THE HONOURABLE MR. JUSTICE S.M. SUBRAMANIAM W.P.Nos.10559, 12033, 12928, 12955, 14447, 14841 and 14842 of 2002             And   W.P.M.P. Nos.14259 and   19454 of 2002 WP No.10559 of 2002 The Associated Cement Companies Limited, Madukarai Village,

IN THE HIGH COURT OF JUDICATURE AT MADRAS

COMMON JUDGMENT RESERVED ON 07-01-2022

COMMON JUDGMENT PRONOUNCED ON 21-01-2022

CORAM :

THE HONOURABLE MR. JUSTICE S.M. SUBRAMANIAM

W.P.Nos.10559, 12033, 12928, 12955, 14447, 14841 and 14842 of 2002             And   W.P.M.P. Nos.14259 and   19454 of 2002

WP No.10559 of 2002

The Associated Cement Companies Limited,

Madukarai Village,

Coimbatore,

Represented by its Sr. Vice President.                         ..          Petitioner

Vs.

1.State of Tamil Nadu,

Represented by its Secretary to Government,

Industries Department,

Guindy,

Chennai – 600 032.

2.Director of Geology and Mining,

Guindy,

Chennai – 600 032.

3.The District Collector,

Coimbatore. .. Respondents WP 10559 of 2002 is filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, calling for the records relating to the order passed by the second respondent bearing Rc.No.17556/MM1/99 dated 19.03.2002 received by the petitioner on 22.03.2002 and quash the same.

For Petitioner in

WP 10559/2002               :   Mr.Karthick Rajan

For Petitioner in

WP 12033/2002               :   Mr.P.R.Raman,                                                                    Senior Counsel for                                                                    Mr.C.Seethapathy.

For Petitioner in

WPs 14841&14842/2002:   Mr.P.R.Raman,

Senior Counsel for

Mr.Thriyambak J.Kannan

For Petitioner in

WP 14447/2002              :   Mr.M.S.Krishnan,                                                                    Senior Counsel for

Mr.M.Praveen Kumar.

For Petitioner in

WPs 12928&12955/2002 :  Mr.Rahul Balaji

For Respondents in all WPs  :   Mr.R.Shanmugasundaram,

Advocate General assisted                                                                   by Mr.P.Muthukumar,                                                                   Government Pleader.

C OM M O N   JUDGMENT

The ‘Road Map’, through which the batch of writ petitions

on hand traverse, is significant. The writ petitions were filed in the year 2002, questioning the demand notices issued by the State. The writ petitions were admitted and an interim order was passed. This Bench (S.M.Subramaniam, J.) had an occasion to hear these matters in December 2018 and at the instance of the parties, adjournments were granted to prepare the case, as it was pending for a longer period. During the relevant point of time, it was found that the entire case bundles relating to this batch itself were missing from the Registry of the High Court. Even the affidavits, docket orders and nothing in connection with these writ petitions were available. However, the interim stay granted is in force for about 19 years in the year 2019 itself and under those circumstances, this Court passed an order on 01.02.2019 as follows:-

“M/s.Narmadha Sampath, learned

Additional Advocate General at the first instance, made a complaint that the bundle itself was missing from the Registry of Hon’ble High Court of Madras.

2.The matter involves Mining activities and Payment of Royalty to the State. The monetary loss being assessed by the State is huge and therefore, the matter deserves an urgent consideration and the original case bundles are not available with the Registry and this apart, interim stay granted is in force for the past 18 years and those circumstances, the matter was taken up for hearing and Mr.P.R.Raman, learned Senior counsel for the writ petitioner, Mr.N.Venkataraman, learned Senior counsel for the writ petitioner and Mr.K.Ramakrishna Reddy, learned counsel for the petitioner argued their respective cases before this Court elaborately.

3.The learned Additional Advocate General also completed her arguments today on 01.02.2019.

4.The learned Senior counsel appearing on behalf of the writ petitioners made a submission that they want to get some more instructions from the petitioners and reply to the queries raised by the learned Additional Advocate General.

5.Mr.N.Venkataraman, learned Senior counsel also requested for time as he was proceeding to the National Judicial Academy, Bhopal. In view of the fact that this Court spent considerable length of time by hearing the entire case and the respective learned Senior Counsels also argued substantially, this Court has to pass orders in this matter and accordingly, Registry is directed to list this matter for pronouncing orders on 11.02.2019.”

2. Again it was adjourned at the instance of the parties and

the case was treated as ‘Part-Heard’ by this Court on 25.02.2019 and following orders were passed:-

“This matter was Part-Heard by this Court.

2.The learned Senior Counsels, appearing on behalf of the petitioners, Shri.P.R.Raman, Shri.M.Venkatraman,Shri

K.Ramakrishna Reddy as well as the learned Additional Advocate General, completed their arguments.

3.However, the matter was adjourned for production of certain documents, the reconstructed bundles and the typed set of papers.

4.Under these circumstances, there is a change in roster and therefore, the Registry is directed to place the papers before My Lord The Hon’ble Chief Justice for passing appropriate orders.”

However, it is not made clear whether the order dated 25.02.2019 had been complied with by the Registry or not.

3. The matter was again kept pending and once again it is

listed before this Court during the regular course in December 2021, and the original case papers are found. The consequences of long pendency undoubtedly caused huge loss of revenue to the State, more specifically, when there is no transparent and proper measurement of minerals, excavated. The Accounting System is not considered as foolproof system even by the State. In view of these repercussions, the matter was again taken up for hearing and the respective learned counsels made their submissions.

THE FACTS OF THE CASE:

4. The writ petitioners are Companies, doing the business,

inter alia, of the manufacture and sale of cement. One of the important raw-materials used in the manufacture of cement is limestone, which is a major mineral whose mining operations are governed by the provisions of the Mines and Minerals (Development and Regulation) Act, 1957 [hereinafter referred to as the ‘Act’, in short]. The mining activities are carried on in patta lands, poramboke lands and the lands situated in Walayar Reserve Forest etc. The mining operations are operated only with the necessary approvals of the Competent Authorities under the provisions of the Act. The mining lease agreements were entered into between the parties in accordance with the provisions of the Act. The terms of lease and the Act provide payment of seignorage, dead rent and royalty to the State Government. The mining leases executed as between the petitioners and the State in respect of the mines are in Form ‘K’ of the Act and Serial No.10 of Part VII of the Lease Deed provide inter alia for the Lessee to maintain the accounts of the various quantities and qualities of the minerals realised from the leased lands.

5. The petitioners state that manufacture of cement requires

the usage of several minerals in addition to limestone such as Laterite, Iron Ore, Bauxite, Gypsum etc. The first stage in the manufacture of various types of cement is a mixture known as ‘Clinker’. This Clinker comprises of limestone and certain other minerals. Depending on the quality of the cement proposed to be manufactured various other minerals are added to the Clinker in different proportions depending on the quality and the type of hardness required. The ratio of various minerals used in the manufacture process referred above, varies from one cement manufacturer to another cement manufacturer. The quantity of limestone used in the manufacture of Clinker would be varying with various indeterminable factors and no absolute figure could be given In manufacture of cement, no raw limestone is used.

Therefore, various combinations are maintainable.

6. The Authorities under the Weights and Measures Act,

have duly certified the Weighing System to be in accordance with the provisions of Weights and Measures Act, which is functioning properly. Calibration of machine is being done regularly to the satisfaction of Weights and Measures Authorities.

7. As per Clause 13 of the Mining Lease Agreement, the petitioners have submitted their plan showing the location of weighbridges and mining leases which were verified by the District Mining Authorities, who had satisfied themselves, forwarded their recommendations for final approval to the Government and to the District Collectors.
8. The petitioners state that they are regularly paying the royalty to the respondents on the limestones extracted from their respective mines and paying the royalty on the basis of weighment done by them on weighbridge for limestone raised and removed from the mining lease areas. The petitioners have maintained their records to this effect. Those records are maintained on the basis of readings

 

taken on Weighing System, which as stated supra is totally mechanised and computerised. The royalty on limestone paid by the petitioners is based on the actual weighment as per the details submitted to the Mining Department in accordance with the provisions of Section 9 of the Act and the respondents have periodically issued ‘No Due Certificates’. The method of payment of royalty being followed by the petitioners is prescribed by law is proper and legally valid.

9. The petitioners have state that they are maintaining all the

details and weightment particulars of the mined materials, which are periodically checked by both the Representatives of the second and third respondents. The ‘No Due Certificates’ are thereafter issued annually by the third respondent. While-so, the petitioners have received the letter dated 26.07.2001 from the second respondent claiming to review its cement production and consumption of limestone alleging that based on the cement production of these petitioners, there is a shortfall in the payment towards royalty in respect of limestone mined and consumed for the period from 1989 to 1999. The petitioners were called upon to pay the shortfall. The petitioners have raised their objections. The method of assessment made by the State based on the computation of limestone

consumption was questioned by the petitioners. The petitioners state that it is unscientific and impractical and the limestone consumption and if at all be relatable only to Clinker production. Thus, the petitioners to raise their objections by stating that the limestone consumption cannot be the criteria for the purpose of assessment and such an assessment is impractical and therefore, the demand impugned is unjustified.

10. On the ground that the basis for re-computation of

limestone consumption was not acceptable to the petitioners and they raised their objections. The petitioners have further stated that the recomputation of consumption of limestone based on production of cement is wholly unscientific and irrational, since the production of cement and consumption of limestone cannot be directly equated without considering the the production of the intermediate product viz., Clinker.

11. Based on the above facts, the respective learned SeniorCounsels appearing on behalf of the petitioners reiterated the very basis for re-assessment is improper and irrational. Thus relied on the judgment of Madhya Pradesh High Court in the case of ACC Limited vs. State of Madhya Pradesh and others [pronounced on 15.02.2018 in WP No.7979 of 2017 by the Hon’ble Division Bench of High Court of Madhya Pradesh: Jabalpur].
12. Relying on the said judgment, the learned Senior Counsels contended that such method adopted by the State is rebuttable as the consumption of limestone cannot have the criteria for the purpose of assessment. The consumption of limestone theory based on the nature of product and therefore, the total quantity of production of cement would not be the correct method for the purpose of ascertaining the consumption of limestone. It is illogical to form an opinion that the consumption of limestone can be assessed based on the total production of cement in the final form. Thus, the very method adopted by the State is improper and therefore, the demand notice issued is liable to set aside.
13. The learned Senior Counsels appearing on behalf of the

petitioners articulated the case of the petitioners by stating that usage of limestone differs from product to product and the ratio adopted are also not in uniform. Thus, the basis of assessment by the State cannot be accepted.

COUNTER FILED BY THE RESPONDENTS:

14. The respondents found that there has been substantial

increase in the production of cement in the State of Tamil Nadu. This implies that there should be corresponding increase in the consumption of limestone and revenue thereon. However, no increase has been reflected in the revenue realised by way of royalty on limestone mined for the production of cement. Since there was a doubt whether cement manufacturing industries file correct returns in respect of their payment of royalty on limestone mined and consumed by them, Secretary to Government, Industries Department convened a meeting on 09.03.2001. Consequently, the details of the quantity of limestone mined by the Cement Industries in the State since 1989 and the quantity of cement produced were collected.

15. The Cement Companies were also furnished the requireddetails. Even as per the letter given by the Cement Companies, the minimum of limestone that is required to produce one tonne of cement is 1.320 tonnes and the maximum being 1.50 tonnes. The Tamil Nadu Cements Corporation have also furnished a figure of 1.5492 tonnes of limestone required (maximum) to produce one tonne of Portland Cement. Therefore, an average and maximum of 1.50 tonne of limestone is considered to be required to produce one tonne of cement. Based on this formula, the total royalty that was due for the entire quantity of limestone mined and consumed in the manufacture of cement was calculated on the basis of the production figure furnished by the Cement Companies. Accordingly, the royalty already paid was deducted and the balance royalty was demanded from the petitioners.
16. The Cement Companies have raised their objections that

the royalty should be calculated on the basis of limestone transported from the mines, Clinker is the penultimate product which consumes limestone. After production of Clinker additives will be added to make different type of cements. Since their reply was not convincing and not supported by any proof with regard to production of different types of cement and payment of royalty for the limestone for the quantity used for the manufacture of either Clinker or cement, further production figures were called for from the Cement Companies. As per the Government letter dated 28.09.2001, the Director of Geology and Mining, Chennai has requested all the cement manufacturers in Tamil Nadu to take up a mandatory study with the Expertise available with the National Council for Cement and Building Materials, New Delhi (Apex National Body under the Ministry of Commerce and Industry, Government of India) to their plant to fix up a proper ratio of consumption of limestone per tonne for optimum production of Clinker for ultimate manufacture of different types and grades of cement in their plants and other attendant problems encountered in the manufacture of cement and furnish the report. Based on the report furnished by the Cement Factories, the limestone consumption factor had been arriving as 1:1.498 to 1.504. The production of cement and the quantity of limestone consumed upto January 2002 were

furnished by the District Collectors  as furnished by the petitioners. Accordingly, based on the figures, a revised notice was issued indicating the short payment of royalty for various periods.

17. The respondents relied on Section 9 of the Act, which

provides for computation of royalty on the total quantity of limestone mined or consumed. Therefore, the respondents are of the opinion that the consumption is also a ground for computation of the limestone consumed. Thus, there is no infirmity as such in respect of computing the usage of limestone based on the final production of cement. As per the Lease Deed, the Lessee shall maintain proper accounts for the minerals mined, transported, sold and purchased etc.

18. The respondents have stated that the important and main

ingredient in the manufacture of cement is limestone. The penultimate product only is Clinker. For the manufacture of Clinker, the other minerals such as Laterite, Iron Ore Bauxite, Gypsum etc., are not the required raw materials. In the process of making Clinker, Silica, Alumina and iron modulus have to be maintained within permissible limits. To maintain these modulus, depending on the original quantity, i.e., content of Calcium Oxide in the limestone, either of the abovementioned mineral will be added. Therefore, an average of 1.50 tonnes of limestone is reckoned for the manufacture of one tonne of cement.

19. With reference to the contention of the petitioners

regarding Mining Dues Certificates, the respondents have stated that ‘no mining dues’ Certificates are being issued at the end of every financial year and valid upto one year. At the end of the year, the total quantity of limestone mined and transported as furnished by the petitioners will be reconciled with reference to the royalty paid by them every month at the time of issue of transport permit. Since the petitioners are Captive Industry and involves transportation of hundred and thousands of tonnes of limestone from the mines to factory every day it is not possible for the District Administration to check each and every load of limestone. Therefore, the transportation accounts as furnished by the Cement Companies at the end of the year taken for reconciliation and based on this, no mining dues certificates were issued. But on a later analysis even the faithful accounts furnished by the Cement Companies does not tally with the formula of consumption of limestone for production of cement. The petitioners have furnished, that maximum of 1.50 tonnes of limestone is required to produce one tonne of cement and minimum of 1.320 limestone is required for one tonne of cement. M/s.Tamil Nadu Cements Limited have reported that 1.549 tonnes of limestone is required for one tonne of Portland Cement. Therefore, an average of 1.50 tonne of limestone was reckoned to be required in the manufacture of one tonne of cement. Thus the impugned notices are for short payment of royalty.

20. In the last few years, there has been a substantial

increase in the production of cement in Tamil Nadu. This implies that there should be corresponding increase in the consumption of limestone and revenue thereon. However, no increase has been reflected in the revenue realised by way of royalty on limestone quarried for the production of cement. Based on the particulars furnished by the petitioners, in their letter dated 23.03.2001 with regard to production of cement and consumption of limestone, notices were issued on 26.07.2001, requesting them to make good the short payment of royalty. The figures were arrived at based on the formula that an average and maximum of 1.50 tonne of limestone is required to manufacture one tonne of cement. In their reply dated 07.08.2001, the petitioners have stated that Clinker is the penultimate product, royalty should be calculated based on the limestone mined and transported, and additives have to be added for manufacture of different type of cement. Therefore, it is arrived that an average of 1.50 metric tonne of limestone is required for the manufacture of one tonne of cement. The petitioners have not come up with satisfactory reply with regard to the consumption of total quantity of limestone and production of cement.

21. The letter dated 19.03.2002, requesting to make good the short payment of royalty was arrived on an accepted formula and calculated on the basis of the figures furnished by the petitioners. It is not a penalty or allied demand and hence no need to issue show cause notice before raising a demand for short payment of royalty. As required under Section 9 of the Act, royalty should be paid for the entire quantity of limestone mined or consumed. The formula of 1.50 tonnes of limestone required to produce one tonne of cement has been arrived based on the figures on ratio of consumption of limestone and production of cement furnished by various cement manufacturing industries in Tamil Nadu. Therefore, the calculation was based only on the figure furnished by the Cement Companies.
22. As per Section 9 of the Act, royalty shall be computed

and paid based on the total quantity of limestone mined or consumed. When the mined and transported account of the company are considered not faithful, there is no bar in cross checking the consumed limestone with reference to the manufacture of cement and payment of royalty. The various cement manufacturers have furnished the ratio of consumption of limestone with reference to production of cement, and it should tally when the royalty is calculated based on the formula and actual royalty paid by the Cement Companies. When there is discrepancy, it is naturally concluded that there is a short payment of royalty. As per Serial No.10 of Part VII of the Lease Deed, the Lessee should maintain faithful and proper accounts in respect of limestone mined, transported, sold and purchased. The details should be made available to the Authorities for checking and reconciliation. The consumption of limestone for the manufacture of cement, should tally the accounts of limestone mined and transported, purchased from outside according to the ratio of consumption of limestone and manufacture of cement. Such accounts, the petitioners have not furnished to substantiate that they have paid royalty for entire quantity of limestone consumed in the manufacture of cement.

23. Considering the various types of cement and

requirement of limestone for their manufacture, an average of 1.50 tonnes of limestone has been reckoned for the manufacture of one tonne of cement. These figures have all been collected only from the cement manufacturing industries. It is clarified that in Section 9 (2) of the Act, it has been categorically specified that the holders of mining lease shall pay royalty in respect of any mineral removed or consumed by them at the rate specified in the Second Schedule in respect of that mineral. Therefore, it is statutorily mandatory on the part of the petitioners to have paid the royalty for the total quantity of limestone consumed in their Captive Industry for the ultimate production of cement. Since the revenue realised by way of royalty on the limestone raised was not in commensuration with the manufacture of cement, details with regard to production of cement consumption of limestone and the ratio of consumption of limestone for production of cement were gathered and based on the data, the formula of 1.50 tonnes of limestone is required for manufacture of one tonne of cement is arrived. Consequently, the short payment of royalty was communicated and requested to be paid. Therefore, the petitioners are liable to pay the amounts indicated in Director of Geology and Mining letter dated 19.03.2002 as per Section 9 of the Act.

24. The learned Advocate General appearing on behalf of the respondents mainly contended that Section 9 (2) of the Act, unambiguously stipulates that the holder of the mining lease granted on or after the commencement of this Act, shall pay royalty in respect

of any mineral removed or consumed by him. Therefore, measurements can be taken on removal of mines, so also assessment can be made based on the consumption of limestone. The consumption of limestone was considered based on various factors and even as per the petitioners, a maximum of 1.50 tonnes of limestone to be required to produce one tonne of cement. If at all the statement even accepted by the petitioners are rebuttable, it is for the petitioners to rebut the same and contrarily they cannot refuse to pay the royalty as demanded and further the writ petitions are filed challenging the demand notice itself and therefore, the writ petitions are liable to be rejected.

PETITIONERS’ COUNSEL ARGUMENTS:

25. The respective learned Senior Counsels appearing on behalf of the petitioners mainly contended that no notice of opportunity was provided to the petitioners before issuing the impugned demand notice by the Director of Geology and Mining and therefore, the principles of natural justice has been violated. It is further contended that the petitioner-Companies were directed by the

Director of Geology and Mining vide letter dated 31.10.2001 to conduct a study by the National Council for Cement and Building Materials in their cements plants and to furnish their reports and without waiting for the submission of reports by the Cement Companies, the impugned demand notices were issued. It is mainly contended that no working sheet was enclosed along with the impugned demand notices. In the absence of any such details, the petitioners will not be in a position to know about the basis for computation of the consumption of limestone. It is contended that the respondents have not considered the intermediate product of Clinker and therefore, the ratio taken for assessment of short payment of royalty is not proper. It is contended that the judgment of the Madhya Pradesh High Court will not be applicable to the case of the petitioners as the mining operations at Madhya Pradesh cannot be compared with that of the mining operations in the State of Tamil Nadu.

26. The learned Senior Counsels for the petitioners further asked that the ratio adopted by the respondents was a theoretical calculation and the demand was outside the Scheme of the Act. The petitioners have installed weighbridges for measurement of limestone transported from the leasehold areas. Apart from that mining dues clearance certificate issued by the respondents indicate that there is no mining due to be paid by the petitioners to the Government.

ARGUMENTS OF THE ADVOCATE GENERAL

27. In reply to the grounds raised on behalf of the petitioners, the learned Advocate General for the respondents reiterated that the holder of a mining lease shall pay royalty in respect of any material removed or consumed from the leased area at the rate for the time being specified in the Second Schedule in respect of their minerals. The data provided by the Cement Companies for the period from 1989 to 2002 revealed that there was a substantial increase in the production of cement. Whereas no increase was reflected in the revenue realised by way of royalty on limestone mined for production of cement.
28. Based on the data provided by TANCEM, who are in the field of mining of limestone and production of cement, limestone cement production ratio of 1.5:1, was taken as a basis for arriving short payment of royalty. After collecting details from the petitioners on the quantum of cement produced and limestone mined for the period from 1989 to 1999, all the petitioners were directed by the Director of Geology and Mining vide letter dated 26.07.2001 to account for short fall of royalty paid by them for the same period and requested to send their response on or before 10.08.2001. The petitioners have furnished their reply vide letter dated 06.08.2001, 07.08.2001, 08.08.2001 and 13.08.2001 in reply to the second respondent letter dated 26.07.2001.
29. All the details provided by the Cement Companies were

taken into account and short payment of royalty was arrived based on the limestone, cement production ratio of 1.5:1 and accordingly, impugned demand was made. The petitioners were issued with notice dated 26.07.2001 with a request to account for the short fall of royalty and therefore, no notice was issued by the respondents before issuing the impugned demand notice as contended by the petitioners is not correct. Even though all the petitioners were directed to conduct a study by the National Council for Cement and Building Material in their cement plants for arriving the limestone consumption factor for cement production, M/s.Madras Cements have already taken up study by National Council for Cement and Building Material and submitted its reports in the month of July 2001 in respect of their Alathiyur Plant, Ariyalur District. Further, they have submitted report in the month of August 2001 in respect of their R.R.Nagar Plant, Virudhunagar District. The limestone consumption factor in respect of R.R.Nagar Plant, Virudhunagar District as reported by National Council for Cement and Building Materials was 1.5:1.

30. The petitioners were subsequently issued with working

sheet in respect of the short payment of royalty arrived based on the limestone consumption factor. As per the Fifth Proviso to Sub-Clause (d) of Clause (i) of Sub-Rule (3) of Rule 22 of Mineral Concession Rules, 1960, the grant of mining due clearance certificate shall not discharge the holder of such certificate from the liability to pay the mining dues which may subsequently be found to be payable by him under the Act or Rules made thereunder. The impugned demand made by the respondent is statutory backing under Sub-Section (2) of Section 9 of the Act and legally tenable and therefore, the contention of the learned Senior Counsels appearing on behalf of the petitioners that the impugned demand is outside the Scheme of the Act, is not correct.

31. The learned Advocate General relied on the judgment of the Hon’ble High Court of Madhya Pradesh by an order dated 15.02.2018 in WP No.7979 of 2017 in the case of ACC Limited vs. State of Madhya Pradesh, wherein in paragraphs 21, 23 and 25, it has been observed as under:-

“21. Thus, the stand of the petitioner that the royalty is being paid on the actual weighment basis is not sufficient to rebut the presumption that the limestone extracted was sufficient to give yield as disclosed by the petitioner to the Excise Department particularly in view of the Reports of NCCBM in respect of the period in question, therefore, the onus was on the petitioner to show that the quantity of cement manufactured was corresponding to the limestone extracted as reflected in the weighbridge or Beltometer. The petitioners have not said anything in their reply to this effect.

23. The argument that the petitioner was not given any opportunity to rebut that the actual extraction of limestone cannot be made basis of assessment, is again not tenable. The petitioner was served with a notice calling information in respect of extraction of limestone and also to seek information regarding the report of NCCBM. In terms of the Division Bench judgment of this Court, the onus was on the petitioner to assert that the clinker or cement manufactured by the limestone is possible on the basis of limestone extracted by the petitioner. The petitioner has not raised even a little finger in respect of process of assessment adopted by the State and made known to the petitioner before framing the assessment.
24. In view of the foregoing reasons, we do not find any merit in the present writ petition. The same is accordingly dismissed.”
25. The Cement Companies have been granted with 123 mining leases for mining limestone over an extent of 6002.78.0 hectares of both patta and Government lands in the State. The details are as follows:-

Sl. No.	Name of the Cement Company	No. of Mining Leases granted	Extent (in Hectares)
1.	ACC Ltd	4	219.38.0
2.	Dalmia Cements	13	508.20.5
3.	Chettinad Cements	20	948.47.5
4.	Ramco Cements	24	1249.74.5
5.	India Cements	43	1221.43.5
6.	Ultratech Cements	10	339.08.5
7.	TANCEM	09	1516.46.0
	Total	123	6002.78.0

33. The question is whether the due royalty was remitted by the Cement Companies for the quantum of limestone mined from their leased out areas over the period from 1989 to 2002 or not. In such circumstances, there was a necessity for taking into account on the limestone consumption factor for cement production and accordingly the limestone cement production ratio of 1.5:1 was taken as a basis for arriving the short payment of royalty by the Cement Companies for the difference quantum of limestone consumed for cement production and the demand was having statutory binding under Section 9 (2) of the Mines and Minerals (Development and

Regulation Act), 1957.

ISSUES TO BE CONSIDERED

• Whether the impugned demand notice is within the

statutory power conferred under the Act and Rules or not?

• Whether there is any violation of principles of natural

justice in the case of the petitioners?

• Whether the assessment made by the State by adopting

the theory of consumption factor and asking the royalty to be paid is rational or not?

ANALYSIS:

34. Normally, there are two forms of issuance of notice

under various Statutes for the purpose of initiation of action under law. One is issuance of show cause notice and another is demand notice. Both are akin to each other to the sense that it provides certain details enabling the Addressees to raise their objections/explanations if any. In case of show cause notice, the details regarding the allegations set out in the notice and the Noticee is asked to submit their explanations/ objections on such allegations for the purpose of deciding the issues. In case of demand notices, mostly issued based on the statutory requirements and in demand notices certain calculations or proposals or determinations are made based on the provisions of the Act and Rules or based on certain terms and conditions of lease or otherwise and the person against whom such demand notice was issued is provided with an opportunity, either to comply with demand made by the parties or to raise objections in the manner known to law. Therefore, there is no prior show cause notice to the demand notice is contemplated and such a concept is unknown to law. Therefore, there cannot be an invention by the petitioners in these writ petitions. Demand notice is the one which is issued on the basis of certain determinations or proposals made by the Competent Authorities and it is for the person, who received the same to comply with the notice or to raise  objections if any.

35. Even this aspect is clarified by the learned Advocate General by categorically stating that there was a substantial increase in the production of cement. Whereas no increase was reflected in the revenue realised by way of royalty on the limestone land for the production of cement. Based on the data, and the data provided by

TANCEM, who are in the field of mining of limestone and production of cement, limestone cement production ratio of 1.5:1, was taken as a basis for arriving short payment of royalty. After collecting details from the petitioners on the quantum of cement produced and limestone mined for the period from 1989 to 1999, all the petitioners were directed by the Director of Geology and Mining vide letter dated 26.07.2001 to account for short fall of royalty paid by them for the same period and requested to send their response on or before 10.08.2001. The petitioners have furnished their reply vide letter dated 06.08.2001, 07.08.2001, 08.08.2001 and 13.08.2001 in reply to the second respondent letter dated 26.07.2001. Thus the details provided by the Cement Companies were taken into account and short payment of royalty was arrived based on the limestone, cement production ratio of 1.5:1 and accordingly, impugned demand notice was issued. Therefore, the petitioners were given sufficient opportunity to place the facts and details and furnished their reply also and the details provided by the Cement Companies were considered by the respondent-Authorities. This being the factum, the very ground raised is that the impugned notice was issued in violation of the principles of natural justice is absolutely untenable and deserves to be rejected.

36. With reference to the demand notice, all the petitionerswere directed to conduct study by the National Council for Cement and Building Materials in their cements plants. M/s.Madras Cements have furnished such report and as per the report, the limestone consumption factor in respect of R.R.Nagar Plant, Virudhunagar District as reported by National Council for Cement and Building Materials was 1.5:1. The petitioners were subsequently issued with working sheet in respect of the short payment of royalty arrived based on the limestone consumption factor. As per the Fifth Proviso to SubClause (d) of Clause (i) of Sub-Rule (3) of Rule 22 of Mineral Concession Rules, 1960, the grant of mining due clearance certificate shall not discharge the holder of such certificate from the liability to pay the mining dues which may subsequently be found to be payable by him under the Act or Rules made thereunder. Thus the impugned demand issued by the respondents has statutory backing under SubSection (2) of Section 9 of the Act and therefore, it is legally tenable and there is no infirmity as such. Thus, this Court is of the considered opinion that the impugned demand notices are issued within the provisions of the Act and Rules and further, an opportunity was provided to the petitioners and they have availed the opportunity by submitting their reply and the details provided by the Cement Companies were also considered by the Competent Authorities and thus there is no perversity as such in respect of the issuance of impugned demand notices to the petitioners.
37. It is contended on behalf of the petitioners that the assessment made based on the final production of cement regarding the usage of limestone is unscientific and irrational. However, the said factum is rebutted by the respondents by holding a detailed study of the usage of limestone for manufacture of cement. Sub-Section (2) to Section 9 of the Act, unambiguously stipulates that “the holders of mining lease shall pay royalty in respect of any mineral removed or consumed” by them.
38. Let us now examine the legislative intention of the term

‘mineral removed or consumed’. There are many ways of making assessments of removal and consumption. In case of removal, the conventional procedure is being followed by the petitioners. They removed the minerals, maintained the records and based on the records, the royalty is paid to the State. When the State found that there is a mismatch between the removal and payment of royalty, it was identified that large quantity of cement was manufactured, but there is no improvement in payment of royalty. Thus, they intercepted and issued letter for conducting a study and thereafter formed their opinion that the consumption also can be taken into consideration for the purpose of assessment of limestone removed and consumed. Therefore, based on the removal of mineral, an assessment can be made and royalty can be recovered. Equally, consuumption also can be a ground for assessment. In all these cases, the consumption factor has been taken into consideration based on the production of cement made by the petitioners. Thus the study was made to ascertain for manufacture of one tonne of cement, what would be the requirement of limestone. Even as per the statement of the petitioners themselves, it is clear that maximum of 1.50 tonne of limestone is considered to be required to produce one tonne of cement.  When such a study was made in a scientific manner, by the State, then there is no reason for this Cout to interfere. If at all the petitioners have got any proof to dismantle the assessment made, then they must establish it scientifically. The petitioners cannot simply say that the final production of cement cannot be the basis for computing consumption of limestone. Such simple statement is insufficient to form an opinon that the contention of the petitioners are to be accepted. Contrarily, the study conducted by the State regarding the usage of limestone and its requirements for the purpose of manufacture of one tonne of cement. During the study, it was found that maxmium of 1.50 tonne of limestone is considered for the production of one tonne of cement. The petitioners have not rebutted the said contention effectively except by stating that various ratio of usage of limestone is applied for manufacture of cement. Though various ratios are prouced, there is no concrete proof to establish that the ratio adopted bythe State is rebuttable. Even in case it is considered as rebuttable, there must be a scientific proof to do so, and is to be established.

39. When the State formed an opinion that the Nation’swealth is being looted by these Cement Companies by improperly maintaining accounts and not producing accounts properly, then the

State is empowered to conduct the study within the provisions of the Act and by virtue of Section 9 of the Act, which specifically states that the minerals removed or consumed, then the assessment made based on the consumption of limestone for manufacture of cement, the ratio adopted by the State cannot be found fault with and is in consonance with the provisions of the Act.

40. Even as per the report of the National Council for Cement and Building Materials, New Delhi, for establishing limestone consumption factor for M/s.Madras Cements Limited, the following conclusions are arrived:-

“All above values are on the basis of limestone as mined from the sponsor’s own captive mine and on an average 95.07% limestone is used in the preparation of raw mix. Taking into account of all factors contributing to limestone consumption factor and on the basis of the plant data and measurements/analysis carried out by NCB, the average limestone consumption per ton of clinker works out to be 1.465, say 1.47 for the plaint. This factor can vary (increase or decrease) from time to time depending on the variation in proportions of raw materials, quality of limestone, corrective raw materials and coal.”

41. Even in WP No.6478 of 2005 filed by M/s.Chettinad

Cements Corporation, in paragraph-5, the petitioners have stated that “limestone is most essential raw material for manufacture of cement and for production of one tonne of cement, early 1.50 tonne of limestone is required”. Thus the petitioners themselves have stated that for production of one tonne of cement,equally 1.50 tonne of limestone is required. This being the study made by the State in an elaborate manner by providing opportunity to the petitioners and allowing them to conduct a study, this Court is of the opinion that the demand notice was issued based on the consumption factor, which is statutorily approved, more specifically under Section 9 (2) of the Act and therefore, the very contention raised on behalf of the petitioners that the quantity of cement manufactured cannot be the basis for consumption of limestone deserves no merit consideration and usage of limestone for manufacture of cement is well established and even in case of simple variations or otherwise, it is for the petitioners to establish the same or to rebut the contentions regarding the actual usage in a particular manner.

42. The writ petitions on hand are pending for more than 21

years. Pursuant to the interim orders granted in these writ petitions, the petitioners are continuing their mining operations and removing the limestones from the land. The writ petitioner companies are paying the royalty based on the registers / records maintained by them. However, the same cannot be trusted upon. Though it is contended that the respondents are countersigning and conducting inspections, the possibility of active and passive collusion between the parties can never be ruled out. The records maintained by the cement companies cannot be the full proof basis for the purpose of computation of consumption of limestone by the cement companies for manufacturing cement. Even during the year 1999, the State found that the cement manufactured by these cement companies and the royalty paid to the State are disproportionate and not in commensuration with the consumption of limestone for

manufacturing of cement in large scale manner. The demand notice impugned was relating prior to the year 2002 and it is needless to state that during the subsequent years, the construction activities have increased to such an extent and in a fastest manner. The usage of cement in the market enhanced considerably, which cannot be compared with the usage, which was prevailing in previous years. More specifically, for the past about 15 years, the growth in construction activities are incomparable and the usage of cement is also high in all sectors. The State of Tamil Nadu found that the royalty being paid by the writ petitioners to the State are not in commensuration with the actual mining of limestone, which is the prime raw material for manufacturing of cement. Under those circumstances, the issues were taken up for study by the State.

43. Mines and Minerals and anything under the Earth areNation’s wealth and belong to “We, the people of India”. Thus, no one can be allowed to exploit “We, the people of India” and least by few greedy men for their unjust gains. Illegalities under the cover of legality is the modern invention of few super brains. Thus, the modernised measuring system of mining operations are imminent. No doubt, the interest of the industrial development must be protected. Industrial development is the development of our great Nation. While supporting the industrial developments, the Nation’s wealth and the public interest must be protected. Beyond this, Ecology and Environmental aspects are also to be protected as the same guarantees “Right to life” under the Indian Constitution. Thus, exploitations at any form can never be allowed and the interest of Nation and its property at no circumstances be compromised. The public interest must be preserved in all respects in order to achieve the constitutional mandates of equality and social justice.
44. Reaching equality in economic statues is the perspective

of the Constitution and social justice being the “sole” of our Indian Constitution, the Nation’s wealth can never be allowed to be looted by any individual person for their personal benefits or for unjust gains. No industry or the person should be allowed to enrich themselves by way of unlawful means. Thus, the ‘State’ is duty bound to ensure that the mining operations are conducted strictly in accordance with the provisions of the Act and Rules and violators are dealt with appropriately in a stern manner as the repercussions would affect the Nation’s interest and also the people of our great Nation. So far, there is no fool proof system for measuring the mining operations carried on by the leaseholders. The mining operators are going on looting the Nation’s wealth and thereby causing heavy damage to the Earth, Ecology and Environmental aspects, which would cause disastrous consequences on the quality of life of every citizen of our great Nation. The damage already caused to the Earth resulted in many disastrous consequences and one such consequence is spreading of virus like COVID-19 etc., We are bound to understand that nature also reacts, when we inflict injuries into the Earth. The Constitutional Courts are struggling to protect the environmental and ecological aspects and many judgments are delivered. Global organizations are also making Propagandas regarding the importance of Environmental protection. Under these circumstances, effective controlling of mining operations are of paramount importance and it involves the

fundamental right of every citizen of our great Nation. In the event of failure on the part of the State, undoubtedly, the ‘State’ is failing in its duty to honour the rights of the citizen enunciated under the Constitution, so also to protect the Earth. ‘Right to life’ guaranteed is not only for human life but for all living creatures. Therefore, such a valuable right can never be allowed to be infringed by few greedy, who always inflict injuries on the Earth and cause damage to the living atmosphere for unjust gains. It is needless to state that more and more injuries we cause into the Earth, the more and more disastrous consequences we face. The corresponding reaction by the nature at one point of time certainly will be furious and that will be the point, where humans will understand the blender they commit. Thus, the ‘State’ must be prudent in watching the mining operations by taking special efforts and to ensure that exploitations, looting of minerals and causing damage to the Earth are effectively prevented.

45. The writ petitions on hand are concerned, the petitionershave challenged Demand Notices and the respondents could able to establish that sufficient opportunities were provided to the petitioners and the detailed study had been conducted with reference to the consumption factor and assessment for manufacture of cement. The ratio of limestone utilized were also taken into consideration based on the study conducted and such ratio is even admitted by the petitioners. The demand notice impugned were issued after adjusting the royalty already paid by the writ petitioners. Pursuant to the interim orders granted in the writ petitions, which is in force for about 21 years, undoubtedly, much more damages would have been caused by the cement companies by continuing their mining operations for large scale production of cements and cement products. Thus, the royalty paid during the pendency of the writ petition and the actual removal of minerals and its consumption are to be assessed accurately, so as to collect the royalty in commensuration with the removal and consumption of minerals by all these writ petitioners. Failure in assessment would cause great loss to the Revenue of the State and therefore, urgent actions are highly warranted.
46. In this regard, this Court has requested the AdvocateGeneral to secure instructions from the competent Authorities, whether drone measurements can be done for the purpose of quantifying the limestone mined from the earth. The learned Advocate General after getting instructions from the Competent Authorities made a submission that the drone measurement activities have already commenced in respect of other mining operations of granites, stone etc., and such drone measurement can be adopted for limestone mining operations also and drone measurement system is the latest advanced system for the purpose of taking measurements of the minerals mined from the lands. Therefore, in addition to the consumption factor assessment, the drone measurement is to be taken on the field for the purpose of identifying the quantum of limestone removed from the mines and accordingly, assessments and computations are to be made regarding the limestone removed and consumed by the petitioners for the purpose of recovery of royalty with reference to the provisions of the Act and Rules.

CONCLUSIONS:

47. In view of the discussions made in the aforementioned

paragraphs, this Court is inclined to pass the following orders:-

• The relief, as such, sought for in all these writ petitions

stands rejected.

• The petitioners are directed to pay the royalty as demanded in the impugned notices within a period of four weeks from the date of receipt of a copy of this order.
• The respondents are directed to conduct ‘drone measurements’ operations in all the lands, wherever the mining operations are conducted by the writ petitioners and accordingly, assess the quantum of minerals / limestone removed or consumed by the petitioners company.
• The respondents are directed to collect the registers /

records from the petitioner companies and ascertain the consumption factors based on the quantum of cement products produced. The drone measurements taken as well as the consumption factors as the case may be to be considered for the purpose of arriving a fair decision and accordingly, determine the royalty to be paid by the writ petitioner companies during the pendency of the writ petitions, and issue appropriate orders and recover the shortfall in payment of royalty.

• The respondents are directed to conduct drone

measurements hereinafter in all mining operations across the State of Tamil Nadu for the purpose of assessing the mining operations and the minerals mined by the mining operators and determine the royalty to be collected, and recover the same accordingly.

• The respondents are directed to file an action taken

report and compliance of the orders of this Court after four months and the matter is to be posted before this Court on 01.06.2022.

48. With the abovesaid directions, the writ petitions stand disposed of. However, there shall be no order as to costs.

Consequently, connected miscellaneous petitions are closed.

Registry to list this matter before this Court under the

capition ‘For Compliance’ on 01.06.2022.

 

21-01-2022

Internet   :  Yes / No.

Index      :  Yes / No.

Speaking order / Nonspeaking order

Svn/kak

To

1.The Secretary to Government,

State of Tamil Nadu,

Industries Department,

Guindy,

Chennai – 600 032.

2.Director of Geology and Mining,

Guindy,

Chennai – 600 032.

3.The District Collector,    Coimbatore.

S.M. SUBRAMANIAM, J.

Svn/kak

Pre-Delivery Common Judgment in

W.P.Nos.10559, 12033, 12928,

12955, 14447, 14841 and

14842 of 2002

 21-01-2022