SOUTH EASTERN COALFIELDS LTDversusSTATE OF MADHYA PRADESH & ORS

                [2023] 12 S.C.R. 767 : 2023 INSC 865



                          CASE DETAILS

              SOUTH EASTERN COALFIELDS LTD
                                   v.
              STATE OF MADHYA PRADESH & ORS
                   (Civil Appeal Nos. 84-85 of 2016)
                        SEPTEMBER 21, 2023
         [DR. DHANANJAYA Y CHANDRACHUD, CJI,
          J. B. PARDIWALA AND MANOJ MISRA, JJ.]
                            HEADNOTES
     Issue for consideration: Whether the High Court was justified in
rejecting the challenge raised by the owner of coal mining colliery in
Madhya Pradesh as regards the levy of terminal tax within the limits of
the Municipal Council.
     Constitution of India – Art. 244(1), 243-X, 243-ZC, Fifth
Schedule Paragraph 5 – Law applicable to Schedule Area – Terminal
tax – Levy of, within the limits of the Municipal Council – Challenge
to, by the owner of coal mining colliery in Madhya Pradesh –
Rejected by the High Court on the ground that the land from where
the owner carried out its coal mining operations fell within the limits
of the Municipal Council which had power to levy the terminal tax;
and that no exceptions notified to the power of the Municipal Council
under the Constitution – Correctness:
      Held: Paragraph 5(1) of the Fifth Schedule enables the Governor
to direct either that a parliamentary or state law shall not apply to a
Scheduled Area in the State or that it would apply subject to exceptions
and modifications – Thus, unless a notifi cation has been issued by
the Governor indicating that a parliamentary or State law shall have
no application to the Scheduled Area; or the parliamentary or State
legislation would apply subject to exceptions or modifi cations, there
would be no hindrance in the application of the law to the State –
Furthermore, the inapplicability of Art. 243X wherein the legislature
of the State may authorise the Municipality to levy taxes, did not
                                  767
768          SUPREME COURT REPORTS                     [2023] 12 S.C.R.


denude the State legislature to enact legislation for the State – No such
notification produced before the High Court nor this Court other than the
notification of 2003 specifying the Scheduled Areas – In view thereof,
the conclusion of the High Court cannot be faulted – Madhya Pradesh
Municipal Corporation Act 1956 – Madhya Pradesh Municipalities
Act 1961 – Terminal Tax (Assessment and Collection) on the Goods
Exported from Madhya Pradesh Municipal Limits Rules 1996 – r. 2(c).
[Paras 13 and 16]

       LIST OF CITATIONS AND OTHER REFERENCES

     Central India Spinning and Weaving & Manufacturing Co. Ltd. The
Empress Mills, Nagpur v. The Municipal Committee, Wardha 1958 SCR
1102 – referred to.
       OTHER CASE DETAILS INCLUDING IMPUGNED
              ORDER AND APPEARANCES

     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 84-85 of
2016.
    From the Judgment and Order dated 21.07.2010 of the High Court of
Madhya Pradesh at Jabalpur in WP Nos. 1340 of 2005 and 1601 of 2010.
      With
      Civil Appeal Nos. 91-92, 89-90, 86, 87-88 and 93 of 2016.
      Appearances:
     N. Venkataraman, A.S.G., Ashok Kumar Sharma, Sr. Adv., T. G.
Narayanan Nair, M.T. George, Chandrasekhar Bharati, Ms. Swathi H.
Prasad, Syed Shahid Hussain Rizvi, Zeeshan Rizvi, Ashwani Kumar
Dubey, Kshitij Mudgal, Rishabh Shukla, Advs. for the Appellant.
     Saurabh Mishra, A.A.G., S.N. Bhat, Sr. Adv., Ms. Anuradha
Mutatkar, Tarun Kumar Thakur, Sunny Choudhary, Vikas Bansal, Abhinav
Shrivastava, Shivang Rawat, Rahul Kaushik, Rajesh Kandari, Vikrant
Singh Bais, M. P. Devanath, Abhishek Anand, Rahul Kumar, Advs. for
the Respondents.
        SOUTH EASTERN COALFIELDS LTD. v. STATE OF                         769
                MADHYA PRADESH & ORS.

        JUDGMENT/ORDER OF THE SUPREME COURT

                                  ORDER
     1. This batch of appeals arises from a judgment dated 21 July 2010 by
a Division Bench of the High Court of Madhya Pradesh in a set of petitions
under Article 226 of the Constitution.
      2. Section 132 of the Madhya Pradesh Municipal Corporation Act
1956 provides for “taxes to be imposed under this Act”. Sub-section 6(n)
empowers the Corporation to levy “a terminal tax” on goods and animals
exported from the limits of the Corporation. A corresponding provision is
contained in the Madhya Pradesh Municipalities Act 1961; Section 127(6)
(n) empowers the Municipal Council to imposed “a terminal tax on goods or
animals exported from the limits of the Council”. In exercise of the statutory
powers conferred by the two statutes, the Terminal Tax (Assessment and
Collection) on the Goods Exported from Madhya Pradesh Municipal Limits
Rules 1996 have been framed. Section 2(c) defines the expression “terminal
tax” in the following terms :
     “(c) “Terminal tax” means the terminal tax on goods exported from the
     Municipal limit in accordance with the sanction of State Government
     under clause (o) of sub-section (2) of Section 132 of the Madhya
     Pradesh Municipal Corporation Act, 1956 and the tax described in
     clause (xvi) of sub-section (1) of Section 127 of the Madhya Pradesh
     Municipalities Act, 1961.”
      3. The appellant is a company registered under the Companies Act,
1956 and owns the coal mines of Jamuna & Kotma Colliery. The appellant
moved the High Court under Article 226 of the Constitution seeking to
challenge the levy of terminal tax within the limits of the Municipal Council.
The plea was rejected by the High Court on the ground that the land from
where the appellant was carrying out its coal mining operations fell within
the limits of the Municipal Council which has levied the terminal tax. The
High Court held that the power of imposing tax was granted by a State statute
which was enacted with due legislative competence. It was observed that no
exceptions have been notified to the powers of the Municipal Council under
any provision of the Constitution. The judgment has been carried in appeal.
770           SUPREME COURT REPORTS                         [2023] 12 S.C.R.


      4. Article 244 of the Constitution provides that the provisions of the
Fifth Schedule shall apply to the administration and control of Scheduled
Areas and Scheduled Tribes. A notification was issued on 29 February
2003 by the Union Ministry of Law and Justice, in exercise of the powers
conferred by Paragraph 6(2) of the Fifth Schedule to the Constitution of
India, by which the Scheduled Areas (States of Chhattisgarh, Jharkhand and
Madhya Pradesh) Order, 2003 was promulgated. The areas specified in the
notification were redefined to be the Scheduled Areas within the States of
Chhattisgarh, Jharkhand and Madhya Pradesh.
      5. Part IXA of the Constitution of India which was inserted by the 74th
amendment provides for the Municipalities. Article 243-ZC stipulates that
nothing contained in the Part shall apply to the Scheduled Areas referred
to in clause (1), and the tribal areas referred to in clause (2) of Article 244.
      6. Mr N Venkataraman, Additional Solicitor General, appears on behalf
of the appellant in support of the appeals. The first submission which has
been urged is that Article 243X empowers the Legislature of a State by
law to authorise the Municipalities to levy, collect and appropriate taxes,
duties, tolls and fees. Since Part IXA does not apply to Scheduled Areas,
it was urged that power under Article 243X is not available in relation to a
Scheduled Area. As regards Scheduled Areas, it was urged that by virtue of
Paragraph 5 of the Fifth Schedule to the Constitution of India, the Governor
is entrusted with the power to direct that any particular Act of Parliament
or the Legislature of the State shall not apply to a Scheduled Area or shall
apply subject to such exceptions and modifications as may be specified. On
this foundation, it was urged that the provisions of the two municipal laws
which have been noticed above, would have no application and hence, the
levy of a terminal tax was ultra vires.
      7. The second submission which has been urged by the Additional
Solicitor General is that Entry 89 of List I of the Seventh Schedule empowers
Parliament to levy terminal taxes on goods or passengers carried by
railway, sea or air; and taxes on railway fares and freights. Entry 56 of List
II empowers the State Legislature to levy taxes on goods and passengers
carried by road or on inland waterways. Entry 52 of List II, as it stood at
the material time, provided for taxes on the entry of goods into a local
area for consumption, use or sale therein. The submission is that while the
        SOUTH EASTERN COALFIELDS LTD. v. STATE OF                         771
                MADHYA PRADESH & ORS.

expression ‘terminal’ used in Entry 89 of List I, Entry 56 of List II does not
use that expression and hence the Rules in the present case and the levy of
a terminal tax would be ultra vires.
     8. We will deal with the two submissions independently.
     9. Article 244(1) of the Constitution provides as follows :
     “244. Administration of Scheduled Areas and Tribal Areas.—(1)
     The provisions of the Fifth Schedule shall apply to the administration
     and control of the Scheduled Areas and Scheduled Tribes in any State
     other than the State of Assam Meghalaya, Tripura and Mizoram.”
      10. Part IX of the Constitution dealing with the Panchayats was
inserted by the 73rd Constitutional Amendment. Part IXA dealing with the
Municipalities was inserted by the 74 th Amendment. Article 243-ZC(1)
indicates that nothing contained in Part IXA would apply to the Scheduled
Areas referred to in clause (1) of Article 244. However, clause (3) of
Article 244 enables Parliament to extend the provisions of Part IXA to the
Scheduled Areas subject to such exceptions and modifications as may be
specified in such law.
      11. The Fifth Schedule contains provisions for the administration
and control of Scheduled Areas and Scheduled Tribes. Paragraph 3 of the
Fifth Schedule, inter alia, provides that the Governor of each State having
Scheduled Areas shall annually or whenever so required by the President
make a report to the President regarding the administration of the Scheduled
Areas in the State and the executive power of the Union shall extend to the
giving of directions to the State as to the administration of the said areas.
Paragraph 5 of the Fifth Schedule is in the following terms :
     “5. Law applicable to Scheduled Areas.—(1) Notwithstanding anything
     in this Constitution, the Governor may by public notification direct
     that any particular Act of Parliament or of the Legislature of the State
     shall not apply to a Scheduled Area or any part thereof in the State
     or shall apply to a Scheduled Area or any part thereof in the State
     subject to such exceptions and modifications as he may specify in the
     notification and any direction given under this sub-paragraph may be
     given so as to have retrospective effect.
772          SUPREME COURT REPORTS                         [2023] 12 S.C.R.


      (2) The Governor may make regulations for the peace and good
      government of any area in a State which is for the time being a
      Scheduled Area.
      In particular and without prejudice to the generality of the foregoing
      power, such regulations may—
      (a) prohibit or restrict the transfer of land by or among members of
          the Scheduled Tribes in such area;
      (b) regulate the allotment of land to members of the Scheduled Tribes
          in such area;
      (c) regulate the carrying on of business as money-lender by persons
          who lend money to members of the Scheduled Tribes in such area.
      (3) In making any such regulation as is referred to in sub-paragraph
      (2) of this paragraph, the Governor may repeal or amend any Act of
      Parliament or of the Legislature of the State or any existing law which
      is for the time being applicable to the area in question.
      (4) All regulations made under this paragraph shall be submitted
      forthwith to the President and, until assented to by him, shall have
      no effect.
      (5) No regulation shall be made under this paragraph unless the
      Governor making the regulation has, in the case where there is a Tribes
      Advisory Council for the State, consulted such Council.”
      12. Paragraph 5 of the Fifth Schedule commences with a non obstante
provision. It empowers the Governor to direct that any Act of Parliament
or of the Legislature of the State shall not apply to a Scheduled Area or a
part of it in the State. The second component of clause (1) of Paragraph 5
empowers the Governor to direct that an Act of Parliament or of the State
Legislature shall apply to a Scheduled Area or any part in the State subject
to such exceptions and modifications as he may specify in the notification.
      13. The High Court in the present case has observed that the appellant
did not produce any notification indicating that the statutes in question would
not apply to the Scheduled Areas in the State of Madhya Pradesh or that
their provisions would apply with exceptions and modifications disabling
        SOUTH EASTERN COALFIELDS LTD. v. STATE OF                         773
                MADHYA PRADESH & ORS.

the power of the municipality to levy a tax. Even before this Court, no
such notification has been produced. The consequence of paragraph 5(1)
of the Fifth Schedule is that it enables the Governor to direct either that a
parliamentary or state law shall not apply to a Scheduled Area in the State
or that it would apply subject to exceptions and modifications. Therefore,
unless a notification has been issued by the Governor indicating that (I)
a parliamentary or state law shall have no application to the Scheduled
Area; or (ii) the parliamentary or state legislation would apply subject to
exceptions or modifications, there would be no hindrance in the application
of the law to the State.
      14. The alternate submission of the Additional Solicitor General is that
since Article 243ZC provides that Part IXA would have no application to a
Scheduled Area, the power which is conferred on the legislature of a State
to authorise the municipality to levy, collect and appropriate taxes would
similarly have no application.
     15. Article 243-X is in the following terms :
     “243-X. Power to impose taxes by, and Funds of, the
     Municipalities.—The Legislature of a State may, by law,—
     (a) authorise a Municipality to levy, collect and appropriate such
         taxes, duties, tolls and fees in accordance with such procedure
         and subject to such limits;
     (b) assign to a Municipality such taxes, duties, tolls and fees levied
         and collected by the State Government for such purposes and
         subject to such conditions and limits;
     (c) provide for making such grants-in-aid to the Municipalities from
         the Consolidated Fund of the State; and
     (d) provide for constitution of such Funds for crediting all moneys
         received, respectively, by or on behalf of the Municipalities and
         also for the withdrawal of such moneys therefrom,
        as may be specified in the law.”
      16. The impact of Article 243-ZC is that Part IXA has no application
to a Scheduled Area. The inapplicability of article 243X did not denude
774            SUPREME COURT REPORTS                         [2023] 12 S.C.R.


the state legislature to enact legislation for the State. A Scheduled Area
governed by Article 244 of the Constitution is subject to the provisions
contained in the Fifth Schedule which govern the administration and control
of Scheduled Areas or Scheduled Tribes. Paragraph 5 confers a power on
the Governor, as noted above, to direct either that parliamentary or state law
shall not apply in the Schedule Area or that it would apply subject to such
exceptions or modifications as may be specified. As the High Court noted,
no such notification has been produced and none, we may add, has been
produced before this Court other than the notification dated 29 February 2003
specifying the Scheduled Areas. In this view of the matter, the conclusion
of the High Court cannot be faulted.
       17. On the second aspect, it needs to be noted that the Additional
Solicitor General has fairly drawn the attention of this Court to the judgment
of the Constitution Bench in Central India Spinning and Weaving &
Manufacturing Co. Ltd. The Empress Mills, Nagpur v. The Municipal
Committee, Wardha1, (particularly paragraph 33). Since he fairly concedes
that the issue which was sought to be raised has been concluded in the above
decision of the Constitution Bench, no further submissions have been urged
in that regard.
     18. For the above reasons, we are of the view that only two issues
which have been raised in the course of the present appeals are lacking in
substance.
      19. The appeals shall accordingly stand dismissed.
      20. Pending applications, if any, stand disposed of.


Headnotes prepared by:                                         Appeals dismissed.
Nidhi Jain




1     1958 SCR 1102