Settling a long pending issue, the Jharkhand High Court on Wednesday directed Tata Steel, holder of a large coal mining areas in Ramgarh and Dhanbad, to pay royalty on processed mineral/ clean coal/steel grade and other grades of coal, which is removed from the leased area to its steel plant at Jamshedpur and not merely on raw coal.
A Division bench comprising Chief Justice R Banumathi and Justice Aparesh Singh, while delivering judgment on a bunch of petitions, said that under Section 9 of the Mines and Mineral (Development and Regulation) Act, 1957, Tata Steel is liable to pay royalty in respect of the processed mineral/washed coal removed from the leased area as per the rate prescribed for coal in the Second Schedule of the MMDR Act.
The court held that Rules 64B (Charging of Royalty in case of minerals subjected to processing and 64C (Royalty on tailings or rejects) of the Mineral Concessions Rules (MCR) are general in nature and applicable to all minerals. The court said that these Rules are not ultra vires the Constitution and MMDR Act, 1957.
The division bench observed that the steel company is liable to pay royalty on the middlings, tailings, rejects, de-shale, which are partly used in Tata Steel’s captive power plants as fuel and partly sold to the consumers. The company had challenged the validity of Rules 64B and 64C of the MCR, inserted by the Central Government, Ministry of Mines.
It had also challenged the demand of royalty raised by the State of Jharkhand on the “processed coal”(washed coal) contending that royalty is payable only on Run-Of-Mine (ROM) extracted by it at the rate prescribed in the Second Schedule and liability to pay royalty is not postponed after processing. Tata Steel holds mining leases for coal over an area of 13,007 Bigha in various villages in the district of Ramgarh, which is also known as West Bokaro Colliery, and the above mine is a captive coal mine. It has two washery plants within the leased area where the raw coal produced from the mine is washed to improve the quality of grade of the coal for being sent for its use in its steel plant at Jamshedpur.
It holds six self amalgamated mining leases of coal over an area of 3511.63 acres in various villages in the district of Dhanbad for a period of 99 years. It comes under administrative control of Jamadoba Group of Collieries of Tata Steel.
The court said that there is no merit in the contention that when processed mineral is removed from the leased area, royalty is payable on the Run-of-Mine (ROM) – as per grade declared by the holder of the mining lease. Royalty is payable on the processed mineral which is removed from the leased area. The court said that if royalty is payable on Run-of-Mine (ROM) and not on the coal marketed as coal depending upon its grade, there will be huge loss to the revenue of the State.
“Royalty is an important source of revenue of some of the states like Jharkhand. The formula adopted is intended to give coal producing states reasonable share of income earned by producing and selling of non-renewable mineral resources, like coal. The legislature in its wisdom stipulated that in case, the mineral is processed in the leased area, royalty is payable on the mineral removed or consumed from the leased area. Since royalty forms a vital part of the revenue of the State Government, it is virtually impossible to lose money on the processed minerals which are the resource of the State,” the court observed.