WP/18160/2006 of M/s. Mettu Ramaswamy Labour Contract, Vs The State of Andhra Pradesh, on 31 December 2009

COMMON ORDER

(per the Honourable Sri Justice A.Gopal Redy)

In this batch of writ petitions, the legislative competence of theState Legislature in enacting Section 2(e) of the Andhra PradeshUrban Areas (Development) Act, 1975 (for short “the Urban AreaDevelopment Act”) including mining operations within the expressionof “development” is challenged as ultra vires, unconstitutional andbeyond the competence of the State Legislature.

The relevant facts, shorn of details, necessary for disposal ofall these writ petitions are as under:

M/s. Pokarna Ltd., Secunderabad--Petitioner in WPNo.12302/2006 was granted a quarry lease for a minor mineral, colourgranite, over an extent of Ac.4-90 cents in S.No.960 of Madikondavillage, Hanumakonda Mandal, Warangal District vide proceedingsNo.14812/K5/95 dt. 26-8-1996 of the fourth respondent- Director of Mines & Geology, Hyderabad for a period of 15 years on petitionerexecuting a lease deed before the sixth respondent-Assistant Directorof Mines & Geology, Warangal in Form-G. The Assistant Directorissued work order proceedings No.2639/Q/96 dt.4-9-1996 limiting thelease period from 4-9-1996 to 20-4-2010 as the pattadar’s consent was

up to 20-4-2010. While so, the second respondent-Kakatiya Urban Development Authority, represented by its Vice-Chairman, Warangal (for short “KUDA”) published an advertisement calling upon the lease-holders of minor-mineral to seek no objectioncertificate from KUDA on payment of usual charges. On issuing suchadvertisement, the petitioner and other companies by way ofapplication dt. 23-2-1998 requested the Government of AndhraPradesh to exclude its quarry lease area along with other surroundingquarry lease areas from development area under Section 13 (2) (a) ofthe Urban Area Development Act and to declare the same as “miningzone”. On the said representation, the first respondent by its letterdt.10-9-2001 indicated certain guidelines. Thereafter, KUDA issuedproceedings No.C1/505/2003 dt. 16-6-2003 permitting six quarry leaseowners to continue mining operations declaring the said quarry leaseas “temporary mining area” subject to certain conditions. KUDA bynotice dt. 10-11-2003 directed the petitioner to pay a sum ofRs.9,62,765/- towards application fee as per resolution passed by itand development charges for change of land use. The petitioner whileregistering its protest deposited Rs.3,08,365/- on 28-11-2003 with arequest to issue permission without insisting any further charges. KUDA by its letter dt. 30-1-2006 called upon the petitioner topay the balance amount of Rs.6,54,400/-. The petitioner paid Rs.3,54,400/- on 11-5-2006 by way of pay order No.010701 dt. 10-5-2006. For not paying the balance of development charges as demanded through notice dt. 10-1-2003, KUDA by proceedingsNo.C1/505/03 dt. 27-5-2006 cancelled NOC/temporary permissionissued by proceedings dt. 16-6-2003. Questioning the demand noticedt. 10-11-2003 for payment of application fee and developmentcharges to a tune of Rs.9,62,765/- and cancellation of No objectionCertificate by KUDA vide its proceedings No.C1/505/03 dt. 27-5-2006,the above writ petition came to be filed.

M/s. Imperial Granites Private Limited, Siddartha Nagar,Kajipet, Warangal—Petitioner in WP No.11764/2004 was grantedquarry lease in respect of colour granite, a minor mineral, inS.Nos.907, 908, 909/AB, 1001 and 1002/1 of Madikonda village,Hanumakonda Mandal, Warangal District by the Director of Mines &Geology, Hyderabad. The Assistant Director of Mines & Geology,Warangal by proceedings dt. 19-10-1993 accordedsanction to continue quarrying operations over an extent of Ac.9-00 cents in S.No.1002/1 of Madikonda village for a period of 15 years witheffect from 8-7-1992 to 7-7-2007. Further, the AssistantDirector of Mines and Geology, Warangal, by proceedings dt. 11-10-1994 accorded sanction to work over an extent of 6.350 hectares inS.No.907, 908, 1001/A and 1001/B of patta land and S.No.1002/1 ofGovernment Land of Madikonda Village for a period of 15 years from11-10-1994 to 10-10-2009. Further, the Deputy Director of Mines andGeology, Warangal by proceedings dt. 30-12-1993 accordedsanction to the petitioner to work over an extent of 1.980 hectares inS.No.909/B of Madikonda village for a period of 15 years from 7-4-1994 to 6-4-2009. KUDA issued a notice in RC No.C1/505/2003 dt.31-10-2003 calling upon the petitioner to pay an amount of Rs.58,05,480/-in favour of Vice-Chairman, KUDA, Warangal through DD drawn fromany nationalized bank within 15 days from the date of receipt of the notice, failing which, necessary action will be initiated against the saidquarry operations made in the site as per the provisions of the UrbanArea Development Act. Questioning the said notice, the above writpetition came to be filed.

M/s. G.B.R. Minerals Private Ltd., Chennai—Petitioner inW.P.No.17056/2006 was granted a quarry lease on 17-2-2005 forcolour granite, a minor mineral, in S.No.947 of Uppugallu village,Zafargadh Mandal, Warangal District over an extent of 2.25 hectares vide proceedings No.5057/R2-2/2004 dt. 17-2-2005 of the Director ofMines and Geology, Hyderabad. The petitioner was served with anotice in RC No.C-2/1265/97/998 dt. 20-7-2006 of KUDA stating thatthe petitioner is continuing the mining operations without priorpermission as required under Sections 13 and 14 of the Urban AreaDevelopment Act and the petitioner was called upon to submit anapplication along with a fee of Rs.2,67,000/- within seven days fromthe date of receipt of the notice. Questioning the same, the above writpetition came to be filed.

M/s. Imperial Granites Private Limited, Siddarthanagar,Kazipet-Petitioner in WP No.17057/2006 was granted quarry lease on30-3-2001 for colour granite over an extent of 18.26 acres in S.No.111of Kothapally village, Hanumakonda Mandal, Warangal District byproceedings No.22634/R7-1/2001 dt. 30-3-2001 issued by the Directorof Mines and Geology, Hyderabad. The petitioner was served with anotice in RC No.C-2/1265/97 dt. 20-7-2006 stating that the petitioneris continuing the quarrying operations without permission as requiredas per the provisions of the Urban Area Development Act and thepetitioner was called upon to submit an application along with a fee ofRs.6,93,000/-. Questioning the same, the above writ petition came tobe filed.

M/s. Mettu Rama Swamy Labour Contact Co-operativeSociety Ltd., Madikonda village, Hanumkonda Mandal, WarangalDistrict—Petitioner in WP No.18160/2006 obtained licence for extracting colour granite over an extent of 1.23 hectares in S.No.905and 1002/1 of Madikonda Village, Hanamkonda Mandal, WarangalDistrict by proceedings No.2458/02 dt. 18-2-2002 issued by theAssistant Director of Mines and Geology, Warangal or a period of twoyears from 18-2-2002 to 17-2-2004. As the petitioner could notcarry on any activity, the Assistant Director of Mines and Geology,Warangal vide proceedings No.593/Q/04 dt. 6-10-2005 granted mininglease for a period of 20 years valid till 5-10-2025 over an extent of1.23 hectares in S.No.905 and 1002/1. The petitioner was served witha notice by KUDA on 5-12-2005, wherein the petitioner was calledupon to pay a sum of Rs.5,97,550/- towards processing fee anddevelopment charges for issuing no objection certificate for quarrylease, followed by final notice dt. 30-1-2006. The petitioner made arepresentation to the second and third respondents, namely,Government of Andhra Pradesh, represented by its Secretary, Minesand Geology, Hyderabad and KUDA stating that the petitioner is not ina position to pay the said amount. Whereupon, KUDA by proceedingsNo.C1/505/03 dt.27-5-2006 cancelled NOC/temporary permission. Questioning the same, the above writ petition came to be filed.

In all the writ petitions except WP No.12302/2006, this courtstayed the proceedings on condition of the petitioner depositing 50%of the demanded amount/balance of the demanded amount.

The plea taken by the petitioners in all the writ petitions is thatArts.245 and 246 of the Constitution of India deal with the powers ofParliament and Legislature of the State to deal with respective matterscontained in List I, II and III of the Seventh Schedule to the Constitution. The Parliament by virtue of powers conferred underEntry 54 of List I enacted Mines and Minerals (Development &Regulation) Act, 1957 (for short “MMRD Act”). Under Section 15 of theMMRD Act, the State Governments are empowered to make rules inrespect of a minor mineral. By virtue of Sec.15 of the MMRD Act, theGovernment of Andhra Pradesh framed the A.P. Minor MineralConcession Rules, 1966 (for short “the Minor Mineral ConcessionRules”). Pursuant to which, the petitioners were granted mining leasessubject to payment of royalty, dead rent and other charges as laiddown under the Minor Mineral Concessions Rules. There is no roomleft for the State Legislature to legislate under Entry 23 of List II levyingdevelopment charges for mining operations within the urban areadevelopment. Therefore, Sec.2 (e) of the Urban Area Development Actauthorizing the KUDA to levy development fee under Section 27 ofthe Urban Area Development Act in respect of the areas where miningoperations are carried on is arbitrary, illegal and beyond thecompetence of the State Legislature and ultra vires to the MMRD Actand the same is liable to be quashed.

Conclusion

Opposing the writ petitions, in WP No.11764/2004 the JointDirector (Town Planning) Municipal Administration and UrbanDevelopment Department, Government of A.P., Hyderabad on behalfof the first respondent filed a counter-affidavit stating that KUDA issued no objection permitting M/s. Coromandal Agencies to utilize the land in S.No.1002/1 of Madikonda village for quarrying the stone for the remaining lease period subject to certain conditions throughproceedings No.C3/699/85/1336 dt. 3-8-1986. Earlier M/s.Coromandal Agencies have operated the quarry under thepermission of KUDA over an extent of 9 acres, but the petitioner in WPNo.11764/2004 after acquiring additional land to an extent of 21

acres in S.Nos.907, 908, 1001/A and B and 1002 of Madikonda villagefiled the writ petition by inventing false grounds. In fact, the AssistantDirector of Mines and Geology has to permit the lease holder to quarryafter prior no objection certificate from the Competent Authority ie.,KUDA, which is competent to issue no objection certificate accordingto land use and zoning regulations of Notified Master Plan sanctioned vide G.O.Msd.No.910, Municipal Administration, dt. 25-11-1971 andG.OP.Ms.No.364, Municipal Administration, dt. 4-6-1977 read withSections 13 and 14 of the Urban Area Development Act, where thequarry is falling within the jurisdiction of “Development Area” asdeclared by the Government in G.O.Ms.No.1177, MunicipalAdministration, dt. 6-11-1981. The Government of Andhra Pradesh hasdeclared the Warangal city and its vicinity area covering 171 villagesas “Development Area” for orderly development of Warangal city andits surrounding areas including Manikonda village where the subjectland is located. In exercise of powers conferred under the Urban AreaDevelopment Act, KUDA issued a notice to the petitioner in WPNo.11764/2004 to obtain No Objection Certificate duly paying therequisite charges as the activity being carried on by the petitioner shallbe ultimately put the burden on City infrastructure facilities and arisedemand for providing additional roads, transport, water supply,housing drainage etc., and impact on the environment. Since thesecond respondent being the statutory authority to look after thedevelopment according to the plan and secure control over the activityhas to mobilize resources by collecting development charges on anydevelopment under Sec.27 of the Urban Area Development Act. Onthe request of the leaseholders-writ petitioners, KUDA declaredManikonda area covering an extent of 20.509 hectares as temporarymining area vide proceedings ROC No.C1/505/3 dt. 16-6-2003 to conduct mining operations. The petitioners who got approval ofdeclaration of mining zone from the second respondent under theprovisions of the Urban Area Development Act cannot question theaction of the KUDA in asking the petitioners to pay the developmentcharges.

KUDA filed a separate counter contending that the AssistantDirector of Mines and Geology is required to obtain NOC from KUDAas it is the competent authority to issue no objection certificateaccording to land use and zoning regulations as notified in thesanctioned master plan vide G.O.Ms.No.910, Municipal Administrationdt.25-11-1971 and G.O.Ms.No.364, Municipal Administration dt. 4-6-1977 and as per Sections 13 and 14 of the Urban Area DevelopmentAct. The Government of Andhra Pradesh declared the Warangal cityas “development area” and its vicinity area covering 171 villages fororderly development. The petitioner in WP No.11764/2004 filed WPNo.3613/98, and it is pending. The petitioners were served withnotices as per the provisions of the Urban Area Development Act asthey are required to obtain NOC duly paying the requisite charges fordevelopment and extraction of rock in the large scale by deployingheavy machinery which activity will ultimately put the burden on thecity infrastructure facilities and arise the demand for providingadditional infrastructure, roads, transport, water supply housingdrainage etc., and the activity of quarrying by the petitioners will haveimpact on the environment. KUDA being the statutory authority to lookafter the development as per the plan and secure control over theactivities of the petitioners and as per the provisions of the Urban AreaDevelopment Act issued notice to the leaseholders and five othercompanies under the provisions of the Urban Area Development Actas the area was declared as “temporary mining area” to conduct quarry operations subject to conditions envisaged under Sections 13 and 14of the Urban Area Development Act. Basing on the request made byM/s. Astral Granites; M/s. Imperial Granites; M/s. Pokarva Granites;M/s. Reliance Granites; M/s. Vaddera Stone Workers Union and M/s.Mettu Rama Swamy Workers Co-operative Society, the AssistantDirector of Mines and Geology granted permission to the aboveleaseholders to carry on quarry operations. They approached KUDAwith a request to declare the quarry operations area as mining zoneenabling them to carry on mining activity by declaring/converting thesanctioned master plan area from residential to quarrying zone.Considering the request made by the petitioners and others, KUDAdeclared the quarrying area into a mining zone subject to payment ofconversion and development charges in the month of Julu,2003. Afterdeclaring the quarry operation area as mining zone, some of the quarrying companies paid development charges and some have notpaid. KUDA issued no objection certificate to M/s. CoromandalAgencies to the extent of lease period. The petitioner shall obtain NOCrenewed as per the sanction accorded earlier by it through theproceedings No.C3/699/85/1336 dt. 3-8-1986. The developmentcharges will be levied according to the land which is taken up fordevelopment are two purposes/use ie., main and appurtenant land and ancillary activities such as parking of vehicles, dumping yards,free planting, storages etc.,, which is mandatory to the petitioner toprovide all the facilities on the site.

The petitioner in WP No.11764/2004 filed a reply-affidavitstating that M/s. Coromandal Agencies has already paid developmentcharges in respect of S.No.1002/1 in respect of Ac.9-00 cents ofMadikonda village, collecting once again the development charges onthe same land does not arise on the basis that there is a change in the lease. The development charges, if any, could be levied on hectarebasis and not square meter basis as per Sec.28 (2) (a) of the UrbanArea Development Act.

Sri Pannala Srinivas, learned counsel for the petitioner in WPNo.12302/2006 contended that Sec.2 of the MMRD Act has not left anyarea to State Legislature to deal with mining area and levy of anycharges for such mining operations. Under Section 15 of the MMRDAct, power is conferred on the State Governments for framing rules,and once in exercise of the said power, the State Government framedMinor Mineral Concession rules, 1996 levying charges under Rules 9and 12 and further levying development charges by KUDA is without authority and development authority should be prohibited from levyingsuch charges. Pursuant to the demand notice dt. 10-11-2003, the petitioner deposited a sum of Rs.3,08,365 on 6-12-2003 andfurther deposited a sum of Rs.3,54,400/- on 11-5-2006 withoutprejudice to their rights that they are not liable to pay the developmentcharges as demanded.

Sri M. V. Suresh Kumar, learned counsel for the petitioners inthe remaining writ petitions contended that the impugned notice dt. 31-10-2003 (in W.P.No.11764/2004) issued by KUDA demandingpayment of development charges including process fee for issue ofNOC is without any power or authority. Assuming Sec. 2(e) of theUrban Area Act is valid, notice dt. 31-10-2003 is not validbecause without prior notice KUDA cannot demand the amountmentioned in the notice. Though the lease was granted in the year1993, levying development charges by taking the value of the land inthe year 2003 is arbitrary and illegal. Under Sec.28 of the Urban AreaDevelopment Act, development charges shall be determined on theproposed use of land at the rate prescribed per hectare for that area, whereas demand made by KUDA shows that it was determined onsquare metre basis, which is per se illegal. Since the petitioner in WPNo.11764/2004 obtained mining lease over an extent of 6.350hectares in S.No.907, 908, 1001/A and 1001/B of patta land andS.No.1002/1 of Government Land in Madikonda village, nodevelopment charges shall be levied on the land vested in or underthe control or possession of the Central or the State Government or ofany local locality as per sub-section(4) of Section 27 of the Urban AreaDevelopment Act. Though notice dt. 17-5-1984 development chargeswere already levied and M/s. Coromandal Agencies, Madras wascalled upon to pay the same and same has been paid by it, and thelease was transferred in the name of the petitioner, therefore, againsubjecting the petitioner to pay the development charge, if any, is onlyfor area covered by mining operations but not the entire land leasedout. He further contended that calling upon the petitioners in WPNos.17056/2006 and 17057/2006 to submit applications along withprocess fee for operating quarry operations does not arise as theGovernment has not agreed to notify it as mining zone. He furthercontended that in the impugned proceedings dt. 27-5-2006 issuedto the petitioner in W.P.No.18160/2006, a reference is made to theproceedings dt. 16-6-2003 and the same has not been communicatedto the petitioner at any time and in spite of the specific plea taken bythe petitioners that it was not served on the petitioner, the same hasnot been denied by the respondents in their counter also, therefore,issuance of the proceedings dt. 27-5-2006 is violation of principles ofnatural justice and the same is liable to be set-aside. In support of thecontentions advanced by both the counsel, strong reliance was placedon the following judgments:

1. STATE OF ORISSA V. M.A. TULLOCH & CO.[[1]]

1. STATE OF ORISSA V. M.A. TULLOCH & CO.[[1]]

2. BAIJNATH V. STATE OF BIHAR[[2]]

Sri M.V. Suresh Kumar further relied on the judgment of this court inK.C.P. LTD., V. GOVERNMENT OF A.P.[[3]]

Per contra, Sri A.Satya Prasad, learned Additional AdvocateGeneral contended that the Urban Area Development Act and MMRDAct operate in different fields. Sections 2(e), 5, 16, 27 and 29 of theUrban Area Development Act for levying development charges arenothing to do with exploiting mines. Section 2 of the MMRD Act dealswith regulation of mines and the development of minerals to the extent provided under the Act. Section 3 ( c ) of the MMRD Act defines“mining lease”, to mean a lease granted for the purpose of undertakingmining operations, and includes a sub-lease granted for such purpose,whereas “mining operations” under Section 3 (d) means anyoperation undertaken for the purpose of winning any mineral. Section4 of the MMRD Act restricts on undertaking prospecting and miningoperations except under and in accordance with the terms andconditions of the licence. Under Section 9 of MMRD Act, the holder ofa mining lease under an obligation to pay royalty in respect of anymineral removed or consumed by him particularly from the leasedarea. Quality of mineral is the basis fro collecting royalty as held bythe Supreme Court in NATIONAL MINERAL DEVELOPMENT

CORPORATION LTD V. STATE OF M.P[[4]]. There is noencroachment in the field occupied by the Central legislation bylevying development charges for the land use. For the saidproposition, he placed reliance on the following judgments:

1. SHRI TARKESHWAR SIO THAKUR JIU V. DARDASS DEY AND CO[[5]]

2. STATE OF W.B. V. KESORAM INDUSTRIESLTD[[6]]

3. INDIA CEMENTS LTD V. STATE OF T.N[[7]]

He further placed reliance on the following judgments of this court andthe Apex Court.

1. CASKEN TEA INDUSTRIES LIMIED V.HYDERABAD URBAN DEVELOPMENTAUTHORITY[[8]]HYDERABAD URBAN DEVELOPMENTAUTHORITY[[8]]

2. BANDHUA MUKTI MORCHA V. UNION OFINDIA[[9]]

3. COLESHILL INVESTMENT V. MIN.OF HOUSING(H.L.(E.))[[10]]

He further contended that “development” as defined under Sec. 2(e) ofthe Urban Area Development Act is derived from the Europeanstatutes, is uniform in all the State Governments under the Urban AreaDevelopment Act, and the provisions were upheld by the SupremeCourt, therefore, challenge to the constitutional validity must fail.

In reply, it was contended by Sri Pannala Srinivas that thereis no need to obtain NOC from the local authority ie., KUDA forlevying development charges as per Granite Conservation andDevelopment Ruels,1999, framed in exercise of powers conferredunder Section 18 of the MMRD Act and it was considered by this court in MAHABALESWARAPPA AND SONS, BELLARY V.COMMISSIONER OF LAND REVENUE, GOVERNMENT OF A.P.HYDERABAD[[11]], which exclusively deals with levy of charges,therefore, KUDA cannot levy development charges. Whereas Sri M.V.Suresh Kumar contended that KUDA has to justify imposition ofdevelopment charges on the basis of quid pro, namely, rendering anyservice for mining operations. Once there is no necessity to comply with the provisions of the Urban Area Development Act, levyingdevelopment charges is not at all warranted and if reasonable chargesare demanded on hectare basis, the petitioners are agreeable to paythe same and levying development charges on square metre basis ishighly arbitrary and illegal. Since no specific orders are required forchange of land use in the case of quarry operations, levyingdevelopment charges cannot be justified, therefore payment of processfee does not arise in the case of the petitioners in WP Nos.17056 and17057 of 2006 as the Government has not agreed to change the landuse.

In the wake of submissions, we shall now consider thesubmissions in the light of relevant statutory provisions under theUrban Area Development Act, which govern the issue involved in allthese writ petitions.

“2(e) 'development' with its grammatical variations means thecarrying out of all or any of the works contemplated in a master planor zonal development plan referred to in this Act, and the carrying outof building, engineering, mining or other operations in, on, over orunder land, or the making of any material change in any building orland and includes re-development:

Provided that for the purposes of this Act, the following operations oruses of land shall not be deemed to involve development of the landthat is to say--

(i) the carrying out of any temporary works for the maintenance,improvement or other alteration of any building, being works which donot materially affect the external appearance of the building;

(ii) the carrying out by a local authority of any temporary worksrequired for the maintenance or improvement of a road, or workscarried out on land within the boundaries of the road;

(iii) the carrying out by a local authority or statutory undertaking ofany temporary works for the purpose of inspecting, repairing orrenewing any sewers, mains, pipes, cables or other apparatus,including the breaking open of any street or other land for thatpurpose;

(iv) the use of any building or other land within the curtilage purpose incidental to the enjoyment of the dwelling house as such; and

(v) the use of any land for the purpose of agriculture, gardening orforestry (including afforestation) and the use for any purposespecified in this clause of any building occupied together with theland so used.”

“2(o) 'urban area' means--

(i) the area comprised within the jurisdiction of the MunicipalCorporation of Hyderabad or of any Municipality constituted under theAndhra Pradesh Municipalities Act, 1965 and also any such area inthe vicinity as the Government may, having regard to the extent of,and the scope for, the urbanisation of that area or other relevantconsiderations, specify in this behalf, by notification; and

(ii) such other area as the Government may, by notification, declareto be an urban area, which in the opinion of the Government, is likelyto be urbanized.

Section 5 of the Urban Area Development Act envisagesobject and powers of the Authority. It reads as under:

5. Object and powers of the Authority:

(1) The objects of the Authority shall be to promote and secure thedevelopment of all or any of the areas comprised in the developmentarea concerned according to plan and for that purpose, the authorityshall have the power to acquire, by way of purchase or otherwise,hold, manage, plan, develop and mortgage or otherwise dispose ofland and other property, to carry out by or on its behalf building,engineering, mining and other operations, to execute works inconnection with supply of water and electricity, disposal of sewerageand control of pollution, other services and amenities and generally todo any thing necessary or expedient for purposes incidental thereof.

(2) The Authority may, for the purpose of efficient performance of itsfunctions, constitute as many committees as it thinks fit, in suchmanner as may be prescribed, and provide by regulations made inthis behalf for rules of procedure at the meeting of the Committeesand allowances to members thereto.

Section 13 confers power on the State Government to declare suchurban area or group of urban areas to be a development area for the purposes of the Act. As per section 14, every person or body includinga Department of the Government desiring to obtain the permissionreferred to in Section 13 under an obligation to make an application inwriting to the Authority in such form, which containing such parties inrespect of the development to which the application relates as may bedetermined by regulations. Under Sub-section (2) of Section 14 everyapplicable under sub-section (1) shall be accompanied by such fee asmay be prescribed. Section 16 excludes certain development worksfrom the purview of the Act. Levy of the development charges isprescribed under Sec.27 of the Urban Area Development Act, which isa charging section, under which permission is required under the Actin the whole area or any part of the development area within themaximum rates specified in Section 28. Section 28 prescribes rates ofdevelopment. It reads as under:

28 Rates of development:

(1) x x x x x ;

(2) The rates of development charges shall be determined on theproposed use of land or building:- (a) in the case of development of land, at a rate to be prescribed perhectare for that area; (b) in the case of development of building, at a rate to be prescribedper square metre of floor area for that area; Provided that the development charges may be levied at differentrates for different institutions of use as may be prescribed from timeto time to which the land, or as the case may be the building, isused; Provided further that where land appurtenant to a building is used forany purpose independent of the building, development charge may belevied separately for the building and the land.

Section 29 deals with assessment and recovery of developmentcharges.

We are, however, relieved of necessity to dwell deep into thequestion of operation of the law made by Parliament, namely, MMRD

Act and scope and extent of field that is left to the State Legislaturesor the extent of limitations in enacting the Urban Area DevelopmentAct in view of the law laid down by the Supreme Court in STATE OFWEST BENGAL V. KESORAM INDUSTRIES LIMITED (6 supra) where the Supreme Court clarified the extent of field occupied by theMMRD Act vis-à-vis competence of the State Legislature in enactingthe Urban Area Development Act in extenso.

The Supreme Court in the above case ie., STATE OF WEST

BENGAL V. KESORAM INDUSTRIES LIMITED (6 supra) wasdealing with regard to the constitutional significance centring aroundEntries 52, 54 and 97 of List I and Entries 23,49,50 and 66 in List II ofthe Seventh Schedule to the Constitution of India as also the extentand purport of the residuary power of legislation vested in the Union ofIndia. The constitutional validity of the amendments under the WestBengal Taxation Laws (Amendment) Act, 1992 amending WestBengal Primary Education Act, 1973 and the West Bengal RuralEmployment and Production Act, 1976 were successfully impugnedbefore the High Court of Calcutta. The High Court of Calcutta afterplacing reliance upon, mainly, on two decisions of the Supreme Court,namely, INDIA CEMENT LTD V. STATE OF T.N. (seven-JudgeBench decision) (7 supra) and ORISSA CEMENT LTD V. STATE OFORISSA[[12]](three-Judge Bench decision) concluded that cess cannot be said to be on land so as to be covered by Entry 49 in List IIand struck down certain levies by way of cess on coal as unconstitutional for want of legislative competence in the StateLegislature. Against which, State of West Bengal preferred appealsbefore the Supreme Court. The High Court of Allahabad upheld theconstitutional validity of cess levied under Section 35 of the U.P.Special Area Development Authorities Act, 1986 r/w Rule 3 of the Shakti Nagar Special Areas Development Authority (Cess on MineralRights) Rules,1997 (herein referred to briefly as “the SADA Act” and“the SADA Cess Rules”) while rejecting the contention of the writpetitioners that MMRD Act,1957 having been enacted containing adeclaration under Section 2 as contemplated by Entry 54 of List I andthe Act being applicable to Sonbhadra falling within the State of U.P.as well, the State Legislature was denuded of its power to enactSADA Act and the SADA Cess Rules and the impugned cess wouldhave the effect of adding to the royalty already being paid and therebyincreasing the same, which was ultra vires the power of the StateGovernment as that power was exercisable only by the CentralGovernment and dismissed the writ petition filed in the High Court(reported as RAM DHANI SINGH V. COLLECTOR, SONBHADRA(AIR 2001 ALLAHABAD 5). On dismissal, the writ petitioners beforethe Allahabad High Court carried the matter in appeal before theSupreme Court.

Justice R.C. Lahoti (as he then was) speaking for the majorityof the Bench after referring to its various earlier judgments on thesubject including the judgments on which the Calcutta High Court aswell as Allahabad High Court place reliance INDIA CEMENT LTD V.STATE OF T.N.,(7 supra) and ORISSA CEMENT LTD V. STATE OFORISSA (12 supra) while summarizing the principles as under:

“109. The primary purpose of taxation is to collect revenue. Power to tax maybe exercised for the purpose of regulating an industry, commerce or any otheractivity; the purpose of levying such tax, an impost to be more correct, is theexercise of sovereign power for the purpose of effectuating regulation thoughincidentally the levy may contribute to the revenue. Cooley in his work on taxation(Vol. 1, 4th Edn., 1924) deals with the subject in paras 26 and 27:

“There are some cases in which levies are made and collected under thegeneral designation of taxes, or under some term employed in revenue laws toindicate a particular class of taxes, where the imposition of the burden may fairly be referred to some other authority than to that branch of the sovereign power ofthe State under which the public revenues are apportioned and collected. Thereason is that the imposition has not for its object the raising of revenue but looksrather to the regulation of relative rights, privileges and duties as betweenindividuals, to the conservation of order in the political society, to theencouragement of industry, and the discouragement of pernicious employments.

Legislation for these purposes it would seem proper to look upon as beingmade in the exercise of that authority which is inherent in every sovereignty, tomake all such rules and regulations as are needful to secure and preserve thepublic order, and to protect each individual in the enjoyment of his own rights andprivileges by requiring the observance of rules of order, fairness and goodneighborhood, by all around him. This manifestation of the sovereign authority isusually spoken of as the police power. The power to tax must be distinguishedfrom an exercise of the police power.” (State v. Tucker (56 SC 516, 35 SE 215)

The political power “is a very different one from the taxing power, in its essentialprinciples, though the taxing power, when properly exercised, may indirectly tend toreach the end sought by the other in some cases”. (p. 94) “The distinction between ademand of money under the police power and one made under the power to tax is notso much one of form as of substance.” (p. 95). The distinction between a levy inexercise of police power to regulate and the one which would be in the nature of tax isillustrated by Cooley by reference to a licence. He says:

“So-called license taxes are of two kinds. The one is a tax for the purpose ofrevenue. The other, which is, strictly speaking, not a tax at all but merely anexercise of the police power, is a fee imposed for the purpose of regulation.”(p. 97)

* * *

“Suppose a charge is imposed partly for revenue and partly for regulation. Is ita tax or an exercise of the police power? Other considerations than those whichregard the production of revenue are admissible in levying taxes, and regulationmay be kept in view when revenue is the main and primary purpose. The right ofany sovereignty to look beyond the immediate purpose to the general effectneither is nor can be disputed. The Government has general authority to raise arevenue and to choose the methods of doing so; it has also general authority overthe regulation of relative rights, privileges and duties, and there is no rule ofreason or policy in the Government which can require the legislature, whenmaking laws with the one object in view, to exclude carefully from its attention theother. Nevertheless, cases of this nature are to be regarded as cases of taxation.If revenue is the primary purpose, the imposition is a tax. Only those cases whereregulation is the primary purpose can be specially referred to the police power. Ifthe primary purpose of the legislative body in imposing the charge is to regulate,the charge is not a tax even if it produces revenue for the public.” (Cooley, ibid.,pp. 98-99)

110. This Court in a seven-Judge Bench decision in Synthetics and Chemicals

110. This Court in a seven-Judge Bench decision in Synthetics and Chemicals Ltd. v. State of U.P (1990) 1 SCC 109) agreed that regulation is a necessaryconcomitant of the police power of the State. However, it was an American doctrine and in the opinion of the Court it was not perhaps applicable as such inIndia. The Court endorsed recognizing the power to regulate as a part of thesovereign power of the State exercisable by the competent legislature. Brushingaside the need for discussion on the question, whether under the Constitution theStates have police power or not, the Court accepted the position that the Statehas the power to regulate. However, in the garb of exercising the power toregulate, any fee or levy which has no connection with the cost or expenses ofadministering the regulation, cannot be imposed; only such levy can be justifiedas can be treated as part of regulatory measure. Thus, the State’s power toregulate perhaps not as emanation of police power but as an expression of thesovereign power of the State has its limitations. In our opinion, theseobservations of the Court lend support to the view which we have formed that apower to regulate, develop or control would not include within its ken a power tolevy tax or fee except when it is only regulatory. Power to tax or levy foraugmenting revenue shall continue to be exercisable by the legislature in whom itvests i.e. the State Legislature in spite of regulation or control having beenassumed by another legislature i.e. the Union. State legislation levying a tax insuch manner or of such magnitude as can be demonstrated to be tampering orintermeddling with the Centre’s regulation and control of an industry can perhapsbe the exception to the rule just stated.”

held that the West Bengal Taxation Laws (Amendment) Act,1992 is intra vires the Constitution.

While considering the minor mineral matters arising in the State of Uttar Pradesh, the Supreme Court held as under:

“140. The MMRD Act enables control over the regulation of mines and thedevelopment of minerals being exercised by the Central Government throughlegislation. The High Court has upheld the validity of the SADA Act by relating it toEntry 5 in List II which is “Local government”. Any Local Government exercising thepower of governance over a local area shall have to administer, manage and developthe area lying within its territory which cannot be done without raising funds. It is usualfor every piece of legislation giving birth to an institution of Local Government to feedit by incorporating provisions conferring power of generating funds for meeting theexpenses of governance. The SADA Act intends to achieve a level of localgovernance which the usual models of Local Government such as boards andmunicipalities are not considered capable of achieving and that is why there is aspecial development area and a Special Area Development Authority. The fundestablished under the Act meets expenses of administration needed to be incurred bythe authority. The funds cannot be utilised for any purpose other than theadministration of the Act. There are pieces of land which though containing a mine yetfall within the territory of special development area. It was pointed out by therespondents before the High Court that in spite of the Act having been enacted in theyear 1986, the successive State Governments, which had preceded it, did not takecare of the legislation and it was only the then Government which became consciousof its obligations under the SADA Act and commenced identifying special areasrequiring development such as Sonbhadra. The imposition of cess envisaged through

the SADA Act and the Rules was a step towards developing the special area. It is amatter of common knowledge, and does not need any evidence to demonstrate, thatmining activity carried on the land within the special area involves extraction, removal,loading-unloading and transportation of the minerals accompanied by its naturalconsequences entailed on the environment and the infrastructure such as roads,water and power supply etc. within the special area. The impugned cess can,therefore, be justified as a fee for rendering such services as would improve theinfrastructure and general development of the area, the benefits whereof would beavailed even by the stone crushers. Entry 66 in List II is available to provideprotective constitutional coverage to the impugned levy as fee.

141. As held in Goodricke Group Ltd (1995 Supp.(1) SCC 707) which we haveheld as correctly decided, this Court has noted the principle of law well established byseveral decisions that the measure of tax is not determinative of its essentialcharacter. The same transaction may involve two or more taxable events in itsdifferent aspects. Merely because the aspects overlap, such overlapping does notdetract from the distinctiveness of the aspects. In our opinion, there is no question ofconflict solely on account of two aspects of the same transaction being utilised bytwo legislatures for two levies both of which may be taxes or fees or one of whichmay be a tax and the other a fee falling within two fields of legislation respectivelyavailable to the two.

143. As a tax the impugned levy of cess is clearly covered by Entry 5 of List II(as the High Court has held, and we add) read with Entries 49 and 50 of List II. Thereis no challenge to the declaration of the area as a special development area and theconstitution of Special Area Development Authority for the administration thereof. Inother words, the constitutional validity of the enactment as a whole and the rulesframed thereunder is not put in issue. What is under challenge is only the levy ofcess. There is nothing wrong in the State legislation levying cess by way of tax so asto generate its funds. Although it is termed as a “cess on mineral right”, the impactthereof falls on the land delivering the minerals. Thus, the levy of cess also fallswithin the scope of Entry 49 of List II. Inasmuch as the levy on mineral rights doesnot contravene any of the limitations imposed by Parliament by law relating to mineraldevelopment, it is also covered by Entry 50 of List II. The power to levy any tax or feelying within the legislative competence of the State Legislature can be delegated toany institution of Local Government constituted by law within the meaning of Entry 5in List II. Entries 5, 23, 49, 50 and 66 of List II provide adequate constitutionalcoverage to the impugned levy of cess. True it is that the method of quantifying thecess is by reference to the quantum of mineral produced. This would not alter thecharacter of the levy. There are myriad methods of calculating the value of the landfor the purpose of quantifying the tax, reference whereto has already been made by usin the other part of this judgment. Validity of cess upon the land quantified byreference to the quantity of its produce was held to be a levy on the land and henceconstitutional in Ralla Ram(1948 FCR 207::AIR 1949 FC 81), Moopil Nai (AIR 1961SC 552) and Ajoy Kumar Mukherjee (AIR 1965 SC 1561) It does not become exciseduty on manufacture and production of goods merely on account of having relationwith the quantity of product yielded of the land. Rather it is a safe, sound andscientific method of determining the value of the land to which the product relates.The levy of cess considered as a tax is constitutionally valid.

146. As stated earlier also, the impugned cess can be justified as fee as well.

146. As stated earlier also, the impugned cess can be justified as fee as well.

The term cess is commonly employed to connote a tax with a purpose or a taxallocated to a particular thing. However, it also means an assessment or levy.Depending on the context and purpose of levy, cess may not be a tax; it may be a feeor fee as well. It is not necessary that the services rendered from out of the feecollected should be directly in proportion with the amount of fee collected. It is equallynot necessary that the services rendered by the fee collected should remain confinedto the persons from whom the fee has been collected. Availability of indirect benefitand a general nexus between the persons bearing the burden of levy of fee and theservices rendered out of the fee collected is enough to uphold the validity of the feecharged. The levy of the impugned cess can equally be upheld by reference to Entry66 read with Entry 5 of List II.

147. Royalty is not a tax. The impugned cess by no stretch of imagination can becalled a tax on tax. The impugned levy also does not have the effect of increasing theroyalty. Simply because the royalty is levied by reference to the quantity of theminerals produced and the impugned cess too is quantified by taking intoconsideration the same quantity of the mineral produced, the latter does notbecome royalty. The former is the rent of the land on which the mine is situated or theprice of the privilege of winning the minerals from the land parted with by theGovernment in favour of the mining lessee. The cess is a levy on mineral rights withimpact on the land and quantified by reference to the quantum of minerals produced.The distinction, though fine, yet exists and is perceptible.

148. In our opinion, Ram Dhani Singh v. Collector, Sonbhadra (AIR 2001ALL5::2001 ALL.LJ 175) has been correctly decided. We uphold and affirm the same.”

In view of the authoritative pronouncement of the SupremeCourt, as referred to above, we do not see any merit in the submissionmade by the learned counsel for the petitioners that the definitionunder Sec. 2(e) of the Urban Area Development Act includes miningoperations within the expression of “development” is ultra vires andbeyond the competence of the State Legislature and the same isaccordingly rejected.

Nextly, it was argued that as per Section 28 (2) (a) of theUrban Area Development Act, development charges shall bedetermined on the proposed use of land on hectare basis but not onsquare metre basis. Rates of development charges levied on squaremetre basis is only where building activities are carried on but notmining operations. First proviso to sub-section (2) of Section 28

prohibits levy of development charges exceeding Rs.300/- in the caseof development of the land and Rs.125/- per square metre in the caseof development of building. The impugned notice dt.10-11-2003 in WPNo.12302/2006 discloses that the application fee for change of landuse was levied at Rs.3-80 per sq.metre and development charges forchange of land use at Rs.30/- per sq. metre. Rs.9,62,765/- towardsdevelopment charges was levied, to be payable at one time. Since thelease period is for 15 years, for all these years, KUDA has to provideinfrastructure facilities, roads, transport, water supply, housingdrainage and to maintain environment by arresting pollution caused bythe mining activity, by incurring necessary expenditure for the saidpurpose. Further on the request made by the petitioners, KUDAdeclared the quarry operations area as mining zone subject topayment of conversion and development charges after converting thesanctioned master plan area from residential to quarrying zone. Someof the quarrying companies have paid development charges, andsome of them have not paid..

In KEWAL KISHAN PURI V. STATE OF PUNJAB[[13]]theSupreme Court while laying down principles for satisfying the test for avalid levy of market fees on the agricultural produce bought or sold bylicensees in a notified market area held that the element of quid proquo may not be possible, or even necessary, to be established witharithmetical exactitude but even broadly and reasonably it must beestablished by the authorities who charge the fees that the amount isbeing spent for rendering services to those on whom falls the burden ofthe fee and At least a good and substantial portion of the amountcollected on account of fees, may be in the neighbourhood of two-thirds or three-fourths must be shown with reasonable certainty asbeing spent for rendering services of the kind mentioned above.

There is no complaint in writ petitions that the petitionerswere not provided with necessary infrastructure facilities like roads,water supply, drainage facility to discharge the rain water within thevicinity of the area etc., In view of the same, it is un-necessary for us togo into the said aspect since the fee collected is being used fordevelopment of the area. Further, when the petitioners were applied forgrant of no objection, KUDA has issued no objection certificate onpetitioners complying with the conditions mentioned in its order inROC No.C1/505/2003 dt. 16-6-2003 by declaring the quarry area as“temporary mining area” and the petitioners are required to comply withthe said conditions, failure to do so, KUDA can withdraw the no-objection for non-compliance of the conditions imposed. Therefore,wherever KUDA cancelled the lease without prior notice, the same canbe treated as a show-cause and the petitioners are granted two weeks’time for submitting their explanation from the date of receipt of a copyof the order and on submission of such explanation, KUDA canconsider the same and pass appropriate orders considering thequestion whether the petitioners have complied with the objectionspointed out in the cancellation notice.

We do not see any merit in the contention that once M/s.Coromandal Agency paid development charges, no developmentcharges can be levied on the petitioner in WP No.11764/2004 sincelease granted in favour of M/s.Coromandal Agency was transferred infavour of the petitioner for the un-expired period of lease up to 7-7-1992. When the petitioner seeks for renewal of quarry lease for colourgranite over an extent of 9 acres in S.No.1002/1 of Government landof Madikonda village, KUDA can levy development charges for theperiod renewal is sought for.

Similarly, the contention advanced by the learned counsel for the petitioners in WP Nos.17056 and 17057 of 2006 that they are notliable to pay process fee as the Government has not accorded tochange the land use is also devoid of any merit.

Sub-section (4) of Section 27 of the Urban Area DevelopmentAct exempts levy of development charges on institution of use or ofchange of use or development of, any land or building vested in orunder the control or possession of the Central or the State Governmentor any local authority. It is not the case of the petitioners that theinstitution is using or changing the use or development of any buildingvested in or under the control of the State Government. In view of thesame, the petitioner in WP No.18160/2006 can treat the impugnednotice dt.27-5-2006 as show cause notice and submit its explanationetc., as referred to above.

In the result, W.P.Nos.12302/2006 and 18160/2006 aredisposed of to the extent indicated above. The remaining writ petitionsie., 11764/2004, 17056/2006 and 17057/2006 are dismissed. Thereshall be no order as to costs.

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A.GOPAL REDDY, J

__________________________

SAMUDRALA GOVINDARAJULU,J

Dt. 31-12-2009KMR

[1]AIR 1964 SC 1284

[2]AIR 1970 SC 1436

[3]AIR 1990 AP 314

[4](2004) 6 SCC 281

[5](1979) 3 SCC 106(1979) 3 SCC 106

[6](2004) 10 SCC 201(2004) 10 SCC 201

[7](1990) 1 SCC 12(1990) 1 SCC 12

[8]1992(1) ALT 641992(1) ALT 64

[9](2000) 10 SCC 104(2000) 10 SCC 104

[10](1969) 1 WEEKLY LAW REPORTS 746(1969) 1 WEEKLY LAW REPORTS 746

[11]1996(4) ALT 3341996(4) ALT 334

[12](1991) Supp.(1) 430(1991) Supp.(1) 430

[13](1980) 1 SCC 416(1980) 1 SCC 416