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3. On 19.01.2015, proceedings were registered by the Collector of Stamps, Satna, under Section 40 read with Article 38(vi) of the Stamp Act. The Collector issued a letter dated 15.01.2015 to the Mining Officer, Satna, seeking information regarding the average annual royalty for the lease area NEUTRAL CITATION NO. 2026:MPHC-JBP:15477 3 MP-6937-2019 of 135.435 hectares. The Mining Officer, Satna, submitted a report dated 24.01.2015 stating that the average annual royalty, as per the approved mining plan, was Rs. 10583370/-. The Mining Officer also stated that the dead rent at Rs. 1,000/- per hectare per year for five years would amount to Rs. 544000/-. However, it is settled that dead rent cannot be added to royalty, as royalty becomes payable when it exceeds the dead rent, and in such cases, dead rent is not payable separately. Based on the Mining Officer's report, the stamp duty at 5% of the average annual royalty of Rs. 10583379/- would amount to Rs.529168/-. However, the Collector wrongly added the dead rent and further multiplied the total annual amount by 30 years, determining the duty at 5% on Rs.10692170/- × 30 years, and thereby calculated stamp duty at Rs. 1,64,38,712/- which also included dead rent and cess (Upkar). The said calculation is wholly erroneous. Under Article 38(vi), stamp duty is to be calculated on the average annual rent reserved. Royalty is equivalent to rent as per Section 26 of the Stamp Act, and dead rent cannot be added thereto. Therefore, stamp duty payable should be 5% of Rs.10583370/-, i.e., Rs.529168/- only. The determination of duty on the entire 30-year lease period is illegal and contrary to law. The petitioner filed objections before the Collector of Stamps on 11.04.2016 stating that, as per the mining plan, total production for five years would be Rs.503969/- metric tons, and the average annual production would be 100793.8 metric tons. At the royalty rate of Rs. 80/- per metric ton, the annual royalty would amount to Rs. 8063440/-. Accordingly, 5% stamp duty under Article 38(vi) would be Rs.

6. Before proceeding with the dispute, the relevant provision should also be included in the notice; therefore, it is useful to reproduce the provision:-

"Section 40 of the Indian Stamp Act, 1899 (Collector's Power to Stamp Instrument Impounded):
Section 40(1): When the Collector impounds any instrument under Section 33, or receives an instrument sent to him under Section 38(2), and if he is of the opinion that such instrument is chargeable with duty and is not duly stamped, he shall require payment of the proper duty or the deficient portion thereof, together with: A penalty of five rupees; or If he thinks fit, a penalty not exceeding ten times the amount of the proper duty or deficient portion thereof Article 38(vi) of Schedule 1-A of the Indian Stamp Act, 1899 (as amended by the Madhya Pradesh Amendment Ordinance/Act, 2014 w.e.f. 16.09.2014):
7. From the provisions of the MMDR Act, it is clear that the lessee is required to pay either royalty or dead rent, whichever is higher.
8. Section 26 of the Indian Stamp Act, 1899 provides that stamp duty on a mining lease is to be determined on the basis of the estimated royalty at the time of execution of the lease deed. Stamp duty is payable according to the law in force on the date of execution of the instrument. The dispute essentially relates to the correct method of calculation of stamp duty and the legality of adding dead rent, Upkar, and penalty. The validity of the impugned orders depends upon whether the Collector correctly applied Article 38(vi) and Section 40 of the Stamp Act in determining the duty and penalty.
10583370/-. The dead rent and Upkar are distinct and different from royalty.
10. Learned counsel for the petitioner further submitted that the Collector wrongly imposed a penalty of Rs. 50 lakhs, which is contrary to NEUTRAL CITATION NO. 2026:MPHC-JBP:15477

7 MP-6937-2019 the provisions of Section 40 of the Indian Stamp Act. As per the aforesaid provision, only a penalty of Rs. 5/- ought to have been imposed. It was contended that the mining lease is neither transferable nor saleable and has no market value; therefore, the stamp duty should be determined on the basis of the annual royalty, which is equivalent to the royalty payable on the average annual production.