The High Court · 2025

Order

Heard Sri Pannala Srinivas, leamed counsel for the petitioner and leamed Assistant Government Pleader for Mines and Geology appeari ng for respondents.

2. This writ petition is filed to declare the impugned order No.35 of 2011 dated 07.01.2011 passed by respondent No. I in Revision Application FileNo.0l(16/201O-RC.II, dated 06. 12.2010 ol respondent No.3 as illegal and consequently remand the same to respondent No.l for disposal in accordance with law. FACTS OF THE CASE:

3. The petitioner is a partnership hrm and it has established a Sponge Iron Plant in Sy.No.346 of Appala Narsimhapuram Village. Nelakondapally Mandal, Khammam District in the year. 2007 at an approximate cost of Rs.2 Crores. The production capacity olthe plant is 20 Metric Tons per day and it is able to run the planr with 40-45% elficiency only i.e. producing 8 to 9 Metric Tons of Sponge Iron per

day. The petitioner firm is regularly filing its retums belore the Salcs Tax and Central Excise authorities. I I - 1 2 KL, J WP No 6969 of20l I

4. While the matter stood thus, on 25.10.2008, tt",e officials of the Regional Vigilance and Enforcement Officer, Wanrngal, visited the Plant ancl seized the records with regard to the procurcment of Iron ore on the ground that the Petitioner firm consumed ur quantity of I 1,852.6[t Motric Tons of Iron ore for which the Royahy/Seigniorage fee was no1 covered. They further observed that 437.5 IvlI was found excess transportation by tampering the transit form of Mining Lease holder, Sri N. Srvadesh Rao. Respondent No.2 has issued notice dated

17.04.2009 to the petitioner firm basing on the report of the Regional Enforcement and Vigilance Officer, Warangal. The Petitioner firm submitted reply dated 08.05.2009 to the said notice. Thereafter, the office ol respondent No.3 issued show cause notice dated 06.07.2010 to the petitioner firm and the Petitioner submiued r:eply dated

05.08.2010 to thc said show cause notice. Respondent No.3 once again issued noticc dated t 1.08.2010 and the petitioner firm submitted reply dated I 5.()9.10 10.

5. Without considcring replies submitted by the petitioner firm, respondent No.l issued notice No.2943MD3/2005 dated t)9.11.2010 demanding to pa)'Rs.48.71.452l- towards royalty lbr having 1 ) 3 KL. ', wP No.6969 of20l I consumed I1,852.68 MTs of Iron ore without permit as per Sec.2l (5) of the Mines and Minerals (Development & Regulation) Acq 1957 ( for short, 'the Act'). Challenging the said notice dated 09.11.2010 issued by respondent No:3, the petitioner firm has filed Revision Application vide File No.02(16)/201O-RC.II on 06.12.2010 before respondent No.l - Tribunal. The Tribunal conducted hearing on

07.01 .20 I I and disposed it of at the admission stage holding that the petitioner firm has got a provision to file an appeal under Rule 12 of the A.P. Mineral Dealers Rules, 2000 (for short, 'the Rules') framed under Section 23 (C) (3) of the Act which reveal that the Central (iovemment shall have no power to revise any order passed by a State (lovemment or any of its authorized officers or any authority under the Rules made under sub-sections (l) and (2).

6. Thus, according to the petitioner, r€spondent No.l erred in stating that it has no jurisdiction to entertain the Revision Application dated 06.12.2010 on the ground that the petitioner firm does not lall undcr the dcfinition 'Dealer' as mentioned in Rule-2(l) (d) ol Rules, 2000 as held by the erstwhile High Court of Andhra pradesh in Novel I \ 4 K]. J WP No.5969 of20ll Granites Limited v. State of Andhra Pradeshr. Respondent No.l erred in holding that the petitioner Iirm has set a factory where the mineral is stored before it is processed/manufactured and the petitioner firm is obligated in law to show to the offioials that the mineral present at the time of inspection has suffered payment of Seigniorage l'ee. In the present case, no mineral has been seized by the officials of the Vigilance Department at the time of inspection on

25.10.2008. The Impugned notice dated 09.11.2010 is based on the assumption and presumption that the petitioner firm hzr"s consumed I1,852.68 Ml- o['Iron r.vithout permit. In fact, the petitioner firm is regularly procuring thc mineral t-rom the leaseholders who have already paid thc seigniorage lec lor processing the same in its plant. Though the petitioner does not lall under the purview ol'Section 21 (5) of the Act. the respondents are unnecessarily harassing the petitioner firm u'hich is the Manuf'acturer. The respondenl-s basing on some books of accounts seized in the f'actory falsely alleging that the petitioner firm consuming thc raw material without payng seigniorage fee, which act of respondents is illegal. In support of its contention, ' et.T 20lo (z);9i \lR l(to9 AP lo7 5 KI-. ', WP No.6 9 of201I the petitioner firm placed reliance on judgment ofa 3-Judge Bench of the Hon'ble Supreme Court in Rukmanand Bairoliya v. the State of Bihar2. Therefore, the petitioner firm sought to set aside the impugned order. CONTENTIONS OF THE RESPONDENTS:

7. Respondent Nos.2 to 5 filed counter, denying the averments made by the petitioner and contended that: i. On 25.10.2008, respondent No.2 along with his officials inspected thc petitioner firm and noticed a stock of 7000 MT of Iron Ore and l0 MT of Sponge lron. '[he Vigilancc and Enforcement Officer, Warangal informed lt. that thc olticials seized the records and on verification. it was lbund that thc pctitioner firm has purchased Iron Ore illegalll, liom othcr than lcaseholders amounting to a quantity ol- I 1852.68 MT lbr which the royalty was not covered and 437.5 M-l' u'as lbund to be excessively transported by tampering the transit tirrms ol- Mining lease holder Sri N. Swadesh Rao. The Regional Vigilance and Enforcement Offrcer, Warangal has - AIR l97l SC 716 \ .l 6 KI,, J WP No 6969 of20ll directed to recover the royalty along with the price of the mineral lbr illegal procurement of Iron Ore. iii. Basing on the report of Regional Vigilance and Enforcement Officer, Warangal, respondent No.2 issued notice dated

17.04.2009 to the petitioner firm calling for explanation for procurement of Iron Ore illegally. iv. The petitioner firm submitted its reply dated 08.05.2@9 stating that it was established in the year 2006 and their plant's production capacity is 20 Tons per day but they are able to run their plant with 6o0/o efficiently only i.e. 12 tons per day. The Vigitance Officials have accounted the receipts of Iron Ore twice and doubled the records i.c. way bills as well as the same date of General Inwards Registers of the local supplies. Sri N. Swadesa Rao is responsiblc lbr the tampered quantilv. v. The petitioner firm in its repl,"- dated 27.06.2009 stated that the capacity ofthe unit is 20 Tons per day and the specilication and consumption of raw material approximately for lron Ore @3.1 Tons. lt has further stated that procurement of [ron Ore from Faqgary, 2008 to thc date of inspection i.e. 25.10.i1008 as per -/ a1 7 KL, ., wP No.6 9 of20ll the records is I I 128 tons inclusive of tampered transit from

437.5+10690.5 and the quantity consumed is 3828 MT and the closing balance of the stock available by the time of inspection is 7000 Tons oralty (but as per the records 7514.59 tons). vi. The petitioner Frrm has not paid any amount to the Department as they are having credit input on capital goods purchased against machinery and other equipments for their industry. vii. In respect of tampered royalty paid transit forms for a quantity of 437.50 MT, it is submitted that said Transit Forms pertain to lessee Sri. N. Swadesa Rao and action has been already initiated against him and therefore th€ quantity of 437.50 MT was taken as proof ol non-payment of royalty. viii. As per the observation ol'respondent No.2, the unit is running at the installed capacity i.e. 20 Tones per day and the production of Sponge [ron approximately is 500 Tons per month which is evidenced from the balance Iron Ore stock of 7000 MT available as on the date of inspection. ix. In this regard, the pctitioner firm stated that the inspecting officials have accounred the receipts of lron Ore twice/doubled \ 8 KL. J w P No.6969 of 201 I the records i.e. way bills as well as the same date of General Inward register of the local suppliers. But the pctitioner firm, has not specified the quantity which was accountrd twice. The registers and bill books seized have been verihed by respondent Nos.2 and 3 and found that no quantity has been entered twice by the Inspection oflicials. Hence the quantit)',rf 11852.680 MT mentioned by the Inspection officials was taken into consideration for levy of penalty on illegal transportation of Iron Ore. x The petitioner firm stated that specification of consumption of Iron Ore approximately @ 3.1 tones o[ Iron Ore per I MT of Sponge lron. But as per the retums submitted by the petitioner firm, for production of I MT ol Sponge [ron, the c()nsumption of Iron ore comes to l-9 MT only which is contrary to his own statement of letter dated 29.06.2009. Hence there is shortfall of lron Ore for production ol Sponge lron which shorvs that the petitioner firm purchased thc material illegally fronr the local suppliers evidenced from the registers maintained by Lt' \_ ./ i-'l I KI-, J wP No.6969 of mll The explanation submitted by petitioner lirm that the Regional Vigilance and Enforcement Officer, Warangal has recorded the quantity by making double entries for the same quantity is totally wrong. xll. Respondent No.4 vide Circular Memo No: 29541Nd2W6 dated 10.08.2007 has issued instructions on the illegal excavation of Iron Ore and levying of penalty. Respondent No.4 has clarified that it is the responsibility of the stock yard/mineral based industry owner to produce valid transit forms/Royalty paid way bills issued by the Mines and Geolory Department for the stocks, otherwise it will be construed that the minerals are procured from illegal sources and therefore penalty and price of the mineral along with royalry and Cess on mineral bearing lands shall be collected under Section 2l(5) of the Act. Since price olthe mineral is to be charged, drere is no need for computation of cost of mineral/pit mouth value for illegally procured Mineral. / l0 KL. J WP No 6969 ot201I xll l. Therefore, the petitioner firm procured I1852.68 MT of Iron ore illegally, therefore it is liable to pay pcnalty as per provisions of the Act. xl\'. The judgment in W.P. No.5871/2002 dated 03.10.2008 has no relevance to the present case on the reason that the Regional Vigilance and Enforcement Offrcer, Warangal afte:r' verification of the registers reported that the sponge lron plant has involved in illegal procurement of lron Ore from the local persons, who are not having any leases. The Ore is procured liom persons carrying out illegal mining operations in Jaggaiahpeta and Nelakondapally Mandals of Krishna and Khamnram Districts respectively. The Iron Ore is known as KAKI RAYI:E which is available mostly in the size of pebbles, oocasionalll' lump size and people pick up the same backed by some contractors/suppliers to carry out illegal mining operations' A quantity of 1 1852.68 M.T's have been arrivcd t'rom six , registers. in which the petitioner firm has recordcd all the particulars like cost of the mineral paid to the supplicrs, transportation, loading charges and place from ',rhcre the l-.ry KI-. J wP No 6969 of20l I mineral received. Respondent No.2 has inspected th'e said areas and seized the Iron Ore which is in the form of pebbles and disposed the same in public auction. xv. The demand raised by respondent No.3 is on the Iron Ore and not on t}re mineral product "Sponge Iron". Hence the demand raised by respondent No.3 is according to the procedure laid down under the Act. xvl- The petitioner firm is holding a dealer license under Rule 5(2) of Rules, vide registration No. 2943/MD-3/DDWGL/2005, dated 30.11.2005. xvtl. As per Section 23-B of thc Act, the State Covemment or the officials authorized by them are empowered to search for any mineral that has been raised in contravention of the provision of the Act or Rules made thereunder or any document or thing in relation to such mineral is secreted in any place or vehicle. As per section - 2l(5) of the Act, whenever any person raises, without any lawful authority. any mineral lrom any [and, or, where such mineral has already been disposed o[, the price thereof, and may also recover tiom such person, rent, royalty or \-- 12 KI,. J WP No 6969 of20l I tax. as the case may be, for the period during which the land was occupied by such person without any lawful authority. xvllt. As per the said provisions of the Act only, the respondent authorities inspected the premises of petitioner fir'rn and seized certain documents wherein the particulars like cost of the mineral paid to the suppliers, transportation, loading chargcs and place from where the mineral received has bcen recorded. As per the verification of the documents, the petitioner firm has procured I 1852.68 MTs of lron Ore from unauthorrzed sourccs i.e. lrom nearby patta lands of Khammam and Krishna Districts. The so called source areas are situated within a radius of l0 to I 2 Kms lrom the unit ar€a. xtx. The petitioner firm, on one hand, contends that their firm does not fall under the definition of "Dealer", under Rule 2 (l ) (d) of the Rules and on the other hand, it is holding a l)ealer license lbr processing, storing of Iron Ore, trading o[spongt lron under the same provision which is quite contradictory' The petitioner is also submitting retums, though not regularly. urrder these rules t,, (hc concemed authorities. Hence the contenlion of the t3 KL,J WP No.6 9 of 201I petitioner that they do not fall under the definition 6f Dealer is not correct. xx. If the petitioner is aggrieved by the demand notice issued by respondent No.3, there is a provision under Rule I I and 12 of the Rules, to prefer appeal before respondent No.4/Director of Mines and Geology, Hyderabad and revision to the Government respectively. The petitioner, instead ol availing the same, approached the Govemment of India by filing revision which was rightly dismissed. With the said submissions, they sought to dismiss the writ petition. ANLYSIS AAID FINDINGS OF THE COURT:

8. The aforesaid rival submissions u'ould rcveal that the Officials of Regional Vigilance and Enforcement Olficer. Warangal, along with Royalty Inspector of ofIice of respondent No.3 inspected the plant of the petitioner situated at Survey No.343 of Apalanarasimhapuftun Village, Nelakondapally Mandat, Khammam District on 25.10.2008. During the said inspection. it was noticed a Stock of 7000 MT of Iron Ore and l0 MT of Sponge [ron. The \-- i t4 KI,, J WP No.6969 of20l I Inspecting Officials seized the records of the Unit, and after verifuing the records, they lound excess transportation by tampering the Transit Forms. A notice dated 17.04.2009 was issued to the petitioner by respondent No.2. The petitioner has submitted explanation dated

08.05.2009 to thc said notice specifically contending that it has not tampered anv waybills for the quantity mentioned therein and leaseholder is held responsible for the said quantity. On consideration of the same, vide letter dated 15.05.2009, respondent No.2 submitted report to respondent No.3 along with reply. A show-,:ause notice dated 06.07.2010 was issued to the petitioner. It has submitted explanation on 05.08.2010. Thereafteq respondent No.3r has issued another notice dated I I .08.2010. The petitioner has subrnined repll'- dated 15.09.2010 to the said notice. Finally, responderrt No-3 has issued demand notice dated 09.11.2010 to the petitioneq directing it ttr pay royalty lbr I I tt52.68 MT of Iron Ore @ Rs.l l/- per M1' and price thcreof @ Rs.l50/- per MT of lron Ore and Cess on MBL @ Rs'50/- per MT (royaltv Rs.t,30.380/- + Price Rs.41,48438/- + Cess on MB[. Rs.5.92.634/-. total Rs.48,71,4521- as per Section - 2l t5) of the fra\aun Act. 1957 l5 KI-, J WP No 6969 of ml I

9. The petitioner has filed a revision under l{ulc 35-A of the Andhra Pradesh Minor Mineral Concession Rules, 1966 with respondent No.l challenging the said demand notice dated

09.1 1.2010. Vide ordq dated 07.01.2011, respondent No.l dismissed the said revision holding that as per Rule - 12 of the Rules framed under Act, any person aggrieved by an order passed on an appeal under the said rules, may file an application for revision belore the State Govemment within thirty (30) days from the communication of such order in Form-K. With the said findings, the revision liled under Section - 23C (3) of the Act was dismissed.

10. Challenging the said order, dated 07.01 .201 I ol respondent No.l and demand notice dated 09.11.2010 of respondcnt No.3, the petitioner filed the present writ petition. I l. In Novel Granites Limitedt, the ersrwhile fIigh Court of Andhra Pradesh considering the provisions of the Act, the Rules lramed thereunder, the principle laid down by the Apcx Court in several judgments and applying the ratio from the saicl .iudgments, in paragraph No.40 held as under: t6 KL, J WP No.6 9 of 201I I "40. the tbtlowing ratio could be culled out fr)m the various judicial precedents referred to above: a) The word 'Mineral' is judicialJy interpreted, more than it is statutorily defined. b) The word 'Mineral' is not a term of art, hut required to be understood in common parlance depending upon the context in which it is used. c) The word 'Mineral', understood in comnlon parlance is an inorganic substance fourxl eilher on or in the earth, which may be garnered or exploited lbr profit and d) The mineral changes its character after it undergoes process such as pulverization."

12. On considcration of the same and also the scope and ambit of Sections - 13. 2l (c) and definition of 'mineral' in Rule - 2 (h) of the Rutes, this Court held that the explanation to the oefinition ol 'mineral' in Rule - 2 (h). it is clear that the State Govemment far too expanded the scope ol the detinition of mineral by inclrrding in its definition processed mineral and final product emerging out of such process. While it is vcry much doubtful whether even the Parliament would have made any such rule without amending the definition o1' mineral in Section - 3 (a). thc State Government is not c('mpetent to stretbh thc definition of 'Mineral' to the extreme extent ol'subjecting t7 KI,. J WP No 6969 of20ll the processed and hnished product derived from the mineral to the regulatory control by including the same in the dehnition of 'Mineral'.

13. Finally, this Court held that explanation to Rule - 2 (h) by which the processed mineral and final products are treated as 'Mineral' is ultra vires the rule making power of the State Govemment and the same is accordingly struck down. The definition of 'Dealer' in Rule - 2 (1) (d) shall be read down as to exclude the persons, who undertake manufacfuring/processing activity using mineral as raw material. It is, however, made clear that the Statc Govemment and its officials that the State Govemment and its officials authorized for this purpose shall be free to inspect and check any premises or tactory/industry where the mineral is storcd be fbre it is proccssed/manufactured and exercise the power of seizure ol mineral befbre it is processed and converted into a finished product. il it is lound that such mineral has not suffered royalty and/or dead rent.

14. There is no appeal preferred challenging the said common order of the ersrwhile High Court of Andhra pradesh at Hyderabad. [t attained finality. Y- r8 KL, J WPNo 6969 of20l I

15. It is apt to note that considering the said prtnciple,, vide order dated 18.03.201I this court granted interint :;uspension as prayed for I the present writ petition. The respondents filed vacate stay application vde WPVMP No.322 of 2012 No.322 <t|2012. Vide order dated 22.06.2015, this Court dismissed the sai<l vacate stay application and posted the matter lor hearing.

16. Thus, there is no consideration of the said aspects by respondent No.3 in the order dated 09.11.2010. Vide order dated

07.01 .201 I , respondent No. I relcgated the petitioner to Appellate Authority in tcrms ol Rule - I 2 ol the Rules framed under the Act. In fact, the petitioner has to pref'er an appeal within thirty (3{)) days from the date of communication of the said order. This writ petition is of theyear20ll. The interim order is dated 18.03.2011. Sincethen, the petitioner is enioling the said interim order. There is no crlnsideration of the principlc laid down by erstrvhite Hlgh Court of Andhra Pradesh at Hyderabad in Novel Granites Limitedr. Now, relegating the petitioner to appetlatc Authorit-v al\er | 4t/z years is improper. 7 \ To, l9 KL. J WP No 6txq of20l I

17. In the light of the above, both the demand notic€ dated

09.11.2010 of respondent No.3 and the order dated 07.01.2011 of respondent No.l are set aside. The matter is remanded back to respondent No.3 with a direction to consider the principle laid down by this Court in Novel Granites Limitedr pass orders afresh by putting the petitioner on notice and affording it an opportunity. However, respondent No.3 shall complete the entire exercise within two (02) months from the date of receipt of copy of this order. I 8. 'Ihis writ petition is accordingly disposed of. In the circumstances olthe cases, there shall be no order as to costs. As a scquel thereto, miscellaneous petitions, if any, pending in the writ petition shall stand closed. I SD/. M. JAWAHAR REDDY ASSISTANT REGISTRAR a SECTION OFFICER //TRUE COPY//

1. The Deputy Secretary (Mines), The Hon'ble Mining Tribunal of the Union of lndia, Sastri Bhavan, New Delhi 110 001

2. The Asst. Director of Mines & Geology, 7-1$411, Dearaka Nagar, Khammam 507 001

3. The Deputy Director of Mines & Geology, Warangal Region, No. 1-7-700, Shanthi Nagar, Subedari (Postal Colony), Hanamkonda, Warangal District 506 001

4. The Director of Mines and Geology, 8th Floor, BRKR Buildings, Tank Bund Road, Hyderabad 500 029 500 022

5. The Secretary (Mines), The State of A.P. Secretariat Buildings, Hyderabad 6. One CC to Sri Pannala Srinivas, Advocate [OPUC] 7. Two CC to The GP for Mines and Geology, High Court for the State of Telangana, at Hyderabad[OUT]

8. Two CD Copies TI prTr- \k Et?- - HIGH COUR.T DATED:1 810812025 ORDER WP.No.6969 of 2011 t-) t 2 7 0[I 2P5 ,t r,n.r(-, HF") DISPOSING OF THE WRIT PETITION WITHOUT COSTS ,.#'lt -f.*