M/S. Ultratech Cemco Ltd vs State Of Maharashtra & Anr

Ultra Tech Cement Ltd. ... Appellant

(earlier Ultratech Cemco Ltd.)

Vs.

State of Maharashtra & Anr. ... Respondents

J U G D M E N T

R. V. Raveendran J.

The appellant (the term `appellant' refers to M/s Larsen & Toubro

Ltd. till date of its demerger in 2004 and thereafter to M/s. Ultra Tech

Cement Ltd.) obtained a mining lease for limestone from the Government of

Maharashtra, as per lease deed dated 12.2.1980. Under the terms of the said

lease, the appellant as lessee was required to pay dead rent as per clause

V(1) and (2), royalty in terms of clause V(3) and surface rent, water rate and

cesses in terms of clauses V(4) of the lease deed. In response to a notice

served by the Collector on the appellant demanding payment of surface rent

(equal to non-agricultural assessment) and the Zilla Parishad Cess (for short

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`ZP Cess') and Gram Panchayat Cess (for short `GP Cess'), the appellant

informed the Collector by letter dated 3.1.1991, that it was not liable to pay

the ZP cess and GP cess and that those cesses may be deleted from the

demand. However by notice of demand dated (nil) July 1991, revised by

notice dated 28.1.1994, the Collector, Chandrapur, reiterated the demand for

surface rent as also the ZP and GP cesses for the years 1987 to 1992, on the

following ground:

"The Government of Maharashtra vide its letter Industries Energy and

Labour Department (IND) No.TQCR-2176/45691/1172/IND-9 Bombay

dated 13.06.1978 and Director, Geology & Mining, Govt.of Maharashtra,

Nagpur vide letter No.STC/295/39/2007 dated 09.06.1989 have issued

instructions regarding fixation of surface rent on the lease area used for

mining purpose. As per these directives and Rule 27(1)(d) of Mineral

Concession Rules, 1960, the lessee is required to pay the surface rent at

such rate not exceeding the land revenue and the cesses assessable on the

land. Since the mining operation is the use of land other than the

Agriculture purpose, the rate of non-agricultural assessment, together

with the cesses assessable on the land, are applicable for levying the

surface rent."

(emphasis supplied)

2. The appellant was aggrieved by the demand in so far as it relates to

ZP cess and GP cess. According to appellant section 151(1) of Maharashtra

Zilla Parishads and Panchayat Samitis Act, 1961 (`Zilla Parishad Act' for

short) exempted the lessees from the state government from payment of the

ZP cess. The appellant also contended that it was not liable to pay the GP

cess, as section 127 (1) of Bombay Gram Panchayats Act, 1958 (`Panchayats

Act' for short) provides for levy of GP cess at the rate of one hundred paise

3

on every rupee payable to the state government as ordinary land revenues in

the area within the jurisdiction of the Panchayat, and as the appellant was

exempted from paying land revenue under section 64 of the Maharashtra

Land Revenue Code, 1966 (`Revenue Code' for short) read with clause

VII(1) of the lease deed, it was not liable to pay the GP cess also. The

appellant admitted the liability to pay surface rent equal to non-agricultural

assessment.

3. On the other hand, the respondents contend that the demand for ZP

cess and GP cess is authorized by Rule 27(1)(d) of the Mining Concession

Rule, 1960 (`MC Rules' for short) read with clause V(4) of the lease deed

and the appellant is liable for the same. The submission of the respondents is

that they have not made any demand for cess under the Zilla Parishads Act

or Panchayats Act and that the demand for ZP cess and GP cess is as a part

of the surface rent. According to the respondents, the reference to ZP cess

and GP cess assessable on the land, in the lease deed is only for the purpose

of arriving at the figure of surface rent. The respondents' submission is that

though "cesses per se could not have been levied under the Mineral

Concession Rules", cesses assessable on the land has been demanded as a

mode of calculating the charges for the surface area used by the lessee; and

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so long as the amount charged does not exceed the land revenue plus ZP

cess and GP cess assessable on the land, the lessees can have no grievance.

4. On the rival contentions urged, two questions arise for our

consideration:

(i) Whether the appellant is liable to pay ZP Cess?

(ii) Whether the appellant is liable to pay GP Cess?

Re: Question No.(i)

5. Rule 27 of the Mining Concession Rules, 1960 prescribes the

conditions subject to which a mining lease should be made. Clause (d) of

sub-section (1) thereof is relevant and is extracted below :

"27. Conditions - (1) Every mining lease shall be subject to the following

conditions - xxxx xxxx

(d) the lessee shall also pay, for the surface area used by him for the

purposes of mining operations, surface rent and water rate at such rate, not

exceeding the land revenue, and cesses assessable on the land, as may be

specified by the State Government in the lease."

(emphasis supplied)

Clause 4 of Part V of the lease deed reads thus:

"The lessee/lessees shall pay rent and water rate to the State Government

in respect of all parts of the surface of the said lands which shall from time

to time be occupied or used by the lessee/lessees under the authority of

those presents at the rate of Rs...and Rs...respectively per annum per

hectare of the area so occupied or used and so in proportion for any area

less than a hectare during the period from the commencement of such

occupation or use until the area shall cease to be so occupied or used and

shall as far as possible restore the surface land so used to us in original

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condition. Surface rent and water rate shall be paid as hereinbefore

detailed in clause (2) provided that no such rent/water rate shall be payable

in respect of the occupation and use of the area comprised in any roads or

ways to which the public have full right of access.

1. Surface rent equal the non-agricultural assessment.

2. Water rates not exceeding the land revenue.

3. Cesses assessable on the land (ZP and GP Cesses) subject to the

revision of rates prescribed by government from time to time."

(emphasis supplied)

A combined reading of Rule 27(1)(d) of the Rules and Clause V(4) of the

lease deed, makes it clear that the lessee under the mining lease deed is

liable to pay, in addition to dead rent and royalty, the following amounts : (i)

surface rent equivalent to non-agricultural assessment; (ii) water rate not

exceeding the land revenue and (iii) cesses assessable on the land specified

by the state government in the lease, that is ZP cess and GP cess assessable

on the land subject to revision of rates prescribed by government from time

to time.

6. What is significant to note is that the State Government has stipulated

in the lease that the mining lessee shall pay ZP cess assessable on the land.

It has not used the words `an amount equivalent to ZP cess that could be or

may be assessed on the land.' The word `assessable' means liable to be

assessed. Therefore when Clause V(4) of the lease deed requires the lessee

to pay ZP cess assessable on the land, it would mean that the mining lessee

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would be liable to pay ZP cess if it is so due under the Maharashtra Zilla

Parishads Act.

7. Section 151(1) of the Zilla Parishad Act which is relevant is extracted

below:

"151. (1) - In the Vidarbha area of the State of Maharashtra, every malik-

makhuza, raiyat malik and occupant and every raiyat, other than a sub-

tenant and lessee from the State Government shall be liable in respect

of the land held by him in the district to pay cess for the purpose of this

Act at the rate of twenty paise or at such increased rate not exceeding two

hundred paise as may be determined by the State Government under

section 155 on every rupee of the land revenue or rent assessed or fixed on

such land or the lease money payable in respect thereof, whether or not

such land revenue or rent or lease money or any portion thereof has been

released, compounded for or redeemed.

[Note : the words in italics should be read as `at the rate of two hundred

paise or at such increased rate not exceeding seven hundred paise as may

be determined by the concerned Divisional Commissioner" after

amendment of section 151(1) by Maharashtra Act 1 of 1993]

(emphasis supplied)

It is evident from the said provision of the Zilla Parishad Act that a `lessee

from the state government' is not liable to pay ZP cess under section 151 (1)

of the Zilla Parishads. The ZP cess can be levied only in terms of and under

the Zilla Parishads Act and cannot be levied by the state government, under

the terms of a contract. Where a particular cess is leviable under an

enactment, and the contract says that the lessee is liable to pay such cess

leviable under that enactment, but the enactment exempted a specified class

of persons (to which the lessee belongs) from paying the said cess, the state

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government cannot make the lessee liable to pay the said cess on the ground

that under the contract entered under a different enactment, the lessee is

liable to pay such cess. For example, if a Sales Tax Act exempts the sale of

particular goods from tax, the seller of such goods cannot demand Sales Tax

on the ground that the contract of sale provides that the buyer is liable to pay

all taxes leviable under any enactment. It follows that if a lessee from the

State Government is exempted from payment of ZP cess leviable under

section 151(1) of the Zilla Parishads Act, by section 151(1) itself, the State

Government cannot `levy' the said ZP cess under a contract entered in terms

of the Mineral Concession Rules. For payment of a cess under a particular

Act, liability under that Act is condition precedent. Therefore if ZP cess is

not due or payable by a lessee under the ZP Act, the State cannot say that the

amount is due under the lease deed executed in terms of the Mineral

Concession Rules.

8. The effect of clause V(4) of the lease deed providing that the mining

lessee shall pay `ZP cess assessable on the land' is this: if it is liable to be

paid under the Zilla Parishads Act, that should be paid by the lessee and

payment thereof is a term of the lease; and if the lessee is not liable to pay

ZP cess in view of the exemption under the ZP Act, it is not payable. The

position would have been different if the lease deed had stipulated that the

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lessee is liable to pay as consideration, in addition to other sums payable, a

sum equivalent to ZP cess under Zilla Parishad Act, irrespective of whether

the lessee is liable to pay such cess under the Zilla Parishads Act or not. If

the lease deed had contained such a term, the lessee would have been liable

to pay a sum equivalent to ZP cess, irrespective of his liability under the

Zilla Parishads Act.

9. We may in contrast, refer to the term in the lease regarding payment

of surface rent. The clause says what is payable is `surface rent equal the

non-agricultural assessment'. The clause does not say that the lessee is liable

to pay `non-agricultural assessment' assessable on the land. Consequently,

irrespective of whether non-agricultural assessment is leviable or not under

the Maharashtra Land Revenue Code, 1966, the lessee shall be liable to pay

an amount equivalent to non-agricultural assessment, as surface rent. What

is payable under the contract is `surface rent' and non-agricultural

assessment is made only the basis for quantification of the surface rent. But

the wording relating to payment of ZP cess and GP cess, are significantly

different from the wording relating to payment of surface rent.

10. There is yet another indication that what is required to be paid in ZP

cess, only if it is leviable under Zilla Parishads Act. Clause V(4) provides

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that the mining lessee shall pay "cesses assessable on the land (ZP and GP

cesses) subject to the revision of rates prescribed by Government from time

to time." This refers to revision by the State Government in exercise of the

power under section 151(1) of Zilla Parishads Act and not in exercise of any

power under the lease deed, as a lessor. This also shows that ZP cess as

revised under the Zilla Parishads Act is payable only if it is payable under

the Zilla Parishads Act and not otherwise.

Re: Question No.(ii)

11. Section 127 of the Bombay Gram Panchayats Act, 1958 deals with

levy and collection of cess. The said section is extracted below :

"(1) The State Government shall levy cess at the rate of one hundred paise,

on every rupee of every sum payable to the state government as

ordinary land revenue in the area within the jurisdiction of a

panchayat and thereupon, the state government shall (in addition to any

cess leviable under the Maharshtra Zilla Parishads and Panchayat Samitis

Act, 1961) levy and collect such cess in such area.

(2) to (4) deleted by Maharashtra Act 10 of 1992.

(5) For the purpose of levying and collecting the cess referred to in sub-

section (1), in the Bombay area athe provisions of section 144 (including

the Fourth Schedule), 145, 147 and 149, in the Vidarbha area, the

provisions of section 151, and in the Hyderabad area, the provisions of

section 152 of the Maharashtra Zilla Parishad and Panchayat Samitis Act,

1961, shall apply thereto as they apply to the levy of cess leviable under

section 144, section 151, or as the case may be, section 152 of that Act."

(emphasis supplied)

Section 64 of the Maharashtra Land Revenue Code, 1966 (`Code' for short)

reads thus:

10 "64. All land liable to pay revenue unless specially exempted.

All land, whether applied to agricultural or other purposes, and wherever

situate, is liable to the payment of land revenue to the State Government as

provided by or under this Code except such as may be wholly exempted

under the provisions of any special contract with the State

Government, or an any law for the time being in force or by special grant

of the State Government.

But nothing in this Code shall be deemed to affect the power of the

Legislature of the State to direct the levy of revenue on all land under

whatever title they may be held whenever and so long as the exigencies of

the State may render such levy necessary."

(emphasis supplied)

The term `land revenue' is defined in section 2(19) of the said Code as

under:-

"(19) "land revenue" means all sums and payments, in money received or

legally claimable by or on behalf of the State Government from any

person on account of any land or interest in or right exercisable over land

by or vested in him, under whatever designation such sum may be payable

and any cess or rate authorised by the State Government under the

provisions of any law for the time being in force; and includes premium,

rent, lease money, quit rent, judi payable by an inamdar or any other

payment provided under any Act, rule, contract or deed on account of any

land."

12. Section 127(1) of the Panchayats Act casts a liability to pay one

hundred paise as cess on every rupee of every sum payable to the state

government as ordinary land revenue. This cess is described as Gram

Panchayat cess or GP cess. The effection of section 127(1) is that wherever

land revenue is payable by a person, such person liable to pay the land

revenue, will also have to pay GP cess equal to the amount of the land

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revenue. Therefore only a person who is liable to pay land revenue will be

liable to pay GP cess. Section 64 of the Land Revenue Code provides that all

lands are liable to payment of land revenue to the state government except

such as may be wholly exempted under the provisions of the special contract

with the state government. Clause VII(1) of the lease deed dated 12.2.1980

between State Government and the appellant provides such exemption as it

says the lessee shall not be liable to pay land revenue. We extract below

clause (1) of Part VII of the lease deed for ready reference:

"Lessee to pay rents and royalties, taxes, etc.

1. The lessee/lessees shall pay the rent, water rate and royalties reserved

by this lease at such times and in the manner provided in the PARTS V

and VI of these presents and shall also pay and discharge all taxes, rates

assessment and impositions whatsoever being in the nature of public

demands which shall from time to time be charged, assessed or imposed

by the authority of the Central and State Governments upon or in respect

of the premises and works of the lessee/lessees in common with other

premises and works of the like nature except demands for land

revenues."

(emphasis supplied)

13. Even under Clause V(4) of the lease deed, what is liable to be paid is

`surface rent' which is equivalent to the non-agricultural assessment, and not

land revenue, that is non-agricultural assessment itself. Thus there is a

special contract between the State and the appellant whereby the appellant is

exempted from paying land revenue. If the appellant is not liable to pay the

land revenue, it will not be liable to pay any GP cess, as section 127(1)

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makes it clear that the said cess is payable only on the amount payable as

land revenue. If no amount is payable as land revenue, it follows as no

amount is payable as GP cess. Therefore appellant is not liable to pay GP

cess under the Panchayats Act. Clause V(4) of the lease deed requires

payment of GP cess only if it is payable under the Panchayats Act. For the

reasons stated while dealing ZP cess, we hold that the appellant is not liable

to pay GP cess also.

Conclusion

14. The object of clause V(4) of the lease deed is clear. Normally, all

leases will contain a provision as to who will be liable to pay the rates, taxes,

cesses on the property leased. If the lease deed is silent, then the lessor

would be liable to bear and pay the rates, taxes and cesses. Therefore, where

the understanding is that the lessee should be liable to pay the rates, taxes

and cesses in addition to the rent or premium, the lease deed will provide

specifically that the lessee shall bear and pay all rates, taxes and cesses. But

this is always on the assumption that there is a liability under the respective

enactments to pay any rates, taxes, cesses in respect of the property. All that

clause V(4) of the lease deed provides is that the lessee should bear and pay

the ZP cess and GP cess, if it is leviable under the respective enactments.

13 15. In view of the above, we accept the contention of the appellant that it

is not liable to pay ZP cess or CP cess to the State Government under the

lease deed. It is however made clear that if the said cesses (ZP cess and CP

cess) become payable by the appellant by virtue of any amendment to the

provisions of the respective enactments under which such cesses are

leviable, then the appellant may have to pay the same. Be that as it may.

16. The appeal is therefore allowed. The judgment of the High Court is

set aside. The writ petition filed before the High Court stands allowed and

the demand notices dated (nil) July 1991 as amended on 28.10.1994 in

regard to the period 1987 to 1992 is quashed in so far as the demand for

payment of ZP cess and CP cess.

...............................................J.

[ R. V. Raveendran ]

................................................J.

[A. K. Patnaik]

New Delhi ..................................................J.

September 27, 2011 [Sudhansu Jyoti Mukhopadhaya)