Madhya Pradesh High Court
Keti Construction Limited vs State Of M.P. And Ors. on 5 July, 2007
Equivalent citations: 2007(3)MPHT433, AIR 2007 (NOC) 2586 (M.P.), 2008 AIHC (NOC) 275 (M.P.)
Author: Dipak Misra
Bench: Dipak Misra
ORDER Dipak Misra, J.
1. The present appeal is directed against the order dated 20-5-2006 passed by the learned Single Judge in W.P. No. 6385 of 2006.
2. The facts which are essential to be stated are that the appellant-petitioner (hereinafter referred to as 'the appellant'), a Private Limited Company registered under the Indian Companies Act, 1956, is a registered contractor under the Public Works Department (PWD). A contract was awarded to him for the value of Rs. 5,78,54,000/-. The appellant executed the work and during the construction work purchased minor mineral from local suppliers/traders from the open market. It completed the work in question, i.e. upgradation and improvement of Khandwa-Deotali Road Km 1 to 55 within the time and submitted the bill as per measurement from time to time. When the question of payment arose, the respondent No. 2, the Engineer-in-Chief, Public Works Department issued a letter dated 25-7-2005, Annexure P-5, requiring it to obtain Royalty Clearance Certificate from the Collector against the purchase of minor minerals like sand, murrum and metal which were used in the construction of road and on failure to obtain the certificate explain why the royalty amount should not be deducted from the deposit of 15% of performance security.
3. The appellant submitted a reply on 29-7-2005 stating, inter alia, the demand of Royalty Clearance Certificate after two years of completion of work was wholly unreasonable and unjust and not legally warranted. There was a prayer to make the payment without insisting for such certificate. Despite the said explanation preferred, the amount was not paid. As the amount was not paid, the writ petition was filed on the ground that the amount could not be withheld in law.
4. A counter affidavit was filed contending that the amount due to the Government from the contractor could be recovered as the arrears of land revenue. It was put forth that the appellant had used minerals such as metal, murrum and sand, for which he was paid as per rate quoted by him. At that juncture, there was no insistence for production of any Royalty Clearance Certificate as the same was not required under the terms and conditions of the agreement. Thereafter, the matter was examined and it was found that the appellant had not deposited any amount of royalty on the mineral used by him. The Mining Officer by memo dated 24-7-2005 directed the respondents to recover a sum of Rs. 89.23 lacs from the amount lying in deposit as security performance towards the amount of royalty payable by the appellant. On the basis of the aforesaid letter of the Mining Department, the Executive Engineer as per his letter dated 25-7-2005 directed the appellant to furnish documents/certificates regarding payment of royalty in respect of minerals used by him before the Collector (Mining) and to obtain Royalty Clearance Certificate from him. As the appellant did not furnish requisite documents/certificates before the Collector (Mining) and took no steps to obtain clearance certificates from the authorities, the amount was withheld. It was pleaded that in the absence of adequate material to show that the appellant had purchased the mineral from third party, liability would rest on the appellant to pay royalty in regard to the mineral used by him. It was also put forth that the royalty is in the nature of a tax or duty on exploitation of mineral and as per Clause 7 of the general conditions of contract, the appellant is liable to pay taxes and other duties payable to the State Government and if any amount is due and is not paid, the same can be recovered from the appellant under Clause 7.8 of the agreement. Rules 30(14) and 30(15) of the M.P. Minor Mineral Rules, 1996 were placed reliance and the circulars Annexure dated 27-8-1997 and 1-7-2004 were pressed into service.
5. The learned Single Judge referred to Clause 7.8, Clause 2 of the Miscellaneous Conditions, Rules 30(14) and 30(15) of the 1996 Rules distinguished the decisions rendered in the cases of M.P. Contractors Sangh, Indore and Ors. v. State of M.P. and Ors. 1987 JLJ 743, M.P. Audhyogik Kendra Vikas Nigam v. Abrar Construction Company and Ors. 2005 Arb.W.L.J. 379 (MP) and Prestige G.S. Sole v. M.P. Rural Development 2004 (4) M.P.L. J. 175 and eventually dismissed the writ petition.
6. Questioning the correctness of the order passed by the learned Single Judge, it is submitted by Mr. M.L. Jaiswal, learned Senior Counsel, that the learned Single Judge has erred in law by distinguishing the decisions cited before him though they are absolutely on the point and no reason have been ascribed to distinguish the same. It is contended that when the factual matrix is the same, the learned Single Judge should have followed the decisions as they are binding precedents. Learned Senior Counsel has further submitted that the observations made by the learned Single Judge that there may be a case where contractor himself might have excavated the sand, murrum or gitti, though such a presumption is totally excluding but the obtaining factual matrix does not attract such presumption as there is no material on record that the appellant was ever granted a quarry lease. Apart from the above submits Mr. Jaiswal that the royalty is not a tax as has been held by the Constitution Bench in the case of State of W.B. v. Kesoram Industries Ltd. , and hence, the question of tax due to be recovered by way of land revenue does not arise. It is put forth that by no stretch of imagination, royalty can be recovered from a purchaser as the said items are available in the open market. It is canvassed by him that there is nothing in the contract/agreement that royalty certificate was required to be produced by the contractor or to produce any document in that regard.
7. Ms. Jai Laxmi Aiyer, learned Counsel for the State has submitted that the learned Single Judge has rightly distinguished the decisions of the Division Bench and the conclusion arrived at by him is absolutely correct. It is contended by her that the ratio of the said decisions were rendered in the facts of the case and not applicable to the case at hand. It is urged by her that it was incumbent on the part of the appellant to produce the payment of Royalty Clearance Certificate to get the security amount and same having not been produced the security amount could not have been paid to the appellant. Learned Counsel for the State has submitted that the circular has been issued to check evasion of the royalty and the contractor is bound to give the requisite information.
8. At the very outset, we may state that the facts that the appellant was awarded the contract and the furnishing of security for performance are not in dispute. The only cavil that arises for consideration is whether the royalty can be recovered from the appellant and on that ground the amount can be withheld.
9. Clause 7.8 of the general conditions of the agreement reads as under:
7.8. Amount due from contractor : Any amount due to the Government of M.P. from the contractor on any account concerning work may be recovered from him as arrears of land revenue.
Clause 2 of the miscellaneous conditions reads as under:
2. Taxes : All dues regarding taxes, including the sales tax, other duties etc. levied on the contractor's work by Government and local bodies of private individuals will be payable by the contractor.
10. Rules 30(14) and 30(15) of the M.P. Minor Minerals Rules, 1996 read as under:
30. Conditions of quarry lease:
(14) The lessee shall issue a transit pass in Form IX to accompany every carrier for every trip carrying mineral, or product or products from leased area. The transit pass shall be prepared in duplicate in book form. Original shall be given to the driver of the carrier after making the necessary entries. The Mining Officer shall issue the transit pass book duly stamped and signed by him on an application in Form VIII made by on an application in Form VIII made by the lessee. The lessee shall surrender all previous duplicates of used transit pass books together with unused transit pass books issued to him before the royalty is paid by him under Clause (b) of Sub-rule (1) and fresh transit passes are issued. The Mining Officer will keep proper accounts of issued and used duplicate transit pass books and unused transit pass books deposited back by the lessee.
(15) Whosoever transports minerals or their products like bricks, tiles, lime, dressed stone, blocks, slabs, tiles chips, stone dust and ballast etc. without a valid pass in Form IX or if the transit pass is found to be incomplete distorted or tampered with, the Collector, Additional Collector, Chief Executive Officer of Zila/Janpad Panchayat and Officer authorised by the Gram Sabha/Deputy Director, Mining Officer, Assistant Mining Officer or Mining Inspector may seize the mineral or its products together with all tools and equipment and the vehicle used for transport:
Provided that the provisions of this sub-rule shall not apply for the purposes of Clause (i) of Rule 3.
11. On a perusal of the Clause 7.8, it is luminescent that the amount due to the Government of M.P. from the contractor on any account concerning work may be recovered from him as arrears of land revenue. Clause 2 of the Miscellaneous Conditions deals with taxes. Royalty is to be paid by the lessee under the 1996 Rules. In the case of M.P. Contractors Sangh, Indore (supra), the Division Bench has been held as under:
13...But, in our opinion, this cannot be a valid argument that because the Government is not able to put up an effective check or control, for which they are alone responsible, the building contractors should produce the royalty paid receipts before their bills are cleared for payment at least in those cases where the minor minerals are supplied by such contractors through petty contractors or other merchants.
12. In the case of M.P. Audhyogik Kendra Vikas Nigam (supra), it has been ruled thus:
Royalty on minor mineral is recoverable but once at the time of its removal from the quarry. If a contractor is proved to have removed minor mineral from a quarry without payment of royalty, he may properly be made liable to pay royalty thereon, besides taking any other action against him. At the same time, the law does not prohibit trade in minor mineral. Royalty-paid minor mineral may be brought into the market and sold and re-sold. The person purchasing minor mineral from the open market is not required to pay any royalty. The royalty receipts initially issued may not have been preserved on their preservation might have become meaningless due to material getting unloaded and mixed up with other material in the market. It will be wrong to assume that a purchaser, who purchases material from the open market, brought it stealthily from the quarry without payment of royalty. The remedy to check the theft of minor mineral without payment of royalty from the quarries is for the Govt. to keep proper staff at the exit point, i.e., at the quarries. If the theft is not detected at the time of removal of the minor mineral from the quarry, it would be wrong to assume with respect to minor mineral purchased by any person from open market that the purchased material was one on which royalty had not been paid, or in other words, it was a stolen material. A contractor, who purchases minor mineral from open market and utilises the same in the execution of any works contract, is not required to produce any royalty receipts before his bills are cleared for payment.
13. In the second Division Bench, reliance was placed on M.P. Contractors Sangh, Indore (supra). In the case of Prestige G.S. Sole (supra), learned Single Judge of this Court after referring to the M.P. Mines and Minerals (Development and Regulation) Act and M.P. Minor Minerals Rules, 1996, specially Rule 30 held in Paragraphs 7, 10, 11 and 13:
7. Considering the aforesaid, there is no reason why the impugned action in this case be also not held to be illegal. Even though, in the present case the agreement contains certain stipulation in Clause 6.2 as referred to in Paragraph 4, but even this condition stipulates that all dues, taxes, royalty etc. levied on the contractor's work shall be payable by the contractor. This condition only stipulates that taxes, dues and royalties are to be paid by the contractor. As far as payment of royalty is concerned, liability can be imposed upon the contractor only if the contractor himself is extracting the mineral and using it for the construction work as the incident for payment of royalty arises at the place where the mineral is extracted and not thereafter.
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10. I am afraid, the aforesaid submission is misconceived. Section 9 of the Mines and Minerals (Development and Regulation) Act contains the statutory provision with regard to liability for payment of royalty. Similarly, the M.P. Minor Mineral Rules, 1996 also contemplates various provisions incorporated in the quarry lease in accordance with Rule 30, wherein detailed procedure is contemplated for payment of royalty and others dues. Chapter 9 of the M.P. Minor Mineral Rules contemplates a detailed procedure for assessment and recovery of royalty. A combined reading of the aforesaid statutory provisions clearly indicates that the statute has imposed strict condition for recovery of royalty from the mine owners. Clause 6.2 and Clause 6.2.1 of the agreement read as under:
6.2. Taxes.--All dues regarding taxes, including the sales tax, other duties, royalty etc. levied on the contractors works by Government and local or private individuals will be payable by the contractor. The Authority will grant certificate for the quantities actually used on the work but will not entertain any claim on this account.
6.2.1. Payment of contractors final bill shall not be released till 'no dues' certificate from Collector relating to the payment of royalty is submitted by the contractor.
11. As far as Clause 6.2 is concerned, as already indicated hereinabove it only imposes a liability on the contractor providing for payment of all sales-tax and other dues like royalty. Clause 6.2.1, which contemplates production of no dues certificate from the Collector with regard to payment of royalty, is clearly contrary to the statutory provisions because the Collector can issue certificate with regard to payment of royalty only if the royalty is payable by the contractor. If the contractor has purchased the material from a supplier and the supplier has purchased the material from the mine owner, who has extracted the mineral from a place which is not known to the contractor, the contractor cannot be expected to run from pillar to post finding out of source of extraction and the mineral consumed by him and then produce the certificate. This condition seems to be impracticable and inconsistent to the statutory provision. Considering this provision in the backdrop of the observation made by the Division Bench in Para 13 in the case of M.P. Contractors Sangh (supra), I am of the considered view that the aforesaid conditions cannot be enforced in the manner as it is being done.
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13. Accordingly, petitions are allowed. Respondents are directed not to insist upon production of certificate of proof with regard to payment of royalty for minor minerals which are employed by the petitioners-contractors in execution of the work awarded to them. It is held that the respondents are not entitled to deduct any amount towards royalty from the running bills from the petitioners.
14. In the case at hand, learned Single Judge in Paragraphs 13 and 14 has expressed the opinion as under:
13. The aforesaid decisions have turned on the facts of each case and in the case of M.P. Contractors Sangh, Indore and Ors. v. State of M.P. and Ors. (supra), power to make an enquiry with respect to whether the material was royalty paid or not has not been denied or ousted. There may be a case where contractor has himself excavated the sand, murrum or gitti. The aforesaid condition as reflected in the circular aims at ensuring that the payment of royalty is not evaded and is to prevent illegal mining. However, at the same time in case purchase has been made from petty contractors or traders, contractor may not be in a position to place on record the proof of the fact that royalty was in fact paid, but at the same time when required as to the source of material used it is clear that the contractors is required to disclose it and to support it also with available documents, then a decision has to be taken by the Collector before issuing NOC with respect to royalty. In the instant case, two years period have passed, thereafter the demand has been made, hence, it is submitted by the petitioner's Counsel that it may be that the petitioner may not have retained the vouchers etc. of purchase, but, that is not submitted in reply submitted by the petitioner to the Collector. In the circumstances, as Collector has to conduct an enquiry into this aspect and at the same time has to consider the ratio of decisions referred to above and apply the ratio on the facts of the instant case which may be found, petitioner is free to file detailed representation within a period of three weeks, same shall be considered by the Collector, it is open to the petitioner to file documents if any which may be available with him then. Let a considered decision be taken duly considering all the aspects by the Collector within a period of two months.
14. The submission raised by petitioner's Counsel that there was no such clause in the agreement so as to necessitate the proof of royalty. In my opinion, when any material is used by the contractor whether it is illegally procured or it is royalty paid or not can be looked into by the respondents. However, there cannot be any straitjacket formula to come to conclusion whether royalty was paid or not, it is necessary for the Collector to make an enquiry from other sources as well in the given set of facts of particular case.
15. In our considered opinion, learned Single Judge should have followed the decisions which hold the field since the facts are absolutely the same. Quite apart from the above, there is no clause in the contract that Royalty Clearance Certificate shall be produced by the contractor. Another aspect also cannot be lost sight of. The certificate was demanded after expiry of two years. In view of the law enunciated in the absence of any stipulation in the contract or any requirement by law and the demand made after expiration of period of two years the decision to withhold the amount is unsustainable.
16. In view of our preceding analysis, the writ appeal is allowed and the order passed by the learned Single Judge is set aside the respondent are directed to release the amount under performance security. There shall be no order aster costs.