STATE OF ORISSA AND ORS. versus STEEL AUTHORITY OF INDIA AND ANR

Citation: [1998] 3 S.C.R. 1072 · Decided: 10-08-1998 · Supreme Court of India · Bench: M.M. PUNCHHI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
STATE OF ORISSA AND ORS. 
v. 
STEEL AUTHORITY OF INDIA AND ANR 
AUGUST IO, 1998 
[M.M. PUNCHHI, CJ. AND K. VENKATASWAMI, JJ.] 
Mines and Minerals (Regulation and Development) Act, 1957: Section 
9(1). 
C 
Mines and Minerals-Royalty-Payment of-Mode of :alculation-
Manufacturer of iron, steel and allied products obtained a piece of land on 
lease for extracting limestone and dolomite for use as raw materials-
Agreement stipulated payment of royalty-Extracted mineral had undergone 
a processing to remove waste and foreign materials-Held : Such processing 
amounts to consumption-Hence, manufacturer liable to pay royalty on the 
D entire mineral extracted and not on the quantity of mineral obtained after 
processing. 
Words and Phrases: 
E 
"Consumption"-Meaning of-Jn the context of S.9 (I) of the Mines 
and Minerals (Regulation and Development) Act, I 9 5 7. 
The respondent, a manufacturer of iron, steel and allied products 
obtained a piece of land from the State Government for extracting limestone 
and dolomite for use as raw materials. The agreement stipulated payment of 
F royalty on the minerals extracted. The extracted mineral had undergone a 
processing to remove waste and foreign matter. It was the case of the appellants 
that the respondent was liable to pay royalty on the mineral extracted while 
the case of the respondent was that the liability was on the quantity of 
mineral obtained after it had undergone the process. 
G 
The High Court, after referring to Section 9(1) of the mines and 
Minerals (Regulation and development) Act, 1957, held that the respondent 
was liable to pay royalty only on the quantity of mineral obtained after 
processing and not on the entire quantity of mineral extracted. Hence this 
appeal 
H 
Allowing the appeal, this Court 
1074 
• 
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STATE v. STEEL AUTHORITY OF INDIA [K. VENKATASWAMI. J.] 1075 
HELD : 1. The levy of royalty is in respect of minerals removed or A 
consumed by the contractor from the leased area. Section 9(1) of the Mines 
and Minerals (Regulation and Development) Act, 1957 also contemplates the 
levy of royalty on the mineral consumed by the holder of a mining lease in 
the leased area. If that be so, the case of the appellants that such processing 
amounts to consumption and, therefore, the entire mineral is exigible to levy B 
of royalty has to be accepted. The High Court erred in holding that the 
royalty can be levied only on the quantity of mineral obtained after processing. 
[1077-H; 1078-A[ 
National Coal Development Corporation Ltd. v. State of Orissa and 
Ors., (CA No. 807176 decided by supreme Court on 5-12-1991 and India 
Cement Ltd. v. State of T.N, [1990] 1SCC12, relied on. 
C 
Saurashtra Cement and Chemicals Industries Ltd. v. Union of India 
and Anr. [1996[ 1 SCC 226, referred to. 
CIVIL APPEALLATE JURISDICTION : Civil Appeal Nos. 3693-
94ofl998. 
D 
From the Judgment and Order dated 25-6-91/10.9.92 of the Orissa High 
Court in O.J.C. No. 1491/86 and O.J.C. No. 3379of1989. 
P.N. Misra for the Appellants. 
G.M Misra, Dhruv Mehta, F. Anam, S.K. Mehta and Mrs. Monita Mehta E 
for the Respondents. 
The Judgment of the Court was delivered by 
K. VENKA TASWAMI, J. Special leave granted. These appeals raise a 
common question of law and the parties are same in both the appeals. As a 
matter of fact, in Civil Appeal arising out ofS.L.P. (C) No. 16665/92 the High 
Court has simply followed its earlier judgment against which the Civil Appeal 
arising out of S.L.P. (C) No. 16718/91 has been filed. In the circumstances, 
both the appeals are disposed of by this common judgement. 
The respondent, a manufacturer of iron, steel and allied products, entered 
F 
G 
into an agreement of lease in respect of !and measuring 569.6 acres with the 
State Government in order to meet its own requirements of raw materials, 
namely, limestone and dolomite. Under the agreement, it was agreed that the 
respondent was liable to pay royalty on the minerals extracted. However, the 
dispute that arises for consideration out of the two judgments of the High H 
1076 
SUPREME COURT REPORTS 
[1998] 3 S.C.R. 
A Court is whether the respondent is liable to pay royalty on the quantity of 
mineral extracted as it is or on the quantity arrived at after the said mineral 
had undergone a processing to remove waste and foreign matters. It was the 
case of the appellants that the respondent was liable to pay royalty on the 
mineral extracted while the case of the respondent was that the l
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