Holding

Section 70 of the Maharashtra Land Revenue Code is within Entry 45 of List II, giving the State power to levy water cess as land revenue, and the appellant is liable to pay the cess from the date of the resolution.

Summary

The appellant, a spinning and weaving mill, installed pumps in 1989 to draw water from the river Wana for industrial use. The Maharashtra Government, under Section 70 of the Maharashtra Land Revenue Code, 1966, issued a resolution fixing rates of water cess for non‑agricultural purposes, and the Tehsildar levied cess on the mill for the years 1967‑74. The mill contended it had a 70‑year easementary right to the water and that the State lacked constitutional competence to levy such cess, especially retrospectively. The High Court held that the State could levy water cess and upheld the resolution. On appeal, the Supreme Court examined whether Section 70 falls within Entry 45 of List II of the Seventh Schedule and whether water can be treated as land revenue. It held that the definition of "land" includes the right to water flowing from it, that Entry 45 empowers the State to levy water cess, and that the resolution was valid and applicable from its date of issuance. Consequently, the mill was ordered to pay the cess as assessed.

Issues considered

Whether the State legislature has power to levy a cess on the use of flowing river water for industrial purposes.
Whether Section 70 of the Maharashtra Land Revenue Code, 1966, falls within Entry 45 of List II of the Seventh Schedule of the Constitution.
Whether the appellant possesses a natural/easementary right to draw water that exempts it from the cess.
Whether the cess demand can have retrospective effect.

Legislation cited

Constitution of Indias. Article 246, s. Seventh Schedule Entry 17, s. Seventh Schedule Entry 18, s. Seventh Schedule Entry 45, s. Seventh Schedule Entry 49, s. Seventh Schedule Entry 56, s. Seventh Schedule Entry 97
Maharashtra Land Revenue Code, 1966s. 20, s. 70
Transfer of Property Act, 1882

Subjects

water cessland revenuelegislative competenceEntry 45Constitution of IndiaMaharashtra Land Revenue Codenatural rightretrospective levyindustrial use of water

Judgment

A MIS. R.S. REKHCHAND MOHOTA SPINNIKG
AND WEA YING MILLS LTD.
..
v.
STATE OF MAHARASHTRA

MAY 7, 1997
B
[K. RAMASWAMY, S. SAGHIR AHMAD AND
G.B. PATTANAIK, JJ.]

Maharashtra Land Revenue Code, 1966 :
c S.70 r/w. s. 2o--R.iver wate1~Levy of Cess on use for non- agricultural
purpose-Industrial pwpos~Power of State Govemment-Spinning and
Weaving Mills-Drawing 1iver water by artificial contrivance--Govemment
Resolution demanding land Cess on use of water at the rates specified
D thereill-fleld, Govemment has power under s.70 read withs. 20 to levy water
cess 011 use of water for industrial purpose and it is taxable as incidence on
cess 011 water as land cess and the indusuy is liable to pay water cess at the
rates presc1ibed by the Government State competent under Entry 45 of List
II of Seventh Schedule to the Constitution to enact law in exemse of power
under Article 246 of the Constitution-Definition of 'land' includes right to
E water flowing therefrom as in the definition in Trans/er of Property
Act-Transfer of Prope1ty Act, 1872-Constitution of India, Article 246,
Seventh Schedule-List II Ent1ies 17 & 45

Province of Madras v. Lady of Dolours Conven~ Trichinopoly, repre-
F sented by Mother Supe1ior & Ors., AIR (1942) Madras 719; Kandukuri Bala
Swyaprasada Rao & Anr. v. Secretary to State for India, AIR (1917) PC 42;
K.S. Ardanareeswarar Gounder v. Tehsildar, Bhavani & Anr., AIR (1976)
Madras 318; Nizam Sugar Factory Ltd. v. City Municipality Bodhan & Anr.,
AIR (1965) AP 91; Raza Buland Sugar Company Ltd., Rampur v. Municipal
G Board Rampur, AIR (1962) All. 83 and Shankar Narayan Ranade v. Union
of India, [1964] 1 SCR 885, referred to.

State of Madras v. Cannon Dunkerley & Co. (Madras) Ltd., [1959] 1
SCR 379, held inapplicable.

H Constitution of India, 1950 :
238
R.S.R. MOHOTA SPINNING AND WEAVING. MILLS v. STATE 239

- Article 246, Seventh Schedule, List II, Entries 17 and 45-River A
water-Use for industrial purpose-'Levy of Cess by State Government-Held,
Entry 45 of List II b1ings within the ambit power of legislature u11der Article
246 to levy ces:: 1J/I use of water eve11 from flowi11g river-Section 70 of
Maharashtra Land Reve11ue Code, 1966 comes within Ently 45 of List II.

Interpretatio11 of Constitution. B

Entlies in Lists of Seve11th Schedule-lnterpretation of-Held, most
liberal co11st1Uctio11 should be put upo11 the words in the Entries so that the
same have effect i11 their widest amplitude.

Kunnathat Thatcunni Moopil Nair v. The State of Kera/a & Anr., C
[1961] 3 SCR 77 and Synthetics and Chemicals & Ors. v. State of U.P. &

- Ors., [1990] 1 SCC 109 followed.

Indian Aluminium Co. & Ors. v. State of Kera/a & Ors., [1996] 7 SCC
637, referred to. D,
Words and Phrases :

"Land''-Definition of-Held, includes right to the water flowing there-
from.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1802 of
E
1990.

From the Judgment and Order dated 8.11.89 of the Bombay High
Court in W.P. No. 1509 of 1981.
F
AK. Sanghi for the Appellant.

T.R. Andhyarujina, Solicitor General and A.M. Khanwilkar for the
Respondent.

The following Order of the Court was delivered :
G
This appeal by special leave arises from the judgment of the Division
Bench of Bombay High Court passed in Writ Petition No. 1509.of 1981 on
November 8, 1989. The primary question is : whether the State legislature
has power to levy rates of cess on use of flowing water from the river
'Wana'. H
240 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.

A The facts are as under. The appellant had installed a mill in the year
1989 and has been drawing water for industrial purpose from the said river
by installing water pumps at its bank with the help of artificial contrivance.
Under Section 70 of the Maharashtra Land Revenue Code, 1966, (for

B
short, 'the Code'), the Government of Maharashtra passed the following
Resolution on June 5, 1972 thus : c
"In exercise of the power conferred in it by Section 70 of the
Maharashtra Land Revenue Code, 1966, the Government is
pleased to sanction the following rates for the use of water (the
right to which vest in Government and in respect of which no rate
C is liable under any law in force in any part of the State) for
non-agriculture purpose.

NON-AGRICULTURE Rate Unit
PURPOSE
1. Industrial purpose (a) Rs. 8 for the first Per ten
D two years. thousand cft.
of water
(b) Rs. 10 for the
third & fourth - do -
year
E
(c) Rs. 12.50 for the
fifth and - do -
subsequent year •
2. Purpose for the Rs. 5
- do -
Municipality
F
3. Purpose for the Rs. 12.50
- do -
Railways
4. Domestic use (i.e. for Nil
drinking water)
--
G The Collector or such other officer as may be authorised in that
behalf should fix the water .rates in accordance with rates sanc-
tioned above.

These orders supersede all the prevalent orders or practice in
H regard to .the quantum or the rates chargeable under Section 70
R.S.R. MOHOTASPINNING AND WEAVING MILLS v. STATE 241

of the Maharashtra Land Revenue Code, 1966. A
These ·orders were issued with the concurrence of the Finance
Department vide in Official reference No. 7041 dated 29th April,
1972"

The Tehsildar of Hinganghat on the appellant levied cess in the sum B
of Rs. 18,348.30 for the period from 1967-68 to 1973-74 on the use of water
for industrial purpose. The appellant, feeling aggrieved, filed an application
under Section 20(2) of the Code before the Sub-Divisional Officer, Hin-
ganghat, challenging the demand of cess, dated December 19, 1974, inter
alia, contending that he had easementary right to draw flowing water from C
the river, Wane, uninterruptedly and continuously since he had been so
drawing the water for over 70 years; that it had perfected as his prospective

- right to draw water from the flowing river, and the Government is, there-
fore, devoid of any power to levy cess on the use of water.

The Sub-Divisional Officer dismissed the application <1fter consider- D
ing necessary evidence. The appeal filed by the appellant against the order
of the Sub-Divisional Officer also was dismissed. The Commissioner, Nag-
pur dismissed the revision. Thereafter, the appellant after filing unsilccessc
ful revision petition before Revenue Tribunal, filed a writ petition in the
High Court. The High Court has found that the Government has power to E
levy cess on water; the resolution, therefore, passed by the Government
under Section 70 of the Code is within the legislative competence under
Article 246 of the Constitution of India. Accordingly, it upheld the action
of the respondent. On leave being granted and a reference having been
made to three-Judge Bench, the matter has come up before us.
F
Shri Sanghi, learned counsel for the appellant contends that the Code
envisages collection of land revenue from agriculturists for use of water for
cultivation purpose. Admittedly, the use of water by the appellant, is for
industrial purpose. By operation of Section 70 read with Section 20 of the
Code, land revenue is relatable to levy on land of cess on the water used
for agricultural purpose. Therefore, the Resolution is clearly illegal. Even G
if it is construed that the Resolution is valid, the legislature lacks com-
petence to enact law since neither Entry 18 nor Entry 45 or Entry 49 of
List are available to sustain the demand under Section 70; therefore, it
cannot be construed that Section 70 is law made under any of the Entries.
As a consequence, he is entitled to the relief. He further contends that in H
242 SUPREME COURT REPORTS [1997) SUPP. 1 S.C.R.

A view of the fact that the High Court has recorded a finding that the
appellant has a natural right to draw water from the flowing river, the
appellant cannot be made to make payment which has no legislative
sanction. Alternatively, as the last straw on the camel's back, learned
counsel for the appellant contends that the Collector has no power to levy
cess with retrospective effect.
B
Shri Andhyarujina, learned Solicitor General, on the other hand,
contends that though the appellant has been using the water for industrial
purpose, he is using the water by artificial contrivance, drawing water from
the flowing river; the levy of cess stands vested in the State; and, therefore,
C the State has power to regulate the payment of cess. The Resolution came
to be passed in exercise of the power under Section 70 of the Code relating
to the mode of payment and the manner in which the land revenue or cess
can be computed. Sub-sections (2) & (3) of Section 20, are the essential
provisions providing for the appellate remedy which the appellant has
D availed of. List II Entries, namely, Entries 18, 45 and 49 are to be read with
reference to the use to which land and water are put. Water is nothing but
integral part of land; without land, water does not exist. Section 70 would
come within Entry 45 since it relates to the use of land or water regulated
in the rural India. Entry 49 relates to use of land or water in the urban
area. Since the factory of the appellant is situated in a rural area, Entry 45
E is the appropriate Entry and is required to be broadly interpreted so as to
b1ing back within the legislative competence under Article :~46 of the
Constitution. He further contends that though the appellant had been using j,

the water for a period of 70 years, he does not have a natural right which
right is exercised with the help of artificial contrivance for carrying on
F industrial activity. That finding of the High Court is not correc[ since the
appellant has been using the water for industrial purpose. The levy as land
cess can be used by operation of Section 70 read with Section 20 and the
definition of the word 'land' and 'land revenue' respectively under the
Code. He also contends that though the demand can be made under
Section 70 read with the Resolution passed by the Government, since the
G Legislature has authorised under Section 70 the Collector to levy and
collect the demand and the Collector having made the impugned demand
in the year 1972, the demand could only be prospective and it .cannot be
given retrospective effect. '

H In view of the respective contentions, the question that raises for
R.S.R. MOHOTASPINNING AND WEAVING MILLS v. STAIB 243

consideration is : whether the appellant has a natural right to use water A
from flowing river and whether the water used by it is exigible to land cess?
Entry 17 of List II of the Seventh Schedule to the Constitution reads as
under:

"Water, i.e. to say, water supplies, irrigation and canals, drainage
and embedments, water storage and water power, subject to the B
provisions of Entry 56 of List I"

Entry 56 of List I reads as under :

"Regulation and development of Entry States rivers and river
valleys to the extent to which such regulation and development C
under the control of the Union is declared by Parliament by law
to be expedient in the public interest."

Entry 97 of list I which was relied upon by Mr. Sanghi reads as under :

"Any other matter not enumerated in List II or List III including D
any tax not mentioned in either of those lists. :

Entry 45 of List II reads as under :

"Land revenue, including the assessment and collection of revenue,
the maintenance of land records, survey for revenue purposes and E
records of rights, and a lienation of revenues."

Section 70 of the Code reads as under :

"70. Rates for use of water.
F
The State Government may authorise thus Collector or the Officer
in charge of a survey or such other officer as it deems fit, to fix
such rates as it may from time to time deem fit to sanction, for the
use, by holders and other persons, of water, the right to which vests
in the Government, and in respect of which no rate is leviable G
under any law relating to irrigation in force in any part of the State.
Such rates shall be liable to revision at such periods as the State
Government shall from time to time determine, and shall be
recoverable as land revenue;

Provided that, the rate for use of water for agricultural pur- H
244 SUPREME COURT REPORTS [1997] SUPP.1 S.C.R.

A poses shall be one rupee only per year per holder."
c:::
Section 20 of the Code reads as under :

"Title of State in all lands, public roads, etc. which are not property
of others.
B
(1) All public roads, lanes and paths, the bridges, ditches, dikes
and fences, on, or beside, the same, the bed of the sea and of
harbours and creeks below the high watermark, and of rivers,
streams, nallas, lakes and tanks and all canals and water-courses,
and all standing and flowing-water, and all lands wherever situated,
c which are not the property of persons, legally capabie of holding
property, and except in so far as any rights of such persons may
be established, in or over the same, and except as may be otherwise
provided in any law for the time being in force, are and are hereby
declared to be, with all rights in or over the same, or appertaining
D thereto, the property of the State Government and it shall be lawful
for the Collector, subject to the orders of the Commissioner, to
dispose of them in such manner as may be prescribed by the State
Government in this behalf, subject always to the right~. of way, and
all other rights of the public or of individuals legally subsisting.

E Explanation :- In this section, "high watermark" means the
highest point reached by ordinary spring tides at any season of the
year.

(2) Where any property or any right in or over any property is
claimed by or on behalf of the Government or by any person as
F against the Government, it shall be lawful for the Collector, or a
survey officer, after formal inquiry of which due notice has been
given, to pass an order deciding the claim.

(3) An order passed by the Collector or survey officer under
sub-section (1) or sub-section (2) shall be subject to one appeal
G
and revision in accordance with the provisions of this Code.

·(4) Any suit instituted in any civil court after the expiration of one
year from the date of any order passed under sub-section (1) or
sub-section (2) or, if appeal has been made against such order
H within the period of limitation, then from the date of any order
R.S.R. MOH OTA SPINNING AND WEAYING MILLS v. STATE 245

passed by the appellate authority, shall be dismissed (through A
limitation has not been set up as a defence) if the suit is brought
to set aside such order or if the relief claimed is inconsistent with
such order, provided that in the case of an order under sub-section
(2) the plaintiff has had due notice of such order.

(5) Any person shall be deemed to have had due notice of an
B
inquiry or order under this section if notice thereof has been given
in accordance with rules made in this behalf by the State Govern-
ment."

A conjoint reading of the provisions of the Code and the respective C
Entries would indicate that the land revenue including the assessment and
collection of revenue, the maintenance of land records, survey for revenue
purposes and records of rights, and alienation of revenue lie under the
broad-head 'land revenue'. It is well settled legal position that the land has
been widely interpreted. In Navinchandra Mafatlal v. The Commissioner of D
Income-tax, Bombay City, (1965] 1 SCR 829 at 836 a Constitution Bench
had observed that the question before this Court related to the correct
interpretation of a word appearing in a Constitution Act which, as has been
said, must not be construed in a narrow and pedantic sense. The inter-
pretation of the statute would apply to the interpretation of the Entries
subject to reservation that their application is of necessity conditioned by E
the subject matter of the enactment itself. It should be remembered that
the problem before_ us is to construe a word appearing in Entry 54 which
is a head of legislative power. It cannot be read in a narrow or restricted
sense and that each general word should be, held to extend to all ancillary
or subsidiary matters which can fairly and reasonably be said to be com- F
prehended to it. It is, therefore, clear that in construing an Entry in a List
conferring legislative powers, the widest possible construction, according
to their ordinary meaning, must be put upon the words used therein.
Reference to legislative practice may be admissible for cutting down the
meaning of a word in order to reconcile two conflicting provisions in two
legislative lists. The cardinal rule of interpretation, however, is that words G
should be given their ordinary, natural and grammatical meaning subject
to the rider that in construing words in a constitutional enactment, confer-
ring legislative power under Article 246, the most liberal construction
should be put upon the words in the Entries in the respective Lists in the
Seventh Schedule so that the same may have effect in their widest H
246 SUPREME COURT REPORTS (1997] SUPP. 1 S.C.R.

A amplitude. The same principle was reiterated in Kunnathat Thatcunni
Moopil Nair v. The State of Kerala & Anr., [1961) 3 SCR 77 at 106 by Sarkar,
J. though in a dissenting tone but on this principle there is no dissent by
majority and it cannot be dissented. It was said thus :

"It is well known that entries in the legislative lists have to be read
B as to cut down the plain meaning of the word "land" in entry 49 to
give full effect to the word "forest" in entry 19. In my view, the two
entries, namely, entry 49 and entry 18 deal with entirely different
matters. Therefore, under entry 49 taxation on land on which a
forest stands is permissible and legal."
c
· In the case of Synthetics and Chemicals & Ors. v. State of U.P. & Ors.,
[1990] 1 SCC 109, a Bench of seven Judges of this Court considered the
effect of interpretation of Constitution and legislative Entries in paragraph ,
67 which reads as under :
D
"It is well to remember that the meaning of the expressions used
in the Constitution must be found from the language used. We
should interpret the words of the Constitution on the same prin-
ciple of interpretation compel one to take into account the nature
and scope of the Act which requires interpretation. A Constitution
E is the mechanism under which laws are to be made and not merely
an Act which declares what the law is to be. It is also well settled
that a Constitution must not be construed in any narrow or pedan-
tic sense and that construction which is most beneficial to the
widest possible amplitude to its powers, must be adopted. An
F exclusionary clause in any of the entries should be strictly and,
therefore, narrowly construed. No entry should, however, be so
read as not (sic) to rob it of entire content. A broad and liberal
spirit should, therefore, inspire those whose duty it is to interpret
the Constitution, and the courts are not free to stretch or to pervert
the language of an enactment in the interest of any Iegal or
G constitutional theory. Constitutional adjudication is not
strengthened by such an attempt but it must seek to declare the
law but it must not try to give meaning on the theory of what the
law should be, but it must so look upon a Constitution that it is a
living and organic thing and must adapt itself to the changing
H situations and pattern in which it has to be interpreted.
R.S.R. MOHOTA SPINNING AND WEAVING MILLS v. STATE 247

It has also to be borne in mind that where divisions of powers and A
jurisdiction in a federal Constitution is the scheme, it is desirable
to read the Constitution in harmonious way. It is also necessary
that in deciding whether any particular enactment is within the
purview of one legislature or the other, it is the pith and substance
of the legislation in question that has to be looked into. It is well B
settled that the various entries in the three lists of the Indian
Constitution are not powers but fields of legislation. The power to
legislate is given by Article 246 and other Articles of the Constitu-
tion. The three lists of the Seventh Schedule to the Constitution
are legislative heads of fields of legislation. These demarcate the
area over which the appropriate legislatures can operate. C

It is well settled that widest amplitude should be given to the
language of the entries in three Lists but some of these entries in
different lists or in the same list may override and sometimes may
appear to be in direct conflict with each other, then and then only D
comes the duty of the court to find the true intent and purpose
and to examine the particular legislation in question. Each general
word should be held to extend to all ancillary or subsidiary matters
which can fairly and reasonably be comprehended in it. In inter-
preting an entry it would not be reasonable to import any limitation
by comparing or contrasting that entry with any other in the same E
list. It has to be interpreted as the Constitution must be interpreted
as an organic document in the light of the experience gathered. In
the constitutional scheme of division of powers under the legisla-
tive lists, there are separate entries pertaining to taxation and other
laws. The aforesaid principles are fairly well settled by various p
decisions of this Court and other courts. Some of these decisions
have been referred to in the decision of this Court in Civil Appeal
No. 62(N)/70 - India Cement Ltd. v. State of Tamil Nadu, (1990) 1
sec 12.
In a recent judgment, this Court, by a Bench of two Judges, to which G
K. Ramaswamy and G.B. Pattanaik, JJ. were members, in Indian
Aluminium Co. & Ors. v. State of Kerata & Ors., (1996) 7 SCC 637,
considered the same question in paragraphs 12 and 20 which read as under:

"The primary question, therefore, is : whether the impugned Act H
248 SUPREME COURT REPORTS (1997] SUPP. 1 S.C.R.

A enacted by the State Legislature is one under Entry 53 of the State
List, viz., "Taxes on the consumption or sale of electricity". Indis-
putably, the title of the Act as well as the charging Section 3
Employ the words "duty on supply of electricity". Under Article
246(3) of the Constitution, every State legislature has explicit
power to make law for that State with respect to the matters
B enumerated in List II (State List) to the Seventh Schedule to the
Constitution. The State's power to. impose tax is derived from the
Constitution. The entries in the three lists of the Seventh Schedule
are not power of legislation but merely fields of legislation. The
power is derived under Article 246 and other related articles of
c the Constitution. The legislative fields are of enabling character
designed to define and delimit the respective areas of legislative
competence of the respective legislature. There is neither implied
restriction imposed on the legislature nor is any duty prescribed
to exercise that legislative power in a particular manner. But the
legislation must be subject to the limitations prescribed under the
D
Constitution.

When the vires of an enactment is challenged, it is v.ery difficult
to ascertain the limits of the legislative power. Therefore, the
controversy must be resolved as far as possible, in favour of the
E legislative body putting the most liberal construction upon the
relevant legislative entry so that it may have the widest amplitude.
The court is required to look at the substance of the legislation. It
is an equally settled law that in order to determine whether a tax
statute is within the competence of the legislature, it is necessary
to determine the nature of the tax and whether the legislature has
F power to enact such a law. The primary guidance for this purpose
is to be gathered from the charging section. It is the substance of
the impost and not the form that determines the nature of tax."

Thus, it is settled principle of interpretation that legislative Entries
G are required to be interprete<,l broadly and widely so as to giv1! power to
the legislatUre to enact law with respect to matters enumerated in legisla-
tive Entries. Substantive power of the legislature to enact law is under
Article 246 of the Constitution and legislative Entries in the respective Lists
1 to 3 of the Seventh Scheduled are of enabling character, designed to
define delimit the respective areas of legislative competence of the respec-
H tive legislature. The substantive power in Article 246 and all other related
R.S.R. MOHOTASPINNING AND WEAVING MILLS v. STATE 249

articles. A

In Province of Madras v. Lady of Dolours Convent, Trichinopoly,
represented by Mother Superior & Ors., AIR (1942) Madras 719, the word
'land' was interpreted to include land cess. In Kandukuri Bala Suryaprasada
Row & Anr. v. Secretary to State for India, AIR (1917) PC 42, the Privy B
Council had also interpreted "charge" on water in the nature of land cess.
It was followed· by the Madras High Court. Similarly, water cess is land ·
revenue as was held in K.S. Ardanareeswarar Gounder v. Tehsildar, Bhavani
& Anr., AIR (1976) Madras 318 at 320. With regard to the incidence of
cess on the use of water in the urban area, the Division Bench of the
Andhra Pradesh High Court in Nizam Sugar Factory Ltd. v. City C
Municipality Bodhan & Anr., AIR (1965) AP 91 had held that it is land
revenue under Entry 49. Similarly, Allahabad High Court in Raza Buland
Sugar Company Ltd., Rampur v. Municipal Board, Rampur, AIR (1962) All.
83 rates of cess on water under the Municipal limits was held to be the
cess of land revenue in the urban area. Thus, we hold that the legislative D
Entry 45 of List II of the Seventh Schedule of the Constitution brings within
the ambit power of the legislature under Article 246 to levy cess on use of
the water even from flowing river. Therefore, Section 70 of the Code comes
within Entry 45 of List II of the Seventh Schedule to the Constitution.

Mr. Sanghi, learned counsel for the appellant has relied upon judg- E
ment of the Court of Shankar Narayan Ranade v. Union of India, [1964) 1
SCR 885 at 893 contending that this Court made distinction between still
water and flowing water. Water for the purpose of cess and the impost
thereof are not referable to flowing water of the river and the river water
is not amenable to land cess; therefore, it is contended that the flowing F
water is not exigible to regulation of the land cess. We find no force in the
contention. The use of the word "water" in the sanad property was con-
strued to exclude the running water of the river and it could not be said
that the title to the flowing water. There exists world of difference between
still water in the land like in the pound and flowing water in a river. This G
Court negatived the contention and held that the flowing water vests in the
State. In that context, at page 894, the title to the bed of the river was
negatived and, therefore, it was held that there were two difficulties in
accepting the contention. The first difficulty was that the use of the word
"water" in the sanad, excluded the running water of the river. Besides, it is
by no means clear that the title to the flowing water of the river necessarily H
250 SUPREMECOURTREPORTS [1997)SUPP.1S.C.R.

A goes with the title to the bed of the river. Shri Sanghi further contends that
this Court made distinction between the cess on sale of goods in State of
Madras v. Cannon Dunkerley & Co. (Madras) Ltd., [1959) 1SCR379 which
is popularly known as first Ca1111011 Dunkerley's case. Therein, the question
was whether 'the material supplied to the Company was exigible to sales
cess under the Madras Sales Tax Act. This Court held that since sale of
B goods is clearly covered in different legislative Entries, it is not exigible to
sales cess. The ratio therein, therefore, has no application to· the facts of
the present case. It is seen that Section 20 of the Code clearly includes
flowing water, as investing title thereof in the State as integral part of the
land. The definition 'land' includes the right to the water flowing therefrom
C as in the definition in the Transfer of Property Act.

Therefore, when the cess has been imposed by virtue of power vested
under Section 70 of the Code by the State Government by way of legisla-
tion, the power of the State is traceable to the legislative Entry under Entry
D 45 of List II of the Seventh Schedule to the Constitution. Therefore, the
demand made is within the legislative competence and the legislature is
competent to enact law in exercise of the power under Article 246. The
Government have power under Section 70 read with Section 20 of the Code
to levy water cess on the use of water by the Resolution which came to be
passed by the State Government determining the rate at which water cess
E is cessable on use of water for industrial purpose. It would accordingly be
exigible from levy of tax. It is true that the appellant has been using the
water for over 70 years but that cannot be construed to mean that it has a
right to draw water by artificial contrivance from the flowing river for use
in its factory for industrial purpose. Having used the water for industrial
purpose, it is taxable as incidence on cess on water as land cess and,
F
therefore, it is liable to pay water cess at the rates prescribed by the
Government.

Mr. Sanghi, learned counsel for the appellant, lastly submits that no
guidelines have been fixed for demand of cess levied on use of water from
G flowing river. We find that the manner in which the prescription of the
rates has been based, is sufficient guideline for determining the rates at
which the demand can be assessed to revenue cess.

It is already seen that the machinery provision under sub-section (2)
H of Section 20 was adopted by the Tehsildar and after demand was made,
R.S.R. MOHOTASPINNING AND WEAVING MILLS v. STATE 251

the appellant approached the appellate authority and the revisional A
authority who complied with the principles of natural justice. In view of the
fair stand taken by learned Solicitor General that the executive cannot
make any demand retrospectively, the demand must be construed to
operate from the date of the Resolution passed by the Government and
from that date, the appellant is liable to pay the land cess for use of the B
water at the rates specified therein. The respondents are directed to
compute the rate on that basis and make a fresh demand; on making such
demand, the appellant shall pay the amount of cess within a period of 30
days from the date of receipt of the demand.

The appeal is accordingly disposed of. No costs.
c
S.M. Appeal disposed of.