indicative of the nature of the tax, the same will not necessarily determine the nature thereof. At best the measure adopted may throw some light on the nature/character of the tax. The third significant aspect dealt with by the Apex Court in Kesoram Industries Ltd. (supra) is with regard to the meaning of land as used in Entry 49 of List II. In this regard, the observations contained in paragraphs 39 and 40 of the decision in Kesoram Industries Ltd. (supra) may be usefully extracted herein under
39. The word 'land', as used in Entry 49 in List III came up for the consideration of this Court in Anant Mills Co. Ltd. v. State of Gujarat. It was held that the word 'land' cannot be assigned a narrow meaning so as to confine it to the surface on the earth. It includes all strata above or below. In other words, the word 'land' includes not only the surface of the earth but everything under or over it, and has in its legal significance an indefinite extent upward and downward. The four-Judge Bench upheld the validity of the law levying tax in respect of area occupied by underground lines by reference to Entry 49 in List II, holding it to be a tax on land only.
40. Ample authority is available for the concept that under Entry 49 in List II the land remains a land without regard to the use to which it is being subjected. It is open for the Legislature to ignore the nature of the user and tax the land. At the same time it is also permissible to identify, for the purpose of classification, the land by reference to its user. While taxing the land it is open for the Legislature to consider the land which produces a particular growth or is useful for a particular utility and to classify it separately and tax the same. Different pieces of land identically situated otherwise, but being subjected to different uses, or having different potential, are capable of being classified separately without incurring the wrath of Article 14 of the Constitution. The Constitution Bench in Kunnathat Thathunni Moopil Nair v. State of Kerala held that the land on which a forest stands is not to be excluded necessarily from Entry 49. The erstwhile Entry 19 of List II applied to 'forest'. Their Lordships held that the use of the word 'forest' in Entry 19 could not be pressed into service to cut down the plain meaning of the word 'land' in Entry 49. It was permissible to tax the land on which a forest stands by reference to Entry 49. In Ajoy Kumar Mukherjee v. Local Board of Barpeta the appellant, a landholder, held a hatt (or market) on his land. The Local Board asked the appellant to take out a licence and pay Rs. 600, later Rs. 700, by way of licence fee for holding the market. It was urged that the impost was unconstitutional, inter alia, on the ground that the tax was actually imposed on the market, which infringed Article 14 of the Constitution, and also because the State Legislature had no legislative competence to tax a market. The Local Board relied on Entry 49 in List II. The appellant urged that Entries 45 to 63 which deal with taxes do not contemplate a tax on markets. Repelling the plea, the Constitution Bench held that the tax was on the land though the charges arise only when the land is used for a market. The tax remained a tax on land in spite of the imposition being dependent upon the user of the land as a market, the tax was an annual tax as contrasted to a tax for each day on which the market was held. The owner or occupier of the land was responsible for payment of tax on an annual basis. The amount of tax depended, upon the area of the land on which the market was held and the importance of the market. Thus, the tax was held to be a tax on land, though the incidence depended upon the use of the land as a market.
14. In Kesoram Industries Ltd. (supra) the Apex Court after clarifying the observations in India Cement Ltd. (supra) that the expression 'royalty' is a tax to mean cess on royalty as a tax and by doing so having averted a possible derailment of the law on the point also clarified a fundamental issue which had thrown considerable cloud on the powers of the State under Entry 23 of List II in view of the enactment of the Mines and Minerals (Regulation and Development) Act, 1957. The aforesaid clarification was in the context of the provisions of Section 6(2)(i) of the erstwhile Mines and Minerals (Regulation and Development) Act, 1948 which conferred the power to levy and collect fees or taxes in respect of minerals mined, quarried, excavated or collected on the Central Government and the absence of any such peri materia provisions in the Mines and Minerals (Regulation and Development) Act, 1957. The aforesaid clarification was answered in the context of doubts being expressed as to the extent of the field occupied by the Act of 1957. It is, perhaps, on account of the aforesaid clarification and the relative 'opening up' of the powers of the State under Entry 23 of List II that the earlier decision in Mahanadi Coalfields Ltd, was over ruled by the Apex Court in Kesoram Industries Ltd. The views of the Apex Court on the correctness of the decision in Goodricke Group Ltd. (supra) as expressed in Kesoram Industries Ltd. has already been noticed. Eventually, the conclusions of the Apex Court have been summarised in para 129 and a production of the aforesaid para 129 would be essential to enable the Court to apply the principles holding the field to the facts of the present case which must be the next logical exercise that has to be attempted.
129. The relevant principles culled out from the preceding discussion are summarised as under :
(1) In the scheme of the lists in the Seventh Schedule, there exists a clear distinction between the general subjects of legislation and heads of taxation. They are separately enumerated.
(2) Power of 'regulation and control' is separate and distinct from the power of taxation and so are the two fields for purposes of legislation. Taxation may be capable of being comprised in the main subject of general legislative head by placing an extended construction, but that is not the rule for deciding the appropriate legislative field for taxation between List I and List II. As the fields of taxation are to be found dearly enumerated in Lists I and II, there can be no overlapping. There may be overlapping in fact but there would be no overlapping in law. The subject-matter of two taxes by reference to the two lists is different. Simply because the methodology or mechanism adopted for assessment and quantification is similar, that two taxes cannot, be said to be overlapping. This is this distinction between the subject of a tax and the measure of a tax.
(3) The nature of tax levied is different from the measure of tax. While the subject of tax is clear and well defined, the amount of tax is capable of being measured in many ways for the purpose of quantification. Defining the subject of tax is a simple task; devising the measure of taxation is a far more complex exercise and, therefore, the Legislature has to be given much more flexibility in the latte field. The mechanism and method chosen by the Legislature for quantification of tax is not decisive of the nature of tax though it may constitute one relevant factor out of many for throwing light on determining the general character of the tax.
(4) Entries 52, 53 and 54 in List I are not heads of taxation. They are general entries. Fields of taxation covered by Entries 49 and 50 in List II continue to remain with State Legislatures in spite of the Union having enacted laws by reference to Entries 52, 53 and 54 in List I. It is for the Union to legislate and impose limitations or the States otherwise plenary power to levy taxes on mineral rights or taxes on lands (including mineral-bearing lands) by reference to Entries 50 and 49 in List II, and lay down the limitations on the States power, if it chooses to do so, and also to define the extent and sweep of such limitations.
(5) The entries in List I and List II must be so construed as to avoid any conflict. If there is no conflict an occasion for deriving assistance from non-obstante clause 'subject to' does not arise. If there is conflict, the correct approach is to find an answer to three questions step by step under :
One - Is it still possible to effect reconciliation between two entries so as to avoid conflict and overlapping ?
Two - In which entry the impugned legislation falls by finding out the pith and substance of the legislation And
Three - Having determined the fields of legislation wherein the impugned legislation falls by applying the doctrine of pith and substance, can an incidental trenching upon another field of legislation be ignored ?
(6) 'Land', the term as occurring in Entry 49 of List II, has a wide connotation. Land remains land though it may be subjected to different user. The nature of user of the land would not enable a piece of land being taken out of the meaning of land itself. Different uses to which the land is subjected or is capable of being subjected provide the basis for classifying land into different identifiable groups for the purpose of taxation. The nature of user of one piece of land would enable that piece of land being classified separately from another piece of land which is being subjected to another kind of user, though the two pieces of land are identically situated except for the difference in nature of user. The tax would remain a tax on land and would not become a tax on the nature of its user.
(7) To be a tax on land, the levy must have some direct and definite relationship with the land. So lone as the tax is a tax on land by bearing such relationship with the land, it is open for the Legislature for the purpose of levying tax to adopt any one of the well-known modes of determining the value of the land such as annual or capital value of the land or its productivity. The methodology adopted, having an indirect relationship with the land, would not after the nature of the tax as being one on land.
(8) and (9) is hot being reproduced as the conclusions relate to the issue as to whether the exercise of the legislative power of the State results in a 'trenching upon' or 'encroachment' on power of regulation and control of the Union covered by the relevant entries in List I, a point of fundamental difference between Kesoram Industries Ltd. (supra) and the writ petitions under consideration, as already noticed.
15. The impugned legislation has classified land into different categories by having reference to the use of the land as for example coal bearing land, crude oil bearing land, natural gas bearing land, etc. It is only those species of land classified separately by having reference to the user thereof that has been brought within the purview of the Act. The Act has also specified the manner in which annual productivity of the land is to be worked out and the rate of tax has been fixed by reference to such annual productivity. As held in Kesoram Industries Ltd. (supra) classification of land by having reference to the user thereof and thereafter levy of a tax/cess on such land by reference of the annual productivity of the land will not take the legislative exercise outside the purview of Entry 49 of List II and the levy/cess will not cease to be a levy/cess on land which the State Legislature is competent to impose under the aforesaid Entry 49 of List II. It cannot be understood to be obligatory on the part of the Legislature to bring all categories of land, with reference to the criteria of user within the purview of a legislation in order to make the same competent under Entry 49 of List II. The Legislature must be left free to bring within the ambit of a fiscal legislation particular categories of land by a process of classification made on the basis of user. The contrary argument advanced on behalf of the petitioners stand belied by the observations of the Apex Court in Kesoram Industries Ltd. (supra) while over-ruling the decision in Mahanadi Coalfields Ltd. (supra), inter alia, on a similar ground. The further argument advanced on behalf of the petitioners that in a situation where no tax is leviable when there is no production which is contemplated by the impugned Act, the Court must understand a snapping of relationship between the levy of the tax and the land cannot, also, find acceptance of the Court. If the measure of the levy is by reference to productivity such measure can have application only when there is production of crude oil or natural gas and definitely not in a situation where there is either no exploration or if the exploration does not yield any positive result. The above fact, by itself, will not alter the fundamental character of the levy so as to enable the Court to understand the impugned tax/levy not to be one on land. In the present case, the impugned levy is on certain categories of land specified by reference to the user of the land. Productivity is the measure adopted of the Act and, therefore, whenever there is no production there is no tax. The aforesaid fact will not, in the considered view of the Court, give the levy the character of a tax or levy on the mineral product, i.e., crude oil or natural gas. The subject of the levy is the land and the measure thereof is the annual productivity of the particular natural resource. Merely because in a situation where the measure contemplated by the Act cannot be applied as there is no production of the natural resource, the subject of the levy cannot be understood to be the natural resource, i.e., mineral oil. The levy continues to be a levy on crude oil and natural gas bearing land but only when there is production the levy becomes imposable inasmuch as annual productivity is the specified measure of the taxy/levy.
16. The alternative argument advanced on behalf of the petitioners to the effect that the levy is one on income derived from the land or one in the nature of excise on the manufacture or production of goods, in the considered view of the Court, would stand self-answered by the discussion that have preceded.
17. For the aforesaid reasons this Court is of the view that by the impugned legislation the Legislature had attempted to make a classification of land by having regard to the user thereof and include certain categories of land within the meaning of 'specified lands' so as to make the same exigible to tax under the Act. In the ultimate analysis, it is the land containing crude oil or natural gas, as the case may be, that is being taxed and it is the quantum of the tax that is being determined by reference to the well known principle of annual productivity. In that view of the matter, the impugned legislation squarely falls within the ambit of Entry 49 of List II and the State Legislature must be acknowledged to be legislatively competent to enact the same. The challenge to the constitutional validity of the impugned legislation, therefore, has to fail and both the writ petitions have to be dismissed which are accordingly dismissed. In the facts and circumstances of the case, the parties are left to bear their own costs.