Holding

The writ petition was maintainable, the respondent was entitled to sales‑tax exemption from the date of commercial production, the merged assessment orders could not be revised, defective Form ‘C’ does not defeat exemption, and royalty is not liable to purchase tax.

Summary

The Supreme Court upheld the Himachal Pradesh High Court’s decision allowing a writ petition under Article 226 despite the existence of statutory remedies. Gujarat Ambuja Cement Ltd. was held to be a "prestigious cement industrial unit" entitled to sales‑tax exemption from the date it commenced commercial production (26‑Sep‑1995). The Court ruled that the doctrine of exhaustion of alternative remedies is discretionary and does not bar writ jurisdiction where the statutory process is ineffective or unjust. It also held that the assessment orders merged with appellate orders could not be revised, that defective Form ‘C’ could not be a ground to deny exemption, and that royalty paid under the Mines and Minerals Act is not subject to purchase tax. Consequently, the appeals were dismissed.

Issues considered

The writ petition under Article 226 was maintainable despite the availability of alternative statutory remedies.
Whether Gujarat Ambuja Cement Ltd. qualified as a "prestigious cement industrial unit" and was entitled to sales‑tax exemption from the date of commercial production.
Whether the doctrine of merger barred revision of assessment orders that had merged with appellate orders.
Whether the failure to file a timely or defect‑free Form ‘C’ could deprive the assessee of exemption.
Whether royalty paid under the Mines and Minerals (Regulation and Development) Act, 1957 attracts purchase tax.

Legislation cited

Central Sales Tax Act, 1956s. Section 8(5)
Central Sales Tax (Registration and Turnover) Rules, 1957s. Rule 12(7), s. Rule 1297
Constitution of Indias. Article 226
Himachal Pradesh General Sales Tax Act, 1968s. Section 31(3), s. Section 42, s. Section 5A
Mines and Minerals (Regulation and Development) Act, 1957s. Section 9, s. Section 9‑A(2)

Subjects

Article 226alternative remedywrit jurisdictionsales tax exemptionprestigious cement unitdoctrine of mergerForm Croyaltypurchase taxmining lawnatural justice

Judgment

A STATE.OF H.P. AND ORS.
v.
GUJARAT AMBUJA CEMENT LTD. AND ANR.

JULY 18, 2005

B [RUMAPAL,ARIJITPASAYAT ANDC.K. THAKKER,JJ.]

Constitution of India, 1950:

Article 226-Writ petition-Alternative remedy-Availing/exhaustion
C of-Maintainability-High Court entertained· writ petition notwithstanding
the existence -Of the statutory remedy-Interference with-Held: In such
circumstances, the Supreme Court would not reconsider· the question of the
alternative remedy being efficacious or not.

H.P.:General Sales Tax Act, I968:
D
Sales Tax-"Prestigious cement unit"-Norification dated l.12.I994
granted exemption from payment of sales ·tax and certain incentives to
'prestigious cement units' registered with the Empowered Committee between
L5.1992 and 3I.3.1995-Such units were req~ired to commence commercial
E production on or after l.5.I992-However, extension of time to commence
commercial production beyond 1.5.1992 was granted to an industrial unit-
Entitlement to €Xemption-Held:_ Cement manufacturing units registered as
'prestigious unit' between l.5.I992 and 1.12.1994 were entitled to
exemption-Such units not required to seek re-registration as a 'prestigious
cement unit'-Once extension of time to commence commercial production
F was granted, such units entitled to the benefit of the Notification.

Sales Tax-AYs 1995-96 and 1996-97-Revisional order-Doctrine of
merger-Assessment order granted exemption from payment ofsales tax fixing
certain dates of entitlement-Assessee questioned the dates by filing appeals,
which were dismissed-Revisional Authority did not take note of the said
G appellate orders-Correct'!~ss of-Held: The assessment order got merged
with the first appellate orders and, therefore, could not be revised without
noticing them-In such cases the Doctrine of merger applied.

Sales tax-Exemption-Notification granted exemption from· sales tax
H 684
STATE OF H.P. v. GUJARAT AMBUJA CEMENT LTD. 685

and certain incentives to units registered with the Empowered Committee- A
Provisional registration certificate granted to assessee for a certain period-
Assessee applied for renewal before expiry of the said period and deposited
the requisite fee-But renewal certificate was effectivefrom a date which was
about two months after the expiry of the provisional certificate-The said
renewal certificate was also issued much later-However, application for B
extension of period of validity never rejected-Entitlement to Exemption-
Held: In such cases the question of absence oj a valid provisional certificate
lost significance-Hence, assessee entitle to exemption from sales tax.

Central ·Sales Tax (Registration and Turnover) Rules, 1957:

Rule 12(7)-0bject of-Declaration Form-Form 'C'-Assessee was C
denied benefit of sales tax exemption on the plea that defective Form 'C' was.
filed-Assessee 's prayer to rectify the defects turned down-Held: Object of
R. 12(7) is to ensure that the assessee is not denied a benefit available to
it under law on a technical plea-Therefore, the provision of filling of
declaration form along with the return is directory and not mandatory-In D
a given case, the declaration form could even be filed before the Appellate
or Revisional Authority-Hence, assessee entitled to sales tax exemption-
Assessing Officer directed to grant opportunity to the assessee to cure the
defects, if any, in the declaration form-Central Sales Tax Act, 1956.

Mines and Minerals (Regulation and Development) Act, 1957: E
Section 9-Removal of minerals-Royalty paid-Purchase tax on-
Liability-Held: Royalty is an alternative to dead rent-It is nothing but a
measure of levy-Royalty is not a payment in respect of any mineral removed
or consumed-Hence, royalty does not attract levy of purchase tax.
F
Words & Phrases:

"Royalty" and "dead rent"-_Meaning of-In the context of Mines and
Minerals (Regulation and Development) Act, 1957.

The respondent was a public limited company incorporated under the G
Companies Act, 1956 and, inter alia, carried on the business of manufacture
and sale of cement. The Director of Industries issued a registration certificate
registering the respondent-company as a 'prestigious unit' whereby certain
incentives were granted t<Ythe respondent subject to the condition that the
production should commence by January 1995. However, further extension H
686 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A was granted to the respondent-company by the Department of Industries till
30.9.1995. Subsequently, by Notifications dated 27.3.1991and31.7.1992 the
concept of 'Prestigious cement industrial unit' was brought into existence
according to which an industrial unit must go into commercial production
after 1.5.1992 and registered with the Empowered Committee of the
Department of Industries. The respondent was declared as a 'prestigious
B cement industrial unit' in accordance with the said Notification.

In the light of all these, the 'Excise and Taxation Department issued a
Notification dated 31.12.1994 granting exemption from payment of sales tax
to the respondent-company under the Central Sales Tax Act, 1956 and
C Himachal Pradesh General Sales Tax Act, 1968.

The Assessing Authori-ty passed an order of assessment for the
Assessment Year 1995-96 and granted exemption from payment ofsales tax
w.e.f. 30.1.1996. The respondent-company filed an appeal before the Additional
Excise and Taxation Commissioner/Appellate Authority challenging the said
D assessment order on the ground that the exemption should have been granted
from the date of commencement of the commercial production, namely,
26.9.1995 and not from 30.1.1996, the date of issuance ofthe exemption
· Notification. Subsequently, the Sales Tax Department passed an assessment
order for the year 1996-97 granting exemption from payment of sales tax
w.e.f. 6.2.1996, which was the date on which the Notification was actually
E published instead of from 30.1.1996 with reference to which it was granted
earlier. Once again the respondent-company filed an appeal against this
assessment order also.

While the appeals were pending a show cause notice under Section 31(3)
F of the State Act was issued to the respondent as to why the exemption granted
could not be revoked on the ground that the declaration of the respondent as
a 'prestigious cement unit' within the meaning of paragraph l(c) of the
Notification dated 31.12.1994 was not correct and, therefore the respondent
was not entitled to any exemption from sales tax either under the Central Act
or the State Act. The appeals filed by the respondent were also dismissed. A
G notice demanding payment of sales tax to the tune of Rs. 18.50 crores under
the Central Act as well as the State Act was also served on the respondent-
company.

The respondent-company filed an appeal against this demand before the
Additional Excise and Taxation Commissioner. The Revisional Authority
H cancelled and annulled the sales tax exemption certificate with retrospective ·
STATE OF H.P. v. GUJARATAMBUJA CEMENT LTD. 687

effect and also made a reference to certain defec.ts in the declaration form i.e. A
'Form C' to highlight as to how the respondent had failed to comply with the
requirements for entitlement of sales tax exemption benefits.

The High Court allowed the writ petition filed by the respondent and
quashed the orders of the Sales Tax authorities and also held that the levy of
purchase tax on the royalty paid was not legally sustainable. Hence the appeal. B
On behalf of the appellant, it was contended that the High Court ought
not to have entertained the writ petition when alternative remedy was available
under the Central Ad and the State Sales Tax Act, if the respondent-company
was aggrieved by the revisional orders; that several factual controversies were C
involved and the High Court was not justified in holding that no factual
controversy was involved; that whether the exemptions claimed were available
in factual background needed factual adjudication and, therefore, the High
Court should not have entertained the writ petition; that the respondent-
company was not a 'new industrial unit' registered with the Empowered D
Committee between 1.5.1992 and 31.3.1995 and had not commenced
CO!Jlmercial production on or after 1.5.1992; that there was no evidence before
the revisional authority that the respondent-company was registered with the
Empowered Committee on 13.1.1993 and, therefore, the High Court should
not hnve taken the same into account; that the High Court confused between
'prestigious units' and 'prestigious cement units'; that the question of E
declaring the respondent-company as a 'prestigious cement unit' did not arise
till it had started commercial production; that the Notifications clearly showed
that at different points of time either no benefit was granted to cement
industries or such industry was entitled to only deferent of payment of sales
tax and exemption; that submission of defective declaration form (Form 'C') F
clearly indicated that the respondent-company had not complied with the
various Statutes, Rules and Notifications; that even if there was a registration
with the Empowered Committee on 13.1.1993, the same was of no consequence
after the new definition of' prestigious cement industrial unit' was introduced
by the notification dated 1.12.1994; that the High Court erroneously held that
royalty paid did not attract levy of purchase tax; that there was a contrast G
between sale and purchase and the definition of purchase is wider; that
according to Section 9 of the Mines and Minerals (Regulation and
Development) Act, 1957 what was being taxed was the consideration as
minerals were being removed; and that in any event, purchase tax on royalty
had not been paid and, therefore, that also amounted to violation of the H
688 SUPREME COURT REPORTS [2005) SUPP. 1 S.C.R.

A conditions stipulated.
On behalf of the respondent-company, it was contended that the
revisional authority clearly acted without jurisdiction; that there was really
no factual dispute involved; that resort to the statutory remedies would have
been an exercise in futility as the Appellate Authority was only subordinate
B to the Revisional Authority; that this Court should not interfere since the
High Court had entertained the writ petition indicating reasons as to why the
writ petition was entertained when alternative remedy was available; and that
the respondent's prayer before the Revisional Authority for grant of an
opportunity to rectify the defects, if any, in the Form 'C' was turned down.
c Allowing the appeal, the Court

HELD: I. Except for a period when Article 226 of the Constitution was
amended by the Constitution (42nd Amendment) Act, 1976; the power relating
to alternative remedy has been considered to be a rule of self-imposed
D limitation. It is essentially a rule of policy, convenience and discretion and
never a rule of law. Despite the existence of an alternative remedy it is within
the jurisdiction of discretion of the High Court to grant relief under Article
226 of the Constitution; at the same time, it cannot be lost sight of the fact
that though the matter relating to an alternative remedy has nothing to do
E with thejurisdiction of the case, normally the High Court should not interfere
if there is an adequate efficacious alternative remedy. [703-E, F)

K.S. Rashidv. Income Tax Investigation Committee, AIR (1954) SC 207,
Sangram Singh v. Selection Tribunal, AIR (1955) SC 425, Union of India v.
T.R. Verma, AIR (1957) SC 882, State of UP. v. Mohammad Nooh, AIR (1958)
F SC 86, Mis. K.S. Venkataraman (P) Ltd v. State of Madras, AIR (1966) SC
1089, State of MP. v. Bhailal Bhat, AIR (1964) SC 1006, N. T. Ve/uswamy
Thevar v. G. Raja Nainar, AIR (1959) SC 422, Municipal Council v. Kamal
Kumar, AIR 1965 SC 1321, Siliguri Municipality v. Amalendu Das, AIR
(1984) SC 653, S. T. Muthusami v. K. Natarajan, AIR (1988) SC 616, R.S.R. T.C.
G v. Krishna Kant, AIR (1995) SC 1715, Kera/a State Electricity Boardv. Kurien
E. Kalathi/, AIR (2000) SC 2573, A. Venkatasubbiah Naidu v. S. Che/lappan,
[2000) 7 SCC 695, L.L. Sudhakar Reddy v. State of A.P., (2001) 6 SCC 634,
Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdjha
Utpadak Sanstha v. State of Maharashtra, (2001) 8 SCC 509, Pratap Singh
v. State of Haryana, (2002) 7 SCC 484, G.k.N. Drive Shafts (India) Ltd. v.
H Income Tax Officer, (2003) 1 SCC 72, Harbans Lal Sahnia v. Indian Oil
Corporation Ltd., [2003) 2 SCC 107, G. Veerappa Pillai v. Raman & Raman

t,
STATE OF H.P. v. GUJARAT AMBUJA CEMENT LTD. 689

Ltd., AIR (1952) SC 192, Assistant Collector of Central Excise v. Dunlop A
(India) Ltd, AIR (1985) SC 330, Ramendra Kishore Biswas v. State ofTripura,
Am (1999) SC 294, Shivgonda Anna Patil v. State of Maharashtra, AIR
(1999) SC 2281, C.A. Abraham v. ITO., AIR (1961) SC 609, Titaghur Paper
Mills Co. Ltd. v. State of Orissa, AIR (1983) SC 603, H.S. Gandhi v. Mis.
Gopinaih and Sons, [1992) Supp. 2 SCC 312, Whirlpool Corporation v.
Registrar of Trade Marks, AIR (1989) SC 22, Tin Plate Co. of India Ltd v. B
-' Stateo/Bihar, AIR(1999)SC74,SheelaDeviv.JaspalSingh, (1999) 1 SCC
=t 209, Punjab National Bank v. O.C. Krishnan, (2001) 6 SCC 669 and Ram
and Shyam Co. v. State ofHary_ana, AIR (1985) SC 1147, referred to.

2. In the instant case, the· writ petitioners had indicated the reasons as
to why they thought that the alternative remedy would not be efficacious. Since c
the High Court has elaborately dealt with the question as to why the statutory
remedy available was not efficacious, it would not be proper for this Court to
consider the question again. When the High Court had entertained a writ
petition notwithstanding the existence of an alternative remedy this Court
while dealing with the matter in an appeal should not permit the question to D
~1 be raised unless the High Court's reasoning for entertaining the writ petition
i is found to be palpably unsound and irrational. (705-C-E)

First Income Tax Officer v. Mis. Short Brothers (P) Ltd, [1966)3 SCR

..
84 and State of UP. v. Mis. Indian Hume Pipe Co. Ltd., (1977) 2 SCC 724,
relied on. E
- 3. There are two well-recognized exceptions to the doctrine of exhaustion
of statutory remedies. First is when the proceedings are taken before the
forum under a provision of law which is ultra vires, it is open to a pa1rty
aggrieved thereby to move the High Court for quashing the pro·ceedings on
the ground that they are incompetent without a party being obliged to wait F
until those proceedings run their full course. Secondly, the doctrine has no
application when the impugned order has been made in violation of the
-•, principles of natural justice. Further, where the proceedings itself are an
abuse of the process of law the High Court in an appropriate case can
entertain a writ petition. [705-F-H)
G
4. Wher.e under a statute there is an allegation of infringement of
fundamen~lrights or when on the undisputed facts the taxing authorities
'
are shown to have assumed jurisdiction which they do not possess, these can
be the grounds on which the writ petitions can be entertzined. But normally,
~ the High Court should not entertain writ petitions unless it is shown tha~
there is something more in a case, something going to the root of the H
690 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A jurisdiction of the officer, something which would show that it would be a case
of palpable injustice to the writ petitioner to force him to adopt the remedies
provided by the statute. {706-A-B]

L. Hirday Narain v. Income Tax Officer, AIR (1971) SC 33, relied on.
[706-C)
B
R. Hil/ington, London Borough Council (1974) 1 QB 720 and Hanson
v. Church Commissioner, (1978) QB 823, referred to.

5. Therefore, the plea that the High Court should not have entertained ..
the writ petition is without any merit. [707-B]
c 6. It is not disputed that the registration of the respondent-company with
the Empowered Committee on 13.1.1993 was within the knowledge of the
appellants. In fact the certificate was a part of the record before the High
Court. Therefore, this establishes that the respondent-company was registered
with the Empowered Committee within the period prescribed in the incentive
D Notification. [707··D]

7.1. In terms of the Notification dated 31.7.1992, the cement units
became eligible for exemption as provided in various incentives Notifications.
A significant change was also made by the Notification to the effect that the

-
concept of "Prestigious cement unit" was introduced. Subject to fulfilment
E of certain conditions a 'prestigious unit' was eligible for both sales tax
exemption and deferment. (707-G; 708-A) .

7.2. Under Rule 24 (of 31.7.1992 Notification) it was open to the
Empowered Committee to register a unit prior to its going into the commercial
production. It was stipulated that the unit was to commence production latest
F by January, 1995. Changes were introduced by the Notification dated
1.12.1994. By this Notification, the roncept of"prestigious cement unit" was
introduced. A unit to be eligible as a 'prestigious cement unit' must be a new
industrial unit registered with the Empowered Committee between 1.5.1992
and 31.3.1995 and must go into commercial production on or after 1.5.1992.
G [708-F-H]

7.3. After coming into force of the new definition of"prestigious cement
industrial unit", the Director of Industries extended the date for commencement
of commercial production up to 3.6.1995 and subsequently up to 30.9.1995.
(709-B]
H 8.1. There is no substance in the contention of the appellant-State that
STATE OF H.P. v. GUJARAT AMBUJA CEMENT LTD. 691

even ifthere was a registration with the Empowered Committee on 13.1.1993, A
the same was of no consequence after the new definition of" prestigious
cement industrial unit" was introduced by the Notification dated 1.12.1994.
There was nothing in the Notification dated 1.12.1994 which required that
those units which had obtained registration between 1.5.1992 and 1.12.1994
were required once again to seek registration as a "prestigious cement unit". B
In fact the extension granted was up to 30.9.1995 and there is no dispute that
the respondent-company commenced its production on 25.9.1995. Para 27 of
the Notification dated 1.12.1994 provided that a 'prestigious cement unit' was
entitled to deferment of sales tax as well as from exemption of payment of the
electricity duty. By Notification dated 6.7.1995, incentives of sales tax
deferment/exemption were restored to cement units. [709-C-F] C
8.2. The definition of 'prestigious cement industrial unit' as introduced
on 1.12.1994 was. not intended to provide that there has to be a registration
either as a 'prestigious unit' or as a 'prestigious cement industrial unit'. It
only required registration as a new industrial 'Unit with the Empowered
Committee. Furthermore, the preconditions for grant of the prestigious unit D
status and prestigious cement unit status were materially identical.
(710-G-H]

9.1. The Notification dated 1.12.1994 contemplates registration from
1.5.1992. To put it differently, registration with the Empowered Committee
prior to 1.12.1994 was permissible in terms of the Notification and that is E
why 13.1.1993 registration cannot be said to have lost its currency after the
promulgation of 1.12.1994 Notification. (711-A]

9.2. Further, in the Notification dated 13.1.1993 respondent-company
was clearly and specifically named as one of the units to which the exemption
from payment of sales tax for a period of 9 years was available. That being so, F
there is no question of the .appellant-State subsequently raising a question
that the respondent-company was not registered between the specified dates.
[711-D)

9.3. From a perusal of Para 1-C introduced in the Notification dated
31.12.1994 by the Notification dated 31.1.1996, it is clear that the appellant's G
plea about non~ntitlement of the respondent-company of the sales tax benefits
and exemptions is misconceived.
10.1. There are two additional factors which also made the revisional
order indefensible. Firstly, assessments were made for the assessment years
1995-96 and 1996-97 fixing the date of entitlement first to be 31.1.1996 and H
692 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A subsequently from 7.2.1996. The respondent-company had questioned the
correctness of the fixation of the dates by filing appeals which came to be
dismissed. In other words, the assessment orders merged with the first
appellate orders, so far as the date of entitlement is concerned. Therefore,
the assessment orders which had got merged with first appellate orders could
B not have been revised. [715-H; 716-A]
10.2. The provisional registration certificate under the Himachal
General Sales Tax Act, 1968 was originally valid up to 14.2.1994 and was
revalidated up to 30.6.1995. On 17.6.1995 an application was made for its
renewal up to 31.12.1995 and the requisite fee had been deposited and the
renewal was granted on 1.1.1996 and the same was made effective from
C 11.8.1995. [716-C-D]
10.3. The plea about absence of the validity of provisional certificate of
registration for two months actually loses significance because the application
for extension of period of validation had not been turned down at any
subsequent point of time. [716-El
D 11. Undisputedly, before the revisional authority a prayer was made for
grant of opportunity to rectify the defects in the declaration forms i.e. Form
'C', if any. That was turned down. Under Rule 1297 of the Central Sales Tax
(Registration and Turnover) Rules, 1957 the declar~tion form can be filed at
a subsequent point of time and not necessarily along ~ith the returns. On an
E application being made before the Assessing Officer the exemption can be
granted. The object of the Rule is to ensure that the assessee is not denied a
benefit which i~ available to it under the la~ on a technical plea. The
Assessing Officer is empowered to grant time. That means that the provisions
requiring flling of declaration forms along. with the return is a directory
provision and not a mandatory provision. In a given case, even the declaration
F forms can be filed before the appellate authority as a~ appe.al is a continuation
of the assessment proceedings. In a given case, ,if the app.ellate authority is
satisfied that the assessee was prevented by reasonable and sufficient cause
which disenabled him to file the forms in time, it can be accepted. It can also
be accepted as additional evidence in support of the claim for deduction.
G Therefore, the question of non-compliance with the relevant statutes does not
arise. Therefore, the assessing officer shall grant opportunity to the
respondent-company to cure the defects, if any, in the Declaration Forms.
[716-G; 717-A, B,C]
Sahney Steel and Press Works Ltd v. Commercial Tax Officer, 11985) 4
H sec t 73, relied on.
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. 693

12.1. Though Section 9 of the Mines and Minerals (Regulation and A
Development) Act, 1957 refers to "minerals removed" it does not mean that
the royalty is paid on removal. It is point of time of payability. Royalty in the
context of the agreement is an alternate to dead rent. Section 9 speaks of
rates of royalty. It is nothing but a measure of levy. The charging of dead rent
and royalty is under different situations. It is shifting of the measure. Both B
"dead rent" and "royalty" are returns to the lessor. The stand of the appellant
that under Section 9 of the Minerals Act royalty is a payment in respect of
any mineral removed or consumed or that royalty is a money consideration
for transfer of property is clearly untenable. The decision in D.K. Trivedi's
case is a complete answer to the appellant's plea that the High Court
erroneously held that royalty paid did not attract levy of purchase tax. c
[721-H; 722-B; 725-C]

D.K. Trivedi & Sons v. State of Gujarat, (1986) Supp. SCC 20, State of
Orissa v. Titaghur Paper Mills Co. Ltd., [1985) Supp. SCC 280, Inderjeet Singh
Sia! v. Karam Chand Thapar, [1995) 6 SCC 166 and State of West Bengal v.
Kesoram Industries Ltd., JT (2004) 1 SC 375, relied on. D
State of M.P. v. Orient Paper Mills Ltd., [1977] 2 SCC 77 and Cooch-
Behar Contractors' Association v. State of West Bengal, (1996) 10 SC:C 380,
overruled.

Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT, (1943) 11
ITR 513 (PC), Chotabhai Jethabai Patel v. State of M.P., [1953) SCR 476 E
and State of M.P. v. Yakinuddin, AIR (1962) SC 1916, cited.

HRS Murthy v. Collector ofChittor, AIR (1965) SC 177, referred to.

Wharton's Law Lexicon, 14th Edn., p. 300, Black's Law Dictionary, 5th
Edn., p. 359, Jowitt's Dictionary of English Law, 2nd Edn., p. 555 and F
Halsbury's Laws of England, 4th Edn., Vo. 31, paras 224, 235, 236, 238,
referred to.

12.2. A mining lease is an interest in immovable property. The
extraction and removal of minerals is essentially an extension of the enjoyment
of immovable property. The right conferred by the lease deed to extract and G
remove the minerals is a profit a prendre. [722-B]

State of Orissa v. Titaghur Paper Mills Co. Ltd., (1985) Supp. SCC 280,
relied on.
CIVIL APPELLATE JURJSDICTION : Civil Appeal No. 2641 of 2000.
H
694 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A From the Judgment and Order dated 17.8.99 of the Himachal Pradesh
High Court at Shimla in C.W.P. No. 52 of 1999.

Anoop G. Chaudhary, J.S. Attri, Additional Advocate General L.R. Seth,
Atul Sharma and Ms. June Chaudhary with him for the Appellants.

B Harish N. Salve, Dr. A.M. Singhvi, Manmohan, R.F. Nariman, Manmohan
Khanna, Ms. Bina Gupta, Manish Jha, Mrs. Divya Roy, U.A. Rana, Ms.
Sumathi K., Biju Mattam, C.P. Pandey, B.K. Satija and Varinder Kumar Shanna,
with them for the Respondents.

The Judgment of the Court was delivered by '> ...

c
ARIJIT PASAYAT, J. These appeals are inter-linked and, therefore, are
taken up together for disposal. Civil Appeal Nos. 2641 and 2642 of 2000 relate
to respondent- Gujarat Ambuja Cement Ltd. (in short 'Gujarat Ambuja') while
Civil Appeal Nos.3744-46 of 2000 relate to respondent-Associated Cement
Ltd. (in short 'ACC'). The common question so far as the appeals are concerned.
D linking the respondents in the appeals relates to one issue i.e. liability to pay
· purchase tax on the royalty paid by the respondents. As other issues are
involved in Gujarat Ambuja 's cases, the factual scenario in Civil Appeal
Nos.2641-2642 of 2000 needs to be noted in some detail.

E Challenge in these appeals is to the judgments rendered by a Division
Bench of the Himachal Pradesh High Court. Writ Petitions were filed by the
present respondents questioning the action taken by the Sales Tax Authorities
and the revisional · orders passed setting aside the orders of assessment
framed for the assessment years 1995-96 and 1996-97 under the Central Sales
Tax Act, 1956 (in short the 'Central Act') and the Himachal Pradesh General
F Sales Tax Act, 1968 (in short the 'Act').

So far as the Gujarat Ambuja is concerned, the factual and legal
background was highlighted in the .writ petitions before the High Court as
follows:

G It is a public limited Company incorporated under the Companies Act,
1956 inter a/ia carrying on the business of manufacture and sale of cement
under the name and style of "Ambuja Cement" in the State of Himachal
Pradesh and that it ranks amongst one of the best managed cement Companies
in India. It had been conferred various prestigious awards for its performance, ·
H pollution control and management including the award in the year 1991 by the
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 695

Prime Minister of India, namely, 'National Award for Public Recognition of A
Outstanding Activity for prevention of control of pollution'. It submitted an
application in the year I 989 for setting up a cement plant in Himachal Pradesh
and it was approved by the State Level Industrial Projects and Review
Authority (hereinafter referred to as '!PARA') in their letter dated 19.2.1990.
It invested more than Rs.500 crores in setting up the cement plant at Darlaghat,
Solan District of Himachal Pradesh and it is the largest investment made by B
any private entrepreneur so far as the State is concerned. The said cement
project also had the approval of the World Bank/International Finance
Corporation, Washington, which also financed the project by way of term
loan in addition to the project being monitored by the Industrial Development
Bank of India too. All these brought substantial economic development in the C
State.

On 27.3.1991, the Industrial Development Department of Himachal
Pradesh Government issued an incentive scheme by their notification notifying
the grant of certain incentives for new as w~ll as already established units
in the State in respect of deferment of payment of Sales Tax, Electricity Duty D
etc. Writ-petitioner obtained provisional Sales Tax registration from the
Himachal Pradesh General Sales Tax Department on 14.2.1992, which was
extended from time to time upto 30.6.1995 before ultimately being granted with
permanent registration w.e.f. 11.8.1995, the date on which the petitioner started
its trial production. On 3 I st July, 1992 the Industries Department issued E
another notification introducing the concept of "Prestigious and Pioneer
Industries" by amending suitably the earlier notification dated 27 .3 .I 991,
according to which "Prestigious unit" meant any new industrial unit, which
goes into commercial production in the State on or after 1.5.1992 and is
registered with the Empowered Committee appointed under Rule 24 between
1.5.1992 and 31.3. I 993, which has a fixed capital investment of at least Rs.50 F
crores and employed at least 200 persons on regular basis. The Empowered
Committee considered the issue of grant of registration certificate as Prestigious
unit in its meeting held on 25.11.1992 and decided to grant the same to Gujarat
Ambuja treating it as a 'Prestigious Unit'. Consequently, the Director of
Industries, Himachal Pradesh issued on 13 .1.1993 the required registration
certificate registering the petitioner Unit as a 'Prestigious Unit'. As the G
production of the unit could not be commenced by January 1995, which was
one of the stipulated conditions, taking into account the substantial progress
made by the Company, the Industries Department by its letter dated 28.1.1995
approved the grant of further extension initially till 30.6.1995 and thereafter
upto 30.9.1995 by their letters dated 28.1.1995 and 30.6.1995. On 1.12.1994, the H
696 SUPREME COURT REPORTS (2005] SUPP. I S.C.R.

A Industries Department made further amendments to the notification dated
27.3.1991 and 31.7:1992, and brought into existence the concept of 'Prestigious
Cement Unit', according to which the unit niust go into commercial production
after 1.5.1992 and registered with the Empowered Committee under Rule 24
between l.5.1992 and 31.3.1995. By the said am~ndment, it was also notified
that such unit should have a fixed capital of Rs.50 crores and employ at least
B 200 persons on regular basis. It is to be noted that by Notifications dated
27.3.1991 and 31.7.1992 Rules were notified. They were called Revised Rules
regarding grant of Incentives to Industrial Units in Himachal Pradesh, 1991
(in short '1991 Rules') and Revised (Amendment) Rules regarding grant of
Incentives to Industrial Units in Himachal Pradesh, 1992 (in short '1992
C Rules'). The Revised Rules were further amended by notifications_ dated
1.12.1994 and 6.7.1995 and these amended Rules were called Revised
(Amendment II) Rules regarding grant of Incentives to Industrial Units in
Himachal Pradesh, 1994 (in short •1994 Rules') and Revised (Amendment-III)
Rules regarding grant of Incentives to Industrial Units in Himachal Pradesh,
1995 (in short '1995 Rules'). The 1991 Rules, as the notification of27.3.1991
D shows, were made after supersession of Rules-I dated 4.10.1976, Rules 9-4/
73-SI-IV dated 14.5.1980, No.I 0-27171-SI dated 28.8.1984 and No.9-4n3-V dated
5.1.1985.

In the light of all these, the Excise and Taxation Department issued a
E notification dated 31.12.1994 to grant exemption from payment of Sales Tax to
pioneer industries, bifurcated in different categories with effect from the date
of their commercial production against the periods as enumerated in the
notification, which was further amended on 27.3.1995 introducing para l(a)
and l(b). On 6.7.1995, the Department of Industries again amended Rule 27(1)
regarding the grant of incentive to Prestigious Cement Units notifying that
F sales tax exemption/deferment under both Central Tax and Himachal Pradesh
General Sales Tax shall be available for a period of 12, 9 and 7 years in respect
of category A, Band C blocks, respectively, to new Prestigious Cement Units
excluding from its purview the only existing cement unit, as per which the
eligible cement units were those, which had come into commercial production
G within the State ofHimachal Pradesh on or after 1.5.1992.

On l l.8.1995, Gujarat Ambuja started trial production and on 26.9.1995
regular commercial production was started. This entitled the Company to
exemption from Sales Tax in terms of the notifications referred to supra. A
formal certificate was also issued by the Department of Industries on 24.1.1996
H specifying the commencement of the commercial production on 26.9.1995
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT, J.] 697
!

confirming at the same time about the investment of about Rupees 391 crores A
and employment of 353 persons on regular basis. Sales tax due was paid to
the Department for the intervening period from 11.8.1995 to 25.9.1995. The
Excise and Taxation Department issued an amendment on 30.1.1996 to the
earlier notification dated 31.12.1994 and introduced para l(C) which was
published in the Official Gazette on 6.2.1996, whereunder the State Government
had specifically given exemption to Gujarat Ambuja from payment of sales tax B
subject to the fulfilment of certain conditions enumerated in the notification
being a company classified and placed in the category of industrial Block 'B'
in terms of which it was shown to be eligible to avail of the concession of
exemption for 108 months (9 years).

Since the unit was already registered as a 'Prestigious unit' on 13.1.1993
c
in accordance with the notification issued by the State Government on 31. 7 .1992
by the Empowered c;ommittee in its meeting held on 25.11.1992 and inasmuch
as the requirements of the 'Prestigious Unit' and the 'Prestigious Cement
Unit' were absolutely one and the same, unit was mentioned and referred to
in the notification dated 30.1.1996 and a formal declaration was also made by D•
the Industries Department on 2.2.1996 declaring the petitioner to be a
'Prestigious Cement Industrial Unit' keeping in view the satisfaction of all the
requisite eligibility criteria. The unit fulfilled all the conditions as required
under Rule 2(rrr), as mentioned in the notification dated 6.7.1995 as well as
30.1.1996 issued by the Industries Department as also the Excise and Taxation E
Department of the State Government having regard to the fact that the unit
has come into commercial production after 1.3. l J92, that it was registered with
the Empowered Committee as a 'Prestigious Unit' on 13.1.1993, that it has
already made investment of more than Rupees 50 crores and had also employed
more than 200 persons on regular basis. The Director of Industries has issued
a certificate in form STH-III on 15.2.1996 certifying that the unit had been F
registered as a 'Prestigious Cement Industrial Unit' with the Empowered
Committee, pursuant to which an application was made to the Excise and
Taxation Department for the grant of exemption certificate in STH-II before the
assessing authority and thereupon on 11.6.1996, the prescribed authority after
due enquiry issued a certificate of exemption in form STH-II for the period C
from 30.1.1996 to 31.3 .1996 and the same was extended further from time to
time upto 31.3 .1998.

On 14.3.1997, the Assessing Authority passed an order of assessment
for the assessment year 1995-96 and granted exemption w .e.f. 30.1.1996.
Aggrieved by a portion of the order, Gujarat Ambuja filed an appeal before I
698 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

• A the Additional Excise and Ta~ation Commissioner/Appellate Authority on the
ground that the exemption should have been allowed from the date of .
commencement of the commercial production, namely, 26.9.1995 and not from
30.1.1996, the date of issuance of exemption notification. On 27.5.1997, the
Sales Tax Department passed an order of assessment for the year 1995-96
granting exemption from payment of the sales tax w.e.f. 6.2.1996, which is the
B date on which the notification was actually published instead of from 30.1.1996
with reference to which it was granted earlier. Once again, in respect of this
order also, an appeal was filed before the Additional Excise and Taxation
Commissioner/Appellate Authority challenging the same on· the ground that
the exemption should have been granted from the date of commencement of
C the commercial production, namely, 26.9.1995 and not as is sought to be given
by the authorities concerned. For the assessment year 1996-97, the Assessing
Authority passed an order dated 24. l 0.1997 after considering all the relevant
material on record granting exemption from the payment of sales tax.
.•

While matter stood thus, according to the respondents on 24.3.1998
D when two political parties formed a Coalition Government in the State of
Himachal Pradesh, the Excise and Taxation Minister, who belonged to a
political party and the leaders of that party started issuing number of
statements against the respondent-company by prejudging the issue and
questioning its entitlement for exemption under the Incentive Scheme
E announced. These statements in the shape of press cuttings were annexed
to the writ petition. It was contended that on account of such extraneous
reasons and influence and with ulterior motive, action was initiated by the
Commissioner of Sales Tax without any justification in law and in an arbitrary
manner proposing to revise the orders passed by the Assessing officer in
exercise of the powers conferred under Section 3 l ( 1) of the Act and for that
F purpose on 29 .4.1998 issued a show cause notice calling upon the respondents
to show cause as to why the exemption granted cannot be revoked on the
ground that the declaration of the petitioner as a "Prestigious Cement Unit"
within the meaning of para 1(C) of the notification was not correct for the
reasons set out in the said notice. It was also proposed to revoke STE-II. On
G 4.5.1998, the revisional authority issued three other show cause notices being
Revision Nos. 2, 3 and 4, both under the Central Act for the year 1995-96 and
Act for the year 1996-97 and the Central Act for the year 1996-97 questioning
the legality and propriety of the earlier assessment orders granting exemption
on the ground that the petitioner was not a Prestigious Cement Unit within
the meaning of para l(C) of the notification dated 31.12.1994 and, therefore,
H was not entitled to any exemption from Sales Tax either under the State Act
STATEOFH.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 699
. or the Central Act. It was also indicated in the show causeAl'lotices about the A
non-payment of the tax payable under Section 5A of the Act. As a sequel
of the said notices issued by the revisional authority, the assessing authority
~.
also issued show cause notice proposing to withdraw the exemption
~ .
accorded
earlier in form STE-II for the assessment year 1997-98 on similar grounds as
were assigned by the revisional authority in its notices; calliqg upon the B
· respondent-company to appear before the said authority on 18.6.1998. So far
. as the two appeals filed by the petitioners before the Additional C9mmissioner
(Appeals) against the assessment orders dated 14.3.1997 and 27.5.1995 for the
assessment year 1995-96 are concerned, the appellate authority by its order
•• dateq3.I0.1998 and 9.10.1998 respectively dismissed the appeals upholding
the a5sessment framed by the Assessing Officer and endorsed the view that C
the assessee was entitled to exemption from payment of sales tax with effect
from 6.2.1996, the date of publication of the notification only and not from the
·date of commencement of commercial production, namely, 26.9.1995. In the
light of the replies filed in response to the notices issued by the revisional
. authority,· the respondent requested the Assessing Authority to adjourn the
·d"'"''P.~~ings relating to the assessment year 1997-98, but on 1.12.1998, the D
·Sal~s Tax Officer passed an order withdrawing the exemption earlier granted
and,dire~ted the assessee to pay the Sales Tax to the tune of Rs.18.50 crores
under the Act as well as the Central Act. It is stated that since para l(C) of
the notification dated 30.1.1996 published on 6.2.1996 prohibited by virtue of
Cl~use 5 therein the assessee from charging tax on the sale of cement E
manufactured in the new unit and any collection of the sales tax would have
exposed to penal consequences under Section 35 of the Act, the assessee
. .: . had not actually collected any sales tax at all and in spite of all these, it was
.· being made to pay huge amount, which is an illegal demand on account of
the arbitrary, illegal and ma/a fide nature of the action initiated by the
· authorities. Against the order of the Sales Tax Officer dated 1.12.1998, an F
appeal was filed before the Additional Excise and Taxation Commissioner,
Himachal Pradesh. The Assessing Authority in the meantime issued a notice
dated 4.1.1999 for the assessment year 1997-98 calling upon the assessee to
pay sales tax in a sum of Rs.18.50 crores under both the Act as well as Central
Act; stipulating coercive action under Section 14(8) of the Act, in default G
thereof. In spite of the representations made before the Appellate Authority,
the assessee was directed to make an initial deposit of Rs.1.50 crores before
the appeal filed could be heard on merit. Appeals were filed before the
Finance Commissioner against the orders passed by the Appellate Authority
dated 3.10.1998 and 6.10.1998, which are said to be pending. Even in spite of
all these, the Assessing Authority issued another show cause notice dated H
700 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A 9.2.1999 calling upon the assessee to pay a sum ofRs.5.50 crores excluding
interest and penalty towards the liability of sales tax for the period from April
1998 to December 1998. In the meantime, the revisional authority has issued
four more notices being Revision Nos. 7, 8, 9, 10 under the Act as well as
Central Act for the years 1992-93 to 199 5-96 alleging that the orders passed
by the Assessing Authority for those periods are neither legal nor proper and
B calling upon the assessee to show cause as to why penalty for the assessment
year from 1992-93 to 1995-96 equivalent to one and half time of the tax that
would have been payable on purchase of materials should not be levied in
view of the fact that the provisional registration certificate under the Act
expired on 30.6.1995 and regular registration certificate was only obtained on ".
C 11.8.1995. On 8.2.1999, the revisional authority cancelled and annulled the
exemption certificate issued in form STE-II with retrospective effect and held
that the assessee-company was liable to pay tax under both the Central Act
and the Act in addition to its liability to pay the purchase tax under Section
5A of the State Act on the limestone extracted. The Revisional Authority was
of the view that the respondents were not entitled to any exemption as they
D did not fulfil the requisite conditions. Additionally it was held that there was
no compliance with the statutory requirements which was a condition precedent
for grant of benefit. That was treated to be an additional ground for holding
that the respondent was not entitled to any benefit. Reference was made to
certain defective 'C Fonns' to highlight as to how the assessee had failed to
E comply with the requirements for entitlement of the benefits. Accordingly, the
Revisional Authority directed fastening of additional tax liability. Apprehending
that the Appellate Authority, which is only subordinate to the revisional
authority is likely to follow the view expressed by the revisional authority and
the remedy of appeal would be merely an empty formality in view of the order
of the revisional authority, the writ petitions were filed. ,The High Court
F allowed the writ petitions by the impugned judgment and quashed the orders
of the Sales Tax· authorities; inter a/ia, holding as follows:

"So long as the petitioners satisfied the eligibility criteria prescribed
in the Revised Incentive Rules, as amended from time to time, he
would be entitled to the benefits and incentives extended under the
G Rules and the statutory notification is not a must or an essential pre-
requisite for the petitioners to assert/enforce such rights. The statutory
notifications issued under the relevant taxing enactments only go to
ratify and accord statutory recognition also to what was originally,
planned and proclaimed as a policy decision and guidelines. Viewed ·
H thus, the petitioners would in our view be entitled to the benefit of
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 701

the incentives from the date of commencement of commercial A
production on 26.9.1995. As held in State of Bihar and Ors. v.
Suprabhat Steel Ltd. and Ors., [I 99 I] I SCC 31, it would not be
permissible for even the State Government to override or negate the
incentives and benefits which may industrial unit would be otherwise
entitled to under the Incentive policy, proclaimed by the Government B
itself."

Additionally, it was held that the levy of purchase tax on the royalty
paid is not legally sustainable.

The High Court held that the approach of the authorities was clearly
erroneous, on a mis-reading of the various Notifications and keeping out of C
consideration certain relevant materials. Particular reference was made to the
Registration Certificate dated I 3th January, I 993 issued by the Empowered
,;.
Committee. Taking note of the fact that the notifications were issued by
promulgating rules, the High Court was of the view that they are to be
considered in the background of Section 42 of the Act. The emphasis on D
defects in 'C' forms was held to be clearly without any basis, and the same
was held to be totally insignificant for the purpose of denying benefits in
terms of the policy of the State to encourage setting up of cement industries.

In ACC's case the High Court followed the view expressed in Gujarat
Ambuja's case relating to levy of purchase tax on royalty paid. High Court's E
judgments are assailed in these appeals on various grounds.

Firstly, it is submitted that the High Court should not have entertained
the writ petitions under Article 226 of the Constitution of India, 1950 (in short
the 'Constitution') when alternative remedy was available under the Central
Act and the State Sales Tax Act, if the respondents were aggrieved by the F
revisional orders. Several factual controversies were involved and the High
Court was not justified in holding that no factual controversy was involved.
Whether the exemptions claimed were available in the factual background
needed faFtual adjudication and, therefore, the High Court should not have
entertained the writ petition. G
1
li>'·
Further submission of appellant-State is that benefits were not available
to respondent N o.1-Company as the req u islte conditions were not fulfilled.
Firstly, it was not a new industrial unit registered with the Empowered
Committee appointed in accordance with Rule 24 between 1st May 1992 and
31st March, 199 5 and had not gone into the commercial production on or after H
702 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A I st May 1992. It was also submitted that various provisions of the Act and
the Central Act were not complied with, as would be evident from the fact
that the requisite declaration forms were not submitted and/or forms submitted
were defective. That being so, the High Court was not justified in interfering
with the revisional orders passed. There was no evidence before the revisional
B authority that respondent No. I-Company was registered with the Empowered
Committee on 13th January, 1993. This did not form a part of the revisional
record and obviously was not considered by the revisional authority. That
being so, the High Court should not have taken the same into account. It was
also pointed out that merely because certain defective forms were filed that
cannot be taken as compliance with the statutory requirement of filing the
C declaration forms within the stipulated time. In any event, purchase tax on
royalty had not been paid and, therefore, that also amounted to violation of
the conditions stipulated.

It is submitted that the High Court confused between Prestigious Units /
and Prestigious Cement Units. The question of declaring the respondent-
D assessee as a Prestigious Cement Unit did not arise till it had started commercial
production. The Notifications clearly show that at different points of time
either no benefit was granted to cement industries or such industry was
entitled to only deferment of payment of sales tax and not exemption. The
respondent-assessee had failed to show as to under what provision the rules
E referred to in the Notifications were framed. According to learned counsel for
the appellant the expression "Rules" has been loosely used in the Notifications
and in the real sense the Notifications contained policy decisions: which as
the Notifications clearly indicated were not enforceable in any Court oflaw
having been granted at the discretion of the State Government. It was submitted_ . .·.
~

that the defective declaration forms (Form 'C') clearly indicated that the
F respondent-assessee had not complied with the various Statutes, Rules and
Notifications. The sine qua non for grant of benefits was not complied with.
Therefore, the Revisional Authority was justified in holding that respondent· ·. · "
assessee was not entitled to any benefit.

In response, learned counsel for the respondents submitted that the
G revisional authority had clearly acted without jurisdiction. There was really no
factual dispute involved and in essence the challenge related to the question
whether on a bare reading of the concerned Notifications/Government Orders
the exemptions claimed by the writ petitioners were originally allowed. The
competent authority had considered the relevant aspects and the benefits had
H been granted. They should not have been withdrawn by the revisional
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 703

authority in the manner done. It was clearly indicated in the writ petitions as A
to why the available statutory remedies would have an exercise in futility. It
was clearly mentioned and substantiated by materials as to why the writ
petitioners had become victims of a political vendetta. The political parties
and persons who had let loose a smear campaign against the writ petitioners
were in power and the subordinate authorities would have been in no position
to give justice ·to the writ petitioners contrary to their dictates. The authorities B
recorded conclusions which clearly show the bias and preconceived notions.
The conclusions were pre-determined. In that background, the writ petitions
were filed and were entertained, The High Court has elaborately dealt with
every relevant aspect and it has not been shown as to how the High Court's
judgments suffer from any infinnity. Further, this Court should not interfere C
since the High Court had entertained writ petitions indicating reasons why
the writ petitions were entertained when alternative remedy was available.
(~.

Stand of the respondents on the other issues was to the effect that the
submissions of the appellants do not carry any weight and have been made
overlooking the factual and legal position. The submissions completely D
ove~look the essence of the notifications and are based on misreading them.

We shall first deal with the plea regarding alternative remedy as raised
by the appellant-State. Except for a period when Article 226 was amended by
the Constitution (42nd Amendment) Act, 1976, the power relating to alternative
remedy has been considered to be a rule of self imposed limitation. It is E
essentially a rule of policy, convenience and discretion and never a rule of
law. Despite the existence of an alternative remedy it is within the jurisdiction
of discretion of the High Court to grant relief under Article 226 of the
Constitution. At the same time, it cannot be lost sight of that though the
matter relating to an alternative remedy has nothing to do with the jurisdiction p
of the case, normally the High Court should not interfere if there is an
adequate efficacious alternative. remedy. If somebody approaches the High
Court without availing the alternative remedy provided the High Court should
ensure that he. has made out a strong case or that there exist good grounds
to invoke the extraordinary jurisdiction.
G
Constitution Benches of this Court in K.S. Rashid and Sons v. Income
Tax Investigation Commission and Ors., AIR (1954) SC 207; Sangram Singh
v. Election Tribunal, Kotah and Ors., AIR (1955) SC 425; Union of India v.
T.R. Varma, AIR (1957) SC 882; State of UP. and Ors. v. Mohammad Noah,
AIR (1958) SC 86 and Mis KS. Venkataraman and Co. (P) Ltd v. State of H
'.
704 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A Madras, AIR (1966) SC 1089, held that Article 226 of the Constitution confers
on all the High Courts a very wide power in the matter of issuing writs.
However, the remedy of writ is an absolutely discretionary remedy and the
High Court has always the discretion to refuse to grant any writ if it is
satisfied that the aggrieved party can have an adequate or suitable relief
B elsewhere. The Court, in extraordinary circumstances, may exercise the power
if it comes to the conclusion that there has been a breach of principles of
natural justice or procedure required for decision has not been adopted.

Another Constitution Bench of this Court in State of Madhya Pradesh
and Anr. v. Bhailal Bhai etc.etc., AIR (1964) SC 1006, held that the remedy
C provided in a writ jurisdiction is not intended to supersede completely the
modes of obtaining relief by an action in a civil court or to deny defence
legitimately open in such actions. The power to give relief under Article 226
of the Constitution is a discretionary power. Similar view has been re-iterated
in N. T. Veluswami Thevar v. G. Raja Nainar and Ors., AIR (1959) SC 422;
Municipal Council, Khurai and Anr. v. Kamal Kumar and Anr., AIR (1965)
D SC 1321; Siliguri Municipality and Ors. v. Amalendu Das and Ors., AIR
(1984) SC 653; S. T. Muthusami v. K. Natarajan and Ors., AIR ( 1988) SC 616;
R.S.R.T.C. and Anr. v. Krishna Kant and Ors., AIR (1995) SC 1715; Kera/a
State Electricity Board and Anr. v. Kurien E. Kalathil and Ors., AIR (2000)
SC 2573; A. Venkatasubbiah Naidu v. S. Chellappan and Ors., [2000] 7 SCC
E 695; and L.L. Sudhakar Reddy and Ors. v. State ofAndhra Pradesh and Ors.,
[200 I] 6 SCC 634; Shri Sant Sadguru Janardan Swami (Moingiri Maharaj)
Sahakari Dugdha Utpadak Sanstha and Anr. v. State of Maharashtra and
Ors., [200 l] 8 SCC 509; Pratap Singh and Anr. v. State of Haryana, [2002] 7
SCC 484 and G.K.N. Driveshafts (India) Ltd. v. Income Tax Officer and Ors.,
[2003.] 1·sec n.
F
In Harbans Lal Sahnia v. Indian Oil Corporation Ltd., [2003] 2 SCC
107, this Court held that the rule of exclusion of writ jurisdiction by availability
of altemat~ve remedy is a rule of discretion and not one of compulsion and
the Court must consider the pros and cons of the case and then may interfere.
if it cq!nes to the conclusion that the petitioner seeks enforcement of any of
G the fundamental rights; where there is failure of principles of natural justice
or where the orders or proceedings are wholly without jurisdiction or the vires
of an Act is challenged.

In G. Veerappa Pillai v. Raman and Raman Ltd., AIR (1952) SC 192; '
H Assistant Collector of Central Excise v. Dunlop India Ltd., AIR (1985) SC
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 705
330; Ramendra Kishore Biswas v. State of Tripura, AIR (1999) SC 294; A
Shivgonda Anna Patil and Ors. v. State of Maharashtra and Ors., AIR (1999)
SC 2281; C.A. Abraham v. I.TO. Kottayam and Ors., AIR (1961) SC 609;
Titaghur Paper Mills Co. Ltd. v. State ofOrissa and Anr., AIR (1983) SC 603;
H.B. Gandhi v. Mis Gopinath and Sons, [1992] Suppl. 2 SCC 312; Whirlpool
Corporation v. Registrar of Trade Marks and Ors., AIR (1999) SC 22; Tin
Plate Co. of India Ltd. v. State of Bihar and Ors., AIR (1999) SC 74; Sheela B
Devi v. Jaspal Singh, [1999] 1 SCC 209 and Punjab National Bank v. O.C.
Krishnan and Ors. [2001] 6 SCC 569, this Court held that where hierarchy of
appeals is provided by the statute, party must exhaust the statutory remedies
before resorting to writ jurisdiction.

If, as was noted in Ram and Shyam Co. v. State of Haryana and Ors.
c
AIR (1985) SC 1147 the appeal is from "Caeser to Caeser's wife" the existence
of alternative remedy would be a mirage and an exercise in futility. In the
instant case the writ petitioners had indicated the reasons as to why they
thought that the alternative remedy would not be efficacious. Though the
High Court did not go into that plea relating to bias in detail, yet it felt that D
alternative remedy would not be a bar to entertain the writ petition. Since the
High Court has elaborately dealt with the question as to why the statutory
remedy available was not efficacious, it would not be proper for this Court
to consider the question again. When the High Court had entertained a writ
./ petition notwithstanding existence of an alternative remedy this Court while E
dealing with the matter in an appeal should not permit the question to be
raised unless the High Court's reasoning for entertaining the writ petition is
found to be palpably unsound and irrational. Similar view was expressed by
this Court in First Income-Tax Officer, Salem v. Mis. Short Brothers (P) ltd.,
[1966] 3 SCR 84 and State of UP. and Ors. v. Mis. Indian Hume Pipe Co. Ltd.,
[1977] 2 sec 724. That being the position, we do not consider the High F
Court's judgment to be vulnerable on the ground that alternative remedy was
not availed. There are two well recognized exceptions to the doctrine of
exhaustion of statutory remedies. First is when the proceedings are taken
before the forum under a provision of law which is ultra vires, it is open to
a party aggrieved thereby to move the High Court for quashing the proceedings
on the ground that they are incompetent without a party being obliged to wait G
until those proceedings run their full course. Secondly, the doctrine has no
application when the impugned order has been made in violation of the
principles of natural justice. We may add that where the proceedings itself are
an abuse of process of law the High Court in an appropriate case can
entertain a writ petition. H
706 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A Where under a statute there is an allegation of infringement of
fundamental rights or when on the undisputed facts the taxing authorities are
shown to have assumed jurisdiction which they do not possess can be the
grounds on which the writ petitions can be entertained. But normally, the
High Court should not entertain writ petitions unless it is shown that there
is something more in a case, something going to the root of the jurisdiction
B of the officer, something which would show that it would be a case of
palpable injustice to the writ petitioner to force him to adopt the remedies
provided by the statute. It was noted by this Court in L. Hirday Narain v.
Income Tax Officer, Bareil/y, AIR (1971) SC 33 that ifthe High Court had
entertained a petition despite availability of alternative remedy and heard the
C parties on merits it would be ordinarily unjustifiable for the High Court to
dismiss the same on the ground of non exhaustion of statutory remedies;
unless the High Court finds that factual disputes are involved and it would
not be desirable to deal with t~em in a writ petition.

At this juncture, it would be appropriate to take note of the few
D expressions in Reg v. Hillington, London Borough Council, (1974) 1 QB 720
which seems to bring out well the position. Lord Widgery, C.J. stated in this
case:

"It has always been a principle that certiorari will go only where there
is no other equally effective and convenient remedy ... "
E
The statutory system of appeals is more effective and more convenient
than application for certiorari and the principal reason why it may
prove itself more convenient and more effective is that an appeal to
(say) the Secretary of State can be disposed of at one hearing whether
the issue between them is a matter of law or fact or policy or opinion
F or a combination of some or all of these ........ whereas of course an
appeal for certiorari is limited to cases where the issue is a matter of ,.
law and then only it is a matter of law appearing on the face of the
order."

"An application for certiorari has however this advantage that it is
G speedier and cheaper than ,the other methods and in a proper case
therefore it may well be right to allow it to be used .... .I would, however,
define a proper case as being one where the decision in question is
liable to be upset as a matter of law because on its face it is clearly
made without jurisdiction or in consequence of an error of law."
H
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 707

After all the above discussion, the following observations of Roskill L.J. A
in Hanson v. Church Commissioner, (1978) QB 823 may not be welcomed but
it should not be forgotten also:

"There are a number of shoals and very little safe water in the
unchartered seas which divide the line between prerogative orders
and statutory appeals, and I do not propose to plunge into those B
seas .... "

Therefore, the plea that the High Court should not have entertained the
writ petition is without any merit and deserves rejection.

Though learned counsel for appellant-State urged that certificate showing C
that respondent No. I-Company was registered with the Empowered Committee
on 13th January, 1993 should not have been considered on the ground that
Revisional authority had not dealt with the same while dealing with the case
of respondent-company, it is not disputed that the registration was within the
knowledge of the appellants. In fact the certificate was a part of the record D
before the High Court. The registration with the Empowered Committee on
13.1.1993 therefore establishes that the respondent No. I-company was
registered with the Empowered Committee within the period prescribed in the
incentive notification. The appellant-State issued a Notification through the
Department of Industries in the name of the Governor on 27 .3 .1991. The
Notification notified rules for grant of revised incentives to industrial units E
and the rules were to be operative from 1st April 1991 which was referred to
as the appointed date. Under the said Notification new industrial units were
eligible for grant of incentives as detailed in the Notification. According to
this Notification new Industrial unit means "any industrial unit located in the
State of Himachal Pradesh which commences production on or after the
appointed date" . .The new industrial units were to be granted various benefits F
including central sales tax concession. But no concession undelthe State Act
was available to a cement unit as cement was in the negative list mentioned
in the Annexure III to the Notification. By Notification dated 31st July, 1992
the earlier Notification dated 27.3.1991 was amended. In other words, the rules
contained in the Notification were amended. By the subsequent Notification, G
certain categories of units were taken out of the negative list. Cement was one
of such units. Resultantly, in terms of the Notification dated 3 lst July, 1992
the cement units became eligible for exemption as provided in various
incentives notifications. A significant change was also made by the Notification
to the effect that the concept of "Prestigious cement unit" was introduced.
Subject to fulfillment of certain conditions a prestigious unit was eligible for H
708 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A both sales tax exemption and deferment. The conditions are as follows:

(i) The unit must be registered with the Empowered Committee as a
new industrial unit between lst May 1992 and 31st March, 1993.

(ii) The new industrial unit must go into commercial production on or
B after 1st May 1992.

(iii) The said unit must have a fixed C<!pital investment ofRs.50 crores.

(iv) A new industrial unit must employ at l~ast 200 persons on a
regular basis.

C Rule 24 (of 3 lst July, 1992 Notification) spelt out the constitution and
function of the Empowered Committee. It also spelt out the procedure for
setting up of a prestigious unit. Under Rule 24.4 applications for setting up
of a prestigious unit were to be made to the Director of Industries who was
then to put those for consideration of the Committee. One of the members of
the Committee was the Excise and Taxation Commissioner. The member-
D secretary of the Committee was the Secretary oflndustries Department. Finality
was attached to the decision of the Empowered Committee in terms of Rule
24. The Empowered Committee was to stipulate the commencement date of the
Unit. To put it differently, it was open to the Empowered Committee to register
a unit prior to its going into the commercial production. This position is
E abundantly clear from the stipulation in the Rule itself that the Empowered
Committee in certain cases could extend the outer limit of the period for going
into commercial production, where 80% of the project had been completed.
As noted above, on 13.1.1993 the proposed unit of respondent No.I-Company
for the manufacture of Portland cement was registered with the Empowered
Committee subject to certain conditions. It was stipulated that the unit was
F to commence production latest by January, 1995. Changes were introduced by
the Notification dated l st December, 1994 vis-a-vis earlier Notification dated
27th March, 1991 and 31st July, 1992. By this notification, the concept of
"prestigious cement unit" was introduced. A unit to be eligible as a 'prestigious
cement unit' was to fulfil the following conditions:
G (i) Must be a new industrial unit registered with the Empowered
Committee appointed in accordance with Rule 24 between I st May
I 992 and 3 lst March 1995.

(ii) The new industrial unit must go into commercial production on or
after 1st May 1992.
H
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 709
(iii) The new unit must have a fixed capital investment ofRs.50 crores. A
(iv) The new unit must employ at least 200 persons on a regular basis.

After coming into force of the new definition of "prestigious cement
industrial unit" the Director oflndustries extended the date for commencement
of commercial production upto 30th June, 1995 and subsequently upto 30th B
September, 1995.

Stand of the appellant-State is that even if there was a registration with
the Empowered Committee on 13.1.1993, the same was of no.consequence
after the new definition of "prestigious cement industrial unit" was introduced.
We find no substance in this submission of learned counsel because of C
several reasons. Firstly, there was nothing in the Notification dated I st
December, 1994 which required that those units which had obtained registration
betv::een I st May, 1992 and l st December, 1994 were required once again to
seek registration as a "prestigious cement unit". Had it been so there was no
question of extending the validity of the registration certificate dated 13 .1.1993
after promulgation of Notification dated 1st December, 1994. In fact the final D
extension granted was upto 30th September, 1995 and there is no dispute that
respondent No. I-company commenced its production on 25th September,
1995. Para 27 of-the Notification dated 1st December, 1994 provided that
prestigious cement unit was entitled to deferment of sales tax as well as from
exemption of payment the electricity duty. On 3 lst December, 1994 the State E
Government issued a Notification under Section 42 of the Act which granted
sales tax exemption for pioneer industries from· the date of commercial
production. On 6th July, 1995 the Governor of Himachal Pradesh issued
another Notification amending the revised rules of 27th March, 1991 regarding
grant of incentives to industrial units. By this Notification incentives of sales
tax deferment/exemption were restored to cement units. On 30th January, 1996 F
Exemption Notifications under Section 8(5) of the Central Act and Section
42(1) of the Act were issued by the Governor of Himachal Pradesh. In this
Notification, the respon.dent No.I-Company was expressly named as a
prestigious cement industrial unit that would be eligible for the benefit. This
Notification also indicated that the respondent No. I -Company was eligible for G
sales tax exemption for a period of 9 years. It is to be noted that the respondent
No.I-company was registered as a dealer on I Ith August, 1995 under the Act
and a certificate in Form STE-III had been issued by the Director of Industries.
When respondent No.1 applied in Form STE-I, exemption certificate in Form
STE-II had been granted by the prescribed authority. The denial of benefit
H
710 SUPREME COURT REPORTS [2005) SUPP. 1 S.C.R.

A contemplated under clause (3) of the Notification related to a finding about
evasion of tax either under the Act or the Central Act.

On 28.1.1995 the Director of Industries extended the date of
commencement of Commercial production till 30th June, 1995 keeping in view
the progress of the plant. The same was further extended up to 30th September,
B 1995 keeping in view the progress of the plant by order dated 30th June, 1995.
By Notification dated 6.7.1995 incentives of sales tax deferment/exemption
were restored to cement units. There is no dispute that the respondent-
company's commercial production started with effect from 26th September,
199 5 and, in fact, the director of Industries by his Certificate dated 24.1.1996
C confirmed this position. On 26.9.1995 respondent-company brought to the
notice of the concerned department these facts and claimed incentives under
the Exemption Notification indicating that commercial production had started.
The Empowered Committee confirmed grant of Permanent Registration
Certification (Declaration) to the respondent-assessee. On 30th January, 1996
the Exemption Notification was issued. The said Notification has also
D significance for the present dispute. In the Notification it was clearly stated
that the respondent-company was exempted from payment of sales tax. It was.
expressly named as a "Prestigious Cement Industrial Unit". It was classified
as a Category 'B' Industry entitled t-0 sales tax exemption for 9 years. The
Notification was published on 6.2.1996. On 2.i 1996 declaration was issued by
E the Industry's department confirming respondent's eligibility for several
incentives and more particularly sales tax concessions. By the certificate No.
STE(III) the Director of Industries certified that the respondent-company
fulfilled all conditions-namely registration by Empowered Committee,
employment of person belonging to the State and capital investment. On
2.3.1996 respondent-company applied for the necessary benefit in form STE
F (I) and on 7th June, 1996 Exemption Certificate was issued in form STE (II).

The respondent No.I-company was registered with the Empowered
Committee and was also declared as a unit which is eligible for incentive of
sales tax concession as available to a prestigious cement. unit ·under the
revised Rules regarding grant of incentives to industrial units. The definition
G of prestigious cement industrial unit as introduc:;ed on 1st December, 1994 was
not intended to provide that there has to be registration either as a prestigious
unit or as a prestigious cement industrial unit. It only required registration as
a new industrial unit with the Empowered Committee. It is significant to note
that the pre-conditions for grant of prestigious unit status and prestigious
H cement unit status were materially identical.
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.j 711

One fallacy in the argument of the State is clearly revealed from the fact A
that the Notification dated 1st December, 1994 contemplates registration from
1st May 1992. To put it differently, registration with the Empowered Committee
prior to lst December, 1994 was permissible in terms of the Notification and
that is why 13. I. I 993 registration cannot be said to have lost its currency after
the promulgation of 1st December, 1994 Notification. There is no dispute that
respondent No. I-company was registered as a new industrial unit within the B
stipulated dates. If the contention of the State is accepted, it would mean that
the extension given by the Secretary of Industries who was the Member
Secretary of the Empowered Committee extending the date of commercial ·
production after considering the progress. of the units was in derogation of
the prescriptions. That is not the case of the appellant-State. Further, it C
overlooks the powers available under Rule 2404 of the Notification dated 31st
I July, 1992.

Another significant aspect which needs to be noted at this juncture is
that in the Notification dated 13.1.1993 respondent No. I-company was clearly
and specifically named as one of the units to which the exemption from D
payment of sales tax for a period of 9 years was available. That being so, there
is no question of the appellant-State subsequently raising a question that the
respondent No. I-company was not registered between the specified dates. A
plea was taken that if that was the position there was no necessity for the
respondent No. I-company to apply and obtain another certificate on 2nd
February, 1996, if according to it there was a valid registration dated 13 .1.1993.
E
The certificate dated 2nd February, 1996 is a declaration issued by the
Empowered Committee. It declared, confirmed and re-stated the status of
respondent No. I-company. It did not create any such status for the first time.

In the 30th January, 1996 Notification two distinct expressions have F
been used; (i) registration by the Empowered Committee between the two
specified dates and (ii) declaration as a prestigious cement company by the
said date as one of the alternate criteria in addition to the registration. The
position is clear from a reading of 30th January, 1996 Notification which reads
as follows:
G
Sale ofgoods manufactured by certain industries-Exemption-Amendment
(Himachal Pradesh)

Notification No.EXN-C(9) 2190-IV Dated 30th January, 1996
In exercise of the powers conferred by sub-section (1) of Section H
712 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A 42 of the Himachal Pradesh General Sales Tax Act, 1968 (Act No.24
of 1968), the Governor of Himachal Pradesh is pleased to make the
following further amendments in this Department's Notification
No.EXN-C(p)/90 dated 31.12.1994 published in the Rajpatra, Himachal
Pradesh (Extraordinary) on 31.12.1994, as amended from time to time
(hereinafter called the "said notification") with immediate effect:-
B
Amendment- I. After the existing para 1-B of the said Notification
the following new para "1-C" shall be inserted namely:-

"1-C.(1) The Governor ofHimachal Pradesh in exercise of the powers
conferred by sub-section (I) of Section 42 of the Himachal Pradesh
c General Sales Tax Act, 1968 (Act No. pleased to order exemption fro
tax subject to their being eligible as per the terms of this para to the
following other industries from the payment of tax leviable on the sale
of cement manufactured by such 'other industries' as specified in the
Table given below and subject to the conditions specified below in
sub-para (2):-
D
Serial Name of the Category of Total time limit
Number industry industrial block within which
In which located concession of
Exemption will
be available
E
I. Mis Gujarat Ambuja 'B' One hundred eight
Cements Ltd., Village months (9 years)
P.O. Darlaghat, Tehsil Suli,
Arki, District Solan (H.P.)

F
2. Mis The Associated 'B' One hundred eight
Cement Companies Ltd. months (9 years)
P.O. Barmana, District
Bilaspur (H.P.)
(2) The concession of exemption from payment of tax under this Act,
G shall be admissible to 'other industries' only if-

(i) it is a prestigious cement industrial unit;

(ii) it has been registered a dealer under the Himachal Pradesh
General Sales Tax Act, 1968, for manufacture of cement for sale
H in the 'new cement industrial unit';
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 713

(iii) it has obtained a certificate in form STE-III from the Director A
of Industries, Himachal Pradesh and has furnished the same to
the prescribed authority for the grant of exemption certificate in
form STE-III.

(iv) It has been granted an exemption certificate in fonn STE-II by
the prescribed authority; B
(v) it (registered dealer) complies with the provisions of (a) the
Himachal Pradesh General Sales Tax Act, 1968 (b) the Central
Sales Tax Act, 1956 and (c) the rules, notifications and orders
made and issued under these Acts;

(vi) the exemption certificate continues to remain operative and c
it has not been withdrawn or cancelled by the prescribed authority
or is not annulled or quashed in any appellate, revisional or other
proceedings;

Provided that the exemption contained in sub-para (1) to Ml
s The Associated Cement Companies Limited, Barmana, District D
Bilaspur (Himachal Pradesh) shall be granted by the prescribed
authority only if,_ in _addition to the preceding conditions-
(a) the payment of tax under the Himachal Pradesh General Sales
Tax Act, 1968 and the Central Sales Tax Act, 1956 in respect of
the old component of the Mis The Associated Cement Companies E
Limited, Barmana, District Bilaspur (Himachal Pradesh} is actually
made even during each financial year of the period of exemption
in respect of the new component of this unit, established as a
result of expansions on the quantity respectively of 5,51,664
_. metric tonnes and 3, 71,028 metric tonnes sold during the year
F
' 1991-92; and

(b) the level of manufacture of 9,22,692 metric tonnes of cement
in the old component of Mis Associated Companies Limited,
Barmana, District Bilaspur (Himachal Pradesh) is also maintained
unchanged throughout each financial year during the period of
exemption in respect of the new component of this unit established G
as a result of expansion.

(3) Notwith~tanding anything contained in sub-paras (1) and (2),
no exemption shall be granted by the prescribed authority to such
other industry-
H
714 SUPREME COURT REPORTS (2005] SUPP. I S.C.R.

A (i) if it is found that the evasion of tax und~r the Himachal
Pradesh General Sales Tax Act, I 968 or the Central Sales Tax Act,
I 956 has been committed by the entrepreneur (registered dealer);

(ii) in respect or the sale of finished cement, which has been
procured or acquired by it for the sale in Himachal Pradesh; and
B iii) in respect of the sale of cement which has not been included
and duly returned in the return filed under Section I 2(3) of the
Himachal Pradesh General Sales Tax Act, I 968.

(4) The provisio_ns contained in paras 5, 7, 8, 9, 11,12, 13 and 14
of the Himachal Pradesh General Sales Tax (Deferred Payment of Tax) .
c Scheme, I 992 notified vide Government Notification No.1-12/73-E&T-
III ·dated 25 .9 .1992 published in Rajpatra, Himachal Pradesh
(Extraordinary) on 1.10.1992 shall apply mutatis mutandis in relation
to (1) mode of availing of benefit of exemption and issue of exemption
certificate, (ii) renewal of exemption certificate, (iii) cancellation of
exemption certificate in form STE-II, (iv) filing ofretums, assessment,
D
etc. (v) registers to be maintained, (vi) condonation of delay, (vi) other
powers of the prescribed authority, and (viii) overriding effect of this
notification.

(5) The exemption .is subject to the further condition that the
E entrepreneur (registered dealer) shall not charge sales tax on the sale
of cement manufactured in the new cement industrial unit during the
period of exemption.

Explanation-

F For the purpose of para I -C of this notification-

(a) 'other industries' means 'prestigious cement industrial units';

(b) 'prestigious cement industrial unit' means a new cement
industrial unit which has fixed capital investment of not less than
rupees fifty crores, comes into production after the 1st day of
G May, 1992 is registered by the Empowered Committee between
the Ist day of May, 1992 and the 3 lst day of March, I 995 and
employs on permanent basis not more than two hundred persons;
and

(i) is based on local raw material; or
H
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 715

(ii) carries out value addition of fifty percentum or more, in its A
manufactured products; or
(iii) undertakes an export commitment of 50% or more of its
production; or
(iv) is declared to be prestigious cement unit by the Empowered
Committee headed by the Secretary (Industries) to the B
Government of Himachal Pradesh;
and also includes an existing industrial unit which fulfills the
above criteria for 'prestigious cement unit' exclusively by virtu~
of the component of 'expansion' or 'diversification' or
'modernisation', as the case may be; C
(c) the expressions 'diversification', 'expansion', 'modernisation',
'Empowered Committee' and 'prescribed authority' shall have the
-., ·, same meanings assigned to them in clauses (iii), (iv), (v) and (xv)
-,-:-.....__ 'respectively of sub para ( 1) of para 2 of the Himachal Pradesh
· ··,<Jenera! Sales Tax (Deferred Payment of (Tax) Scheme, 1992; D
. (d) 'Fixed Capital Investment' means capital investment made of
land, building, machinery and plant as verified by the prescribed
authority; and
(e) forms 'STE-I', 'STE-II' and 'STE-III' mean the forms as E
appended to this notification; and
. (f) unless there is anything repugnant in the subject or context,
all words and expressions used herein shall have the meaning
assigned to them under the Himachal Pradesh General Sales Tax
Act, 1968.
F
Judged from the above background, the appellant's plea about non
entitlement of _the respondent No. I-company of the sales tax benefits and
exemptions is clearly mis-conceived. The High Court's judgment does not
suffer from any infirmity to warrant interference.

It may be noted here that there are two additional factors which also G
made the revisional order indefensible. Firstly, assessments were made for the
assessment years 1995.-96 and 1996-97 fixing the date of entitlement first to
be 31st January, 1996 and subseq.uently from 7th February, 1996. The
respondent No. I-company had questioned the correctness of the fixation of
the dates by filing appeals which came to be dismissed. In other words, the H
716 SUPREME COURT REPORTS [2005] SUPP. l S.C.R.

A assessment orders merged with the first appellate orders, so far as the date
of entitlement is concerned. It may be noted at this juncture that the respondent
No. I-company wanted the exemption from an anterior date. In any event, the
fixation of the date of entitlement w.e.f. 7.2. I 996 became final by the first
appellate orders. The revisional authority did not take note of the said appellate
orders. In that view of the matter, the assessment orders which had got
B merged with the first appellate orders could not have been revised. Significantly,
by the revisional orders the revisional authority set aside only the assessment
orders, though according to the show cause notices the respondent No. I was
required to show cause as to why the exemption notification shall not be
recalled. In the operative part of the order, only the assessment orders have
C been quashed. The final certificate was issued to the respondent No. I-company
on 1st June, 1996 but was made effective from I l.8.1995. Undisputedly, the
provisional registration certificate under the Act was originally valid upto
I4.2. I994 and was re-validated upto 30.6.1995. On I 7.6.1995 an application was
made for its renewal upto 31.12.1995 and the requisite fee had been depos"ited
and the renewal was granted. Though much stress was laid on the absence
D of a certificate of provisional registration upto the date of commercial
production, it has not been disputed that an application for extension of the
validity period was filed on 17.6.1995. A certificate of registration as a dealer
was issued on 1st January, 1996 same was made effective from 11.8.1995.

E A plea was made about absence of the validity of provisional certificate
of registration for two months. That actua~ly loses significance because the
application for extension of period of validation had not been turned down
at any subsequent point of time.

It was urged on behalf of the appellant-State that declaration forms
F under the Central Act were not filed within the time and/or were defective.
That does not in reality amount to non-compliance of a statutory provision.
The respondent No. I-company was claiming exemption and, therefore, had
not filed the declaration forms. Some of the forms which were filed were
treated to be defective. Undisputedly, before the revisional authority a prayer
was_made for grant of opportunity to rectify the defects, if any. That was
G turned down. It is to be noted that under Rule 12(7) of the Central Sales Tax
(Registration and Turnover) Rules, 1957 (in short the 'Registration Rules') the
declaration form can be filed at a subsequent point of time and not necessarily
along with returns. On an application being made before the Assessing
Officer the exemption can be granted. The object of the Rule is to ensure that
H the assessee is not denied a benefit which is available to it under law on a
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 717
technical plea. The Assessing Officer is empowered to grant time. That means A
that the provisions requiring filing of declaration forms along with the return
is a directory provision and not a mandatory provision. In a given case even
the declaration forms can be filed before the appellate authority as an appeal
is continuation of the assessment proceedings. In a given case, if the appellate
authority is satisfied that assessee was prevented by reasonable and sufficient B
cause which dis-enabled him to file the fonns in time, it can be accepted. It
can also be accepted as additional evidence in support of the claim for
deduction. In the instant case, respondent No. I-company made a specific
request before the revision-al authority which was turned down. Therefore, the
question of any non-compliance with the relevant statutes does not arise. It
was noted by this Court in Sahney Steel and Press Works Ltd. and Anr. v. C
Commercial Tax Officer and Ors., [ 1985] 4 SCC 173 that even in a given case,
an assessee can be given an opportunity to collect Declaration Fonns and
furnish them to the assessing authority if the challenge of the assessee to
taxability of a particular transaction is turned down.

Respondent No.I-company's stand was that it was granted exemption D
from payment of sales tax and, therefore, there was no requirement of furnishing
any "C Fonn" for certain periods relating to which there was a doubt about
availability of the concession, the declaration Fonns were filed. Therefore, the
assessing officer shall grant opportunity to the respondent No.I-company to
cure the defects, if any in the Declaration Fonns. E
It was urged by learned counsel for the appellant-State that revision
notices nos. 7 to 10 were erroneously quashed by the High Court. Learned
counsel for the respondents submitted that in the writ petition filed by it there
-\ was no prayer for quashing revision notices nos. 7 to I 0. It is stated that the
High Court had not clearly quashed the said revision notices and the appellant- p
State and its functionaries have not pursued the revision notices. Be that as
it may, the respondent No. I-company is granted two months' time to respond
to the said notices and indicate its stand. The revisional authority shall
consider desirability of continuing the revision notices after considering the
response of the respondents, if any, filed. The basic issue involved in these
notices is to the effect of absence of provisional registration certificate after G
11.8.1995 upto 25th September, 1995. As noted above, respondent No.1-
company's stand is that it had applied for extension of the validity period
upto 31.12.1995 and absence ofany order on the same has not been disputed.
Let the concerned authority deal with the application within a period of 6
weeks after giving nofi<::e to the respondent No. I -company. The Revisional H
718 SUPREME COURT REPORTS [2005) SUPP. 1 S.C.R.

A authority shall take note of the order to be passed thereon.
The question relating to liability to pay purchase tax on royalty paid is
common to both Gujarat Ambuja and ACC. According to learned counsel for
appellant-State, the High Court erroneously held that roy~lty paid did not
attract levy of purchase tax. The foundation for the argument is a decision
B of this Court in State of M.P. v. Orient Paper Mills ltd., [1977] 2 SCC 77. In
that case it was held that royalty paid under the lease was the sale price.
There is a contrast between sale and purchase. The definition of purchase is
wider. It involves the acquisition and, therefore, nothing but a transfer.
Reference is also made to several provisions of Mines and Minerals (Regulation
C and Development) Act, 1957 (in short 'Minerals Act, 1957') and it was
submitted that position is different after amendment in 1972. In fact, according
to the appellant what is being taxed is the consideration as minerals are being
removed.

According to learned counsel for the respondents, the plea is untenable
D in view of the decision of this Court in State of Orissa v. Titaghur Paper Mills
Ltd, [1985] Supp. sec 280.

In State of Orissa and Ors. v. Titaghur Paper Mills Co. ltd and Anr.
[ 1985] Supp SCC 280, it was, inter a/ia, observed by this Court as follows:

E "102. Royalty is not a term used in legal parlance for the price of
goods sold. 'Royalty' is defined in Jowitt's Dictionary of English Law,·
Fifth Edition, Vol. 2, page 1595 as follows:

Royalty, a payment reserved by the grantor of a patent, lease of a·
mine or similar right, and payable proportionately to the use made of
F the right by the grantee. It is usually a payment of money, but may
be a payment in kind, that is, of part of the produce of the exercise
of the right.

Royalty also means a payment which is made to an author or composer
by a publisher in respect of each copy of his work which is sold, or ·
G to an inventor in respect of each article sold under the patent

We are not concerned with the second meaning of the word
'royalty' given in Jowitt. Unlike the Timber.contracts, the Ba~oo ·•.
Contract is not an agreement to sell bamboos standing in the contract
areas with an accessory licence to enter upon such areas for the
H purpose of felling and removing the bamboos nor is it, unlike the
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 719
Timber Contracts in respect of a particular felling season only. It is an A
agreement for a long period extending to fourteen years, thirteen
years and eleven years with respect to different contract areas with
an option to the respondent company to renew the contract for a
further term of twelve years and it embraces not only bamboos which
are in existence at the date of the contract but also bamboos which
are to grow and come into existence thereafter. The payment of royalty B
under the Bamboo Contract has no relation to the actual quantity of
bamboos cut and removed. Further, the respondent Company is bound
to pay a minimum royalty and the amount of royalty to be paid by it
is always to be in excess of the royalty due on the bamboos cut in
the contract area. c
103. We may pause here to note what the Judicial Committee of the
Privy Council had to say in the case of Raja Bahadur Kamakshya
Narain Singh of Ramgarh v. C. I. T, Bihar and Orissa, (1943) 11 ITR
513 (PC) about the payment of minimum royalty under a coal mining
lease. The question in that case was whether the annual amounts D
payable by way of minimum royalty to the lessor were in his hands
capital receipt or revenue receipt. The Judicial Committee held that it
was an income flowing from the covenant in the lease. While discussmg
this question, the Judicial committee said (at pages 522-3) :

These are periodical payments, to be made by the lessee under . E
his covenants in consideration of the benefits which he is granted
by the lessor. What these benefits may be is shown by the
extract from the lease quoted above, which illustrates how
inadequate and fallacious it is to envisage the royalties as merely
the price of the actual tons of coal. The tonnage royalty is ind!:!ed
only payable when the coal or coke is gotten and dispatched : F
but that is merely the last stage. As preliminary and ancillary to
that culminating act, liberties are granted to enter on the land and
search, to dig and sink pits, to erect engines and machinery, coke
ovens, furnaces and form railways and roads. All these and the
like liberties show how fallacious it is to treat the lease as merely G
one for the acquisition of a certain number of tons of coal, or the
agreed item of royalty as merely the price of each ton of coal.

Though the case before the Judicial Committee was of a lease of
a coal-mine and we have before us the case of a grant for the purpose
of felling, cutting and removing bamboos with various other rights H
720 SUPREME COURT REPORTS (2005] SUPP. I S.C.R. '~-=
A and licences ancillary thereto, the above observations of the Judicial
Committee are very pertinent and apposite to what we have to decide.

xxx xxx

120. It is true that the nomenclature and description given to a
contract is not determinative of the real nature of the document or of
B
the transaction thereunder. They, however, have to be determined
from all the terms and clauses of the document and all the rights and
results flowing therefrom and not by picking and choosing certain
clauses and the ultimate effect or result as the Court did in the Orient
Paper Mills case.
c xxx

127. Conclusions:

To summarize our conclusions :

D xxx

(9) The dictionary meaning of a word cannot be looked at where· that
word has been statutorily defined or judicially interpreted but where
there is no such definition or interpretation, the court may take the aid ,.
I

of dictionaries to ascertain the meaning of a word in common parlance,
E bearing in mind that a word is used in different senses according to
its context and a dictionary gives all the meanings of a word, and the
court has, therefore, to select the particular meaning which is relevant
to the context in which it has to interpret that word.

xxx ..
I
..

F
(16) Being a benefit to arise out of land, any attempt on the part of
the State Government to tax the amounts payable under the Bamboo
Contract would be not only ultra vires the Orissa Act but also
unconstitutional as being beyond the State's taxing power under
Entry 45 in List II in the Seventh Schedule to the Constitution of
G India.

(17) The case of Firm Chhotabhai Jethabai Patel & Co. v. State of
M P., [1953] SCR 476 is not good law and has been overruled by
decisions of larger benches of this Court as pointed out by this Court
is State of M P. v. Yakinuddin, AIR (1962) SC 1916.
H
STATE OF H.P. v. GUJARAT AM BUJA CEMENT LTD. [PASA YAT, J.) 721
;, (18) The case of State ofM P. v. Orient Paper Mill Ltd, [1977] 2 SCC A
77 is also not good law as that decision was given per incuriam and
laid down principles of interpretation which are wrong in law."

~ ln Cooch-Behar Contractors' Association and Ors. v. State of West
Bengal and Ors., [1996] IO SCC 380, a two-Judge Bench of this Court followed
Orient Paper Mills Ltd, case (supra), and held that in view of the decision B
of this Court in Orient Paper Mills Ltd, case (supra), payment of royalty
amounts to payment of price for the goods obtained from the government
departments and used in the works contract. Unfortunately, the subsequent
~
judgment of a larger Bench in Titagurh Paper Mill~. case (supra) does not
appear to have been cited. That being so, this decision does not lay down
the correct position and is overruled.
c
'Royalty' is not a term used in legal parlance for the price of the goods
sold. It is a payment reserved by the grantor of a patent, lease of a mine or
similar right, and payable proportionately to the use made of the right by the
grantee as held in Titaghur Paper Mills Co. Ltd. case (supra). D
In its primary and natural sense 'royalty' in the legal world, is known
as the equivalent or translation of 'jura regalia' or 'jura regin'. Royal rights
and prerogatives of a sovereign are covered thereunder. In , its secondary
sense, the word 'roya_lty' would signify, as in mining leases, that part of the
reddendum, variable though, payable in cash or kind, for rights and privileges E
obtained. (See Inderjeet Singh Sia/ and Anr. v. Karam Chand Thapar and
Ors., [1995] 6 SCC 166).

'Royalty' is not a tax. Simply because the royalty is levied by reference
to the quantity of the minerals produced and the impugned cess too is
quantified by taking into consideration the same quantity_ of the mineral F
produced, the latter does not become royalty.. The former is the rent of the
land on which the mine is situated or the price of the privilege of winning the
r
f
minerals from the land parted by the government in favour of the mining
1 lessee. The cess is a levy on mineral rights with impact on the land and
quantified by reference to the quantum of mineral produced. The distinction,
G
though fine, yet exists and is perceptible. (See The State of West Bengal and
Anr. v. Kesoram Industries Ltd. and Ors., JT (2004) I SC 375).

Though Section 9 refers to "mineral removed" it does not mean that the
royalty is paid on removal. It is print of payability. Royalty in the context of

....i,
the agreement is an alternate to dead rent. Section 9 speaks of rates of royalty. H
t.

722 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
...
J

A It is nothing but measure of levy. The charging of dead rent and royalty is
under different situations. It is shifting of the measure. Both "dead rent" and
"royalty" are returns to the lessor. The stand of appellant that under Section

B
9 of the Minerals Act royalty is a payment in respect of any mineral removed
or consumed or ~hat royalty is a money consideration for transfer of property
is clearly untenable. in view of the analysis made above.
-
A mining lease is an interest in immovable property. The extraction and
removal of minerals is essentially an extension of the enjoyment of immovable
property. As noted in Titagarh Paper Mill's case (supra) the right conferred
by the lease deed to extract and remove the minerals is a profit a prendre.
c It will be useful to know the meaning of the expressions "dead rent" and
"royalty" and their connotation. Wharton's Law Lexicon, 14th Edn., at p. 300,
defines "dead rent" as :

Dead Rent - A rent payable on a mining lease in addition to a
royalty, so called because it is payable whether the mine is being
D worked or not.

The definition of ,"dead rent" given in Black's Law Dictionary, 5th ed.,
at p. 359, is as follows:

Dead Rent. - In English law, a rent pa~ able on a mining lease in
E addition to a royalty, so called because it is payable altho~gh the mine
may not be worked.

Jowitt's Dictionary of English Law, 2nd Edn., at p. 555, defined "dead
rent" as :

F Dead Rent, a term sometimes used in mining leases in
contradistinction to a royalty, to denote a fixed rent to be paid whether
the mine is productive or not. . See Rent.

The same dictionary states under the heading "Rent", at p. 1544 :

G When a mine, quarry, brick-works, or similar property is leased,
the lessor usually reserves not only a fixed yearly rent but also a
c::
I
royalty or galeage rent, consisting of royalties (q. v.) varying with the
quantity of minerals, bricks, etc., produced during each year. In this
case the fixed rent is called a dead rent.

H "Royalty" is defined in Jowitt's Dictionary of English Law, 2nd ed., at
/
r'
STATE OF H.P. v. GUJARAT AM BUJA CEMENT LTD. [PASAYAT, J.] 723

p. 1595, inter alia, as : A
Royalty, a payment reserved by the grantor of a patent, lease of
a mine or similar right, and payable proportionately to the use made
of the right by the grantee. It is usually a payment of money, but may
be a payment in kind, that is, of part of the produce of the exercise
of the right. See Rent. B
"Royalty" is defined in Wharton's Law Lexicon, 14th Edn., at p. 893, as:

Royalty, payment to a patentee by agreement on every article
made according to his patent : or to an author by a publisher on every
copy of his book sold; or to the owner of minerals for the right of C
working the same on every ton or other weight raised.

The definition of"royalty" given in Black's Law Dictionary, 5th Edn.,
at p. 1195, is as follows :

Royalty. Compensation for the use of property, usually copyrighted D
material or natural resources, expressed as a percentage of receipts
from using the property or as an account per unit produced. A
payment which is made to an author or composer by an assignee,
licensee or copyright holder in respect of each copy of his work which
is sold, or to an inventor in respect of each article sold under the
patent. Royalty is share of product or profit reserved by owner for E
permitting another to use the property. In its broadest aspect, it is
share of profit reserved by owner for permitting another the use of
property.....
In mining and oil operations, a share of the product or profit paid
to the owner of the property....... F
In H. R. S. Murthyv. CollectorofChittoorandAnr., AIR(1965) SC 177,
this Court said that "royalty" normally connotes the payment made for the
materials or minerals won from the land.

In Halsbury's Laws of England, 4th Edn. in the volume which deals with G
"Mines, Minerals and Quarri~f, namely, volume 31, it is stated in paragraph
224 as follows: ·

224. Rents and royalties. An agreement for a lease usually contains
stipulations as to the dead rents and other rent and royalties to be H
724 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A reserved by, and the covenants and provisions to be inserted in, the
lease .....

The topics same of dead rent and royalties are dealt with in Halsbury's
Laws of England in the same volume under the sub-heading "Consideration",
the main heading being "Property demised; Consideration". Paragraph 235
B deals with "dead rent" and paragraph 236 with "royalties". The relevant
passages are as follows:

235. Dead rent. It is usual in mining lease to reserve both a fixed
annual rent (otherwise known as a "dead rent", "minimum rent" or
"certain rent") and royalties varying with the amount of minerals
c worked. The object of the fixed rent is to ensure that the lessee will
work the mine; but it is sometimes ineffective for that purpose. Another
function of the fixed relit is to ensure a definite minimum income to
the lessor in respect of the demise.

If a fixed rent is reserved, it is payable until the expiration of the
D tertn even though the mine is not worked, or is exhausted during the
currency of the term, or is not worth working, or is difficult or
unprofitable to work owing to faults or accidents, or even if the
demised seam proves to be non-existent.

236. Royalties. A royalty, in the sense in which the word is used
E in connection with mining leases, is a payment to the lessor
proportionate to the amount of the demised mineral worked within a
specific period.

In paragraph 238 of the same volume ofHalsbury's Laws of England it
F is stated :

238. Covenant to pay rent and royalties. Nearly every mining
lease contains a covenant by the lessee for payment of the specified
rent and royalties.

Rent is an integral part of the concept of a lease. It is the consideration
G moving from the lessee to_ the lessor for demise of the property to him. Section
105 of the Transfer of Property Act, 1882, contains the definitions of the terms
"lease", "lessor", "lessee", "premium" and "rent" and is as follows:

105. Lease defined - A lease of immovable property is a transfer
of a right to enjoy such property, made for a certain time, express or
H
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 725

implied, or in perpetuity, in consideration ofa price paid or promised, A
or of money, a share of crops, service or any other thing of value, to
be rendered periodically or on specified occasions to the transferor by
the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined. The transferor is called
the lessor, the transferee is called the lessee, the price is called the B
premium, and the money, share, service or other thing to be so rendered
is called the rent."

The decision of this Court in D.K. Trivedi & Sons and Ors. v. State of
Gujarat and Ors., [ 1986] Supp SCC 20 is a complete answer to the plea raised
by learned counsel for the appellate-State. It was, inter a/ia, held in that case C
as follows: (The relevant paras are quoted).

"39. In a mining lease the consideration usually moving from the
lessee to the lessor is the rent for the area leased (often called surface
rent), dead rent and royalty. Since the mining lease confers upon the
lessee the right not merely to enjoy the property as under an ordinary D I
lease but also to extract minerals from the land and to appropriate
them for his own use or benefit, in addition to the usual rent for the
area demised, the lessee is required to pay a certain amount in respect
of the minerals extracted proportionate to the quantity so extracted.
Such payment is called "royalty". It may, however, be that the mine E
is not worked properly so as not to yield enough return income,
whether the mine is worked properly so as not to yield enough return
to the lessor in the shape of royalty. In order to ensure for the lessor
a regular income, whether the mine is worked or not, a fixed amount
is provided to be paid to him by the lessee. This is called "dead rent".
"Dead rent" is calculated on the basis of the area leased while royalty F
is calculated on the quantity of minerals extracted or removed. Thus,
while dead rent is a fixed return to the lessor, royalty is a return which
varies with the quantity of minerals extracted or removed. Since dead
rent and royalty are both a return to the lessor in respect of the area
leased, looked at from one point of view dead rent can be described G
as the minimum guaranteed amount of royalty payable to the lessor
but calculated on the basis of the area leased and not on the quantity
of minerals extracted or removed. In fact, clause (ix) of Rule 3 of the
Rajasthan Minor Mineral Concession Rules, 1977, defines "dead rent"
as meaning "the minimum guaranteed amount of royalty per year
payable as per rules or agreement under a mining lease". Stipulations H
726 . SUPREME COURT REPORTS [200S] SUPP. I S.C.R.

A providing for the lessee's liability to pay surface rent, dead rent and
royalty to the lessor are the usual covenants to be found in a mining
lease.
54. As pointed out earlier, since dead rent is the minimum guaranteed
amount of royalty and partakes of the nature of royalty, what, therefore,
B applies to royalty must necessarily apply or should be made applicable
dead rent also. The proviso to Section 9(3) prohibits the Central
Government from enhancing the rate of royalty in respect of any
mineral other than a minor mineral more than once during any period
of four years. The proviso to Section 9-A(2) also prohibits the Central
Government from enhancing the dead rent in respect of any area more
c than once during any period of four years. Halsbury's Laws of England,
4th Edn., volume 31, paragraph 236, points out that "usually the
royalties are made to merge in the fixed rent by means of a provision
that the lessee, without any additional payment, may work, in each
period for which a payment of fixed rent is made, so much of the
D minerals as would, at the royalties reserved, produce a sum equal to
the fixed rent". The same purpose is achieved by the proviso to /
Section 9-A(l) and in the Mineral Concession Rules, 1960, by the
proviso to clause (c) of Rule 27 under which the lessee is liable to pay
the dead rent or royalty in respect of each mineral, whichever be
higher in amount, but not both. In all State rules which provide for
E payment of both dead rent and royalty, there is a provision that only
dead rent or royalty, whichever is higher in amount, is to be paid, but
not both. Rules made under the 1948 Act, as for example, Rule 41 of
the Mineral Concession Rules, 1949, and Rule 18 of the Bombay
Mineral Extraction Rules, 1955, also. contained a similar provision.
F Thus,. the practice followed throughout in exercising the power to
make rules regulating the grant of mining leases has been to provide
that either dead rent or royalty, whichever is higher in amount, should
be paid by the lessee, but not both."

Following paras in Halsbury's Laws of England (Fourth Edition) 2003
G Re-issues need to be noted:
Para 32 I: Nature of mining lease. A lease may be granted of land
or any part of land, and since minerals are a part of the land it follows
that a lease can be granted of the surface of the land and the minerals
below, or of the surface alone, or of the minerals alone. It has been
H said that a contract for the working and getting of minerals, although
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.) 727

for convenience called a mining lease, is not in reality a lease at all A .
in the sense in which one speaks of an agricultural lease, and that
such a contract, property considered, is really a sale of a portion of.
the land at a price payable by instalments, that is, by way of rent
orroyalty, spread over a number of years.

Para 322: Statutory definitions of 'mining lease. ' In the Law of B
Property Act, 1925, 'mining lease' means a lease for mining purpose,
that is, the searching for, winning, working, getting, making
merchantable, carrying away or disposing of mines and minerals, or
connected purposes, and includes a grant or licence for mining
purposes; and 'lease' includes an underlease or other tenancy.
c
In the Settled Land Act 1925 and the Landlord and Tenant Act
1927, 'mining lease' means a lease for any mining purpose or connected
purposes, and 'mining ·purposes' includes the sinking and searching
for, winning, working, getting, making merchantable, smelting or
otherwise converting or working for the purposes of any manufacture, /
carrying away and disposing of mines and minerals, in or under land, D
and the erection of buildings and the execution of engineering and
other works suitable for those purposes.

'Mining lease' is also defined for the purposes of the Opencast
Coal Act 1958, whilst 'coal-mining lease', 'lease' and 'mine of coal' E
were all defined for the purposes of the Coal Act 1938.

Para 323:Rents and royalties. An agreement for a lease usually
contains stipulation as to the dead rents and other rents and royalties
to be reserved by, and the covenants and provisions to be inserted
in the lease, but the omission to provide for the payment of a dead F
rent does not render the agreement so inequitable as to be
unenforceable.

Rent and royalties are true rents in the sense that they are incident
to the reversion, but periodical payments under a lease of mines for
a specific period may amount to personal debts only. G
A lessee who goes into possession and works minerals before
completion of the lease may be ordered on interim application to pay
into Court the amount of royalties due in respect of minerals raised.

Para 324: Usual provisions in leases- The statutory formalities regarding H
728 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A the disposition of an interest in land will apply to a contract for a mining lease.
In a contract for a lease for' working a mine, time is of the essence of the
contract even if not expressly stated to be so. Mining leases usually contain
clauses providing for the reference of dispute to arbitration or determination
+-
by an expert where the value of the minerals gotten is in dispute."

B Relevant clauses in the Lease Deed dated 28.5.19923 also need to be quoted.
They read ·as follows: '·

xxx

Part V : RENT AND ROYALTIES RESERVED BY THE LEASE
c I. To pay dead rent or lease whichever is higher.

The lessee shall pay, for every year except the first year of the
lease, deed rent as specified in clause 2 of this part:

Provided that, where the holder of such mining lease becomes
D liable under Section 9 of the Act, to pay royalty for any mineral
removed or consumed by him or by his agent, manager, employee,
contractor or sub-lessee from the leased area, he shall be liable to pay
either such royalty or the deed rent in respect of that area, whichever
is higher.

E 2. Rate and mode of payment of dead rent:

Subject to the provisions of clause I of this ·Part, during ·the
subsistence of the lease, the lessee shall pay to the State Government
annual deed rent for the lands demised and described in Part I of this
Schedule at the rate for the time being specified in the Third Schedule
F to the Act in such manner as may be specified in this behalf by the
State Government.

3. Rate and mode of payment of royalty:

Subject to the provision of clause I of this Part, the lessee shall,
G during the substance of this issue, pay to the State Government at
such times and in such manner, as the State Government may prescribe
in respect of any minerals removed by him from the leased area at the
rate for the time being specified in the Second Schedule to the Mines
and.Minerals (Regulation and Development) Act, 1957.

H
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 729

4. Payment of surface rent and water rate A
The lessee 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 unde·r the authority
of these pres~nts at the rates as assessed by the Deputy Commissioner
per hectare of the area so occupied or used and so in proportion for B
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 lands so used
to its original condition. Surface rent and water rate shall be paid as
hereinbefore detailed in clause 2: PROVIDED THAT NO such rent/ C
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".

Civil Appeal Nos.3744-46 of 2000

These -appeals are concerned so far as the issue regarding liability to
D
pay purchase tax on royalty has been dealt with in detail in the connected
Civil Appeal Nos. 2641-42 of 2000 (State of Himachal Pradesh and Ors. v.
Mis Gujarat Ambuja Cement Ltd and Ors.,) Following the view expressed
therein, these appeals deserve dismissal which we direct.
E
The appeals are dismissed subject to the aforesaid observations with
no order as to costs.

v.s.s. Appeal allowed.