Supreme Court Upholds State’s Right to Levy Royalty on Brick Earth Mining(2025)

Date of the Judgment: January 21, 2025
Citation: 2025 INSC 88
Judges: Abhay S. Oka, J. and Ujjal Bhuyan, J.
Can a state government levy royalty on the extraction of brick earth, even if the land is privately owned? The Supreme Court of India recently addressed this question in a case concerning brick kiln owners in Punjab. The court clarified the state’s power to collect royalties on minor minerals, irrespective of land ownership, provided that the activity falls under the purview of the state’s mining regulations. This judgment, delivered by a bench of Justices Abhay S. Oka and Ujjal Bhuyan, settles the dispute between the State of Punjab and several brick kiln owners regarding the legality of royalty assessments.

Case Background

The case involves a dispute between the State of Punjab (the appellants) and several brick kiln owners (the respondents). The brick kiln owners were extracting earth from leased private lands to manufacture bricks. The State of Punjab sought to levy royalty on this extraction of earth, which the brick kiln owners contested. They argued that the land was not owned by the government and that under the Wajib-ul-arz (a record of rights), brick earth did not belong to the state. The brick kiln owners thus sought a permanent injunction to restrain the State from assessing and recovering royalty.

Timeline

Course of Proceedings

The Trial Court dismissed the suits, holding that since the record of rights was completed before November 18, 1871, and the Wajib-ul-arz did not specify that quarries belonged to the landowners, the quarry vested in the State Government under Section 42(1) of the Punjab Land Revenue Act, 1887. The First Appellate Court upheld this decision, stating that the right to recover minor minerals vested in the State, and the absence of specific mention of brick earth did not disentitle the State from levying tax. However, the High Court allowed the second appeals, concluding that the State could not levy royalty merely by declaring brick earth as a minor mineral without proving ownership.

Legal Framework

The Supreme Court examined several key legal provisions:

• Section 41 of the Punjab Land Revenue Act, 1887: This section states that all mines of metal and coal, and all earth oil and gold, are deemed the property of the State.
• Section 42 of the Punjab Land Revenue Act, 1887: This section deals with the presumption of ownership of forests, quarries, and waste lands. It states:
  
  “42. Presumption as to ownership of forests, quarries and waste lands.— (1) When in any record-of-rights completed before the eighteenth day of November, 1871, it is no expressly provided that any forest quarry, unclaimed unoccupied, deserted or waste-land, spontaneous produce or other accessary interest in land belongs to the land-owners, it shall be presumed to belong to the Government. (2) When in any record-of-rights completed after that date it is not expressly provided that any forest or quarry or any such land or interest belongs to the Government, it shall be presumed to belong to the land-owners. (3) The presumption created by sub-section (1) may be rebutted by showing — (a) from the records or report made by the assessing officer at the time of assessment; or (b) if the record or report, is silent, then from a comparison between the assessment of villages in which there existed, and the assessment of villages of similar character in which there did not exist, any forest or quarry, or any such land or interest, that the forest, quarry, land or interest was taken into account in the assessment of the land-revenue. (4) Until the presumption is so rebutted, the forest, quarry, land or interest shall be held to belong to the Government.”
• Section 3(e) of the Mines and Minerals (Regulation and Development) Act, 1957: This section empowers the government to declare certain minerals as minor minerals. The Government of India declared brick earth as a minor mineral under this provision on June 1, 1958.
• Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957: This section empowers the State Government to make rules for regulating the extraction of minor minerals and for charging royalty.
• Rules 54A, 54B, and 54C of the Punjab Minor Mineral Concession Rules, 1964: These rules regulate quarrying and mining operations, requiring a certificate of approval, submission of returns, and assessment of royalty.
  
  “54A. Prohibition of under taking quarrying or mining operation – No person shall undertake quarrying or mining operation unless and until he holds a certificate of approval in Form “B” : Provided that no such certificate shall be necessary for undertaking quarrying or mining operation by a person exempted under rule 3. 54B. Returns. – Every assessee shall for each month furnish a return in Form ‘N’ about the production and disposal of minor minerals, during that month by the 10th day of the month following that to which the return relates. 54C. Assessment of royalty. (1) If the Assessing Authority is satisfied without requiring the presence of the assessee or the production by him of any evidence that the returns furnished in form ‘N’ in respect of any period are correct and complete, he shall assess the amount of royalty due from the assessee on the basis of such returns and record assessment order in Form ‘O’. (2) If the Assessing Authority is not satisfied without requiring the presence of the assessee who furnished the returns in Form ‘N’ or production of evidence that the returns furnished in Form ‘N’ in respect of any period are correct and complete, he shall serve on such asses see a notice in Form ‘P’, requiring him on a date and a place specified therein, to attend in person or to cause to be produced any evidence (on which such assessee may rely) in support of such returns. (3) In case the assessee having furnished the returns in respect of a period in Form ‘N’ fails to comply with the terms of the notice in Form ‘P’ issued under sub-rule (1), the Assessing Authority shall within three years after the expiry of such period proceed to assess to the best of his judgment, the amount of the royalty due from the assessee and record the assessment order in Form ‘O’. (4) If an assessee does not furnish the returns in respect of any period by the due date, the Assessing Authority shall serve a notice upon the assessee in Form ‘Q’ and after giving the assessee a reasonable opportunity of being heard shall, within a period of three years after the expiry of the said period, proceed to assess to the best of his judgment the amount of royalty if any due from the assessee and record the assessment order in form ‘O’. (5) If upon information which has come into his possession the Assessing Authority is satisfied that any person has raised, without any lawful authority, any minor mineral from any land and has not paid the royalty due thereon to the Government, the assessing Authority shall within three years after the expiry of the period during which the land was occupied by such person serve on such person in Form ‘R’ and after giving such person a reasonable opportunity of being heard, proceed to assess to the best of his judgment the amount of royalty due from him. The Assessing Authority may also pass an order for recovery from such person of the minor mineral so raised or where such minor mineral has already been disposed of the price thereof. (6) The amount of royalty due and the price of minor mineral, if any, shall be paid by the assessee into the government Treasury by such date as may be specified in the notice in Form ‘S’ issued by the Assessing Authority for this purpose and the date so speci fied shall not be less then thirty days from the date of service of such notice :Provided that the Assessing Authority may in respect of any particular assessee and for reasons to be recorded in writing extend the date of such payment or allow the payment of royalty and price, if any, by instalments not exceeding four. (7) If in consequence of definite information which has come into his possession the Assessing Authority discovers that an assessee has been under – assessed or escaped assessment of royalty in any year, the Assessing Authority may, at any time within three yea rs after the expiry of that year re-assess the royalty in Form ‘O’ after giving the assessee a reasonable opportunity of being heard. (8) The Assessing Authority may, at any time, within one year from the date of any order passed by him of his own motion, rectify any clerical or arithmetical mistake apparent from the record and within a like time period rectify any such mistake which has bee n brought to his notice by any person, affected by such order.”

Arguments

Submissions by the State of Punjab:

• The State argued that Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957 empowers the State to make rules for charging royalty on minor minerals.
• Brick earth was declared a minor mineral under Section 3 of the same Act.
• The first regular settlement of the village was before 1871, and there was no record showing that forests and quarries belonged to landowners. Thus, there was a presumption of ownership in favor of the State under Section 42(1) of the Punjab Land Revenue Act, 1887.
• Rule 54A of the Mineral Rules prohibits quarrying or mining without a certificate of approval.
• The royalty is payable irrespective of the ownership of the land.

Submissions by the Brick Kiln Owners:

• The State has not proven that the brick earth vests in it.
• Merely declaring brick earth as a minor mineral does not give the State the right to levy royalty.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a dedicated section. However, the core issue addressed by the court was:

• Whether the State Government has the right to levy royalty on the extraction of brick earth, especially when the land is not owned by the government but is privately leased.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Court relied on Section 42 of the Punjab Land Revenue Act, 1887* to explain the presumption of ownership but clarified that the issue of ownership was not central to the case.
• The Court emphasized Section 3(e) and Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957* to highlight the State’s power to declare minor minerals and levy royalty.
• The Court extensively discussed Rules 54A, 54B, and 54C of the Punjab Minor Mineral Concession Rules, 1964* to establish that the State has the right to levy royalty on the production and disposal of minor minerals, irrespective of land ownership.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following points:

• The declaration of brick earth as a minor mineral under the Mines and Minerals (Regulation and Development) Act, 1957.
• The power of the State Government under Section 15 of the same Act to make rules for regulating the extraction of minor minerals and for charging royalty.
• The provisions of the Punjab Minor Mineral Concession Rules, 1964, which mandate obtaining a certificate of approval for mining operations, submission of returns, and assessment of royalty.
• The fact that the brick kiln owners were not exempted under Rule 3 of the Mineral Rules.
• The availability of an efficacious remedy of appeal under Rule 54F of the Mineral Rules to challenge the assessment of royalty.

The Court reasoned that the High Court had missed the real issue by focusing on the ownership of the land. The Supreme Court clarified that the State’s right to levy royalty stems from the declaration of brick earth as a minor mineral and the rules framed under the Mines and Minerals (Regulation and Development) Act, 1957, rather than the ownership of the land. The Court noted that the brick kiln owners did not fall under the exempted category specified in Rule 3 of the Mineral Rules. The Court emphasized that the ownership of the land was not relevant to the issue of the State’s right to levy royalty, as the Mineral Rules empower the State to levy royalty on the production and disposal of minor minerals, irrespective of land ownership.

The Court stated:

“Therefore, even if a person owns the land, he cannot undertake quarrying or mining operations therein unless he holds a certificate of approval in Form “B”. A person to whom the certificate is issued is required to file returns showing the production and disposal of mines or minerals. The royalty is determined as provided in sub-Rule (1) of Rule 54C.”

“Once it is shown that under the Mineral Rules, the first appellant – State Government was entitled to levy royalty on the activity of mining of brick earth, the issue of ownership of the said lands becomes irrelevant.”

“The reason is that the owners of the said lands in which the excavation is made are not in the exempted category specified in Rule 3 of the Mineral Rules.”

The Supreme Court set aside the High Court’s judgment and restored the Trial Court’s dismissal of the suits. The Court clarified that its judgment did not adjudicate on the right of ownership of the lands. The Court also pointed out that the brick kiln owners had an efficacious remedy of appeal under Rule 54F of the Mineral Rules to challenge the assessment of royalty.

Key Takeaways

• The State Government has the right to levy royalty on the extraction of brick earth once it is declared a minor mineral.
• The right to levy royalty is not dependent on the ownership of the land from which the brick earth is extracted.
• Mining operations require a certificate of approval under the Punjab Minor Mineral Concession Rules, 1964.
• An appeal mechanism is available under Rule 54F of the Mineral Rules to challenge the assessment of royalty.
• This judgment clarifies the scope of the State’s power to regulate and levy royalty on minor minerals, irrespective of land ownership, and underscores the importance of compliance with mining regulations.

Directions

The Supreme Court did not issue any specific directions other than setting aside the High Court’s judgment and restoring the Trial Court’s dismissal of the suits.

Development of Law

The ratio decidendi of this case is that the State Government has the right to levy royalty on the extraction of brick earth, once it is declared a minor mineral, irrespective of land ownership. This judgment clarifies that the State’s power to levy royalty is derived from the Mines and Minerals (Regulation and Development) Act, 1957, and the rules framed thereunder, and not from the ownership of the land. This position is a reaffirmation of the State’s regulatory powers over minor minerals.

Conclusion

In conclusion, the Supreme Court’s judgment in State of Punjab vs. Om Prakash Brick Kiln Owners upholds the State’s authority to levy royalty on the extraction of brick earth, irrespective of land ownership. The Court emphasized that the State’s power stems from the declaration of brick earth as a minor mineral and the relevant mining regulations. This decision clarifies the legal position on the State’s right to regulate and collect royalties on minor minerals, ensuring compliance with mining laws and regulations.

Category

• Mines and Minerals (Regulation and Development) Act, 1957
  • Section 3(e), Mines and Minerals (Regulation and Development) Act, 1957
  • Section 15, Mines and Minerals (Regulation and Development) Act, 1957
• Punjab Land Revenue Act, 1887
  • Section 41, Punjab Land Revenue Act, 1887
  • Section 42, Punjab Land Revenue Act, 1887
• Punjab Minor Mineral Concession Rules, 1964
  • Rule 54A, Punjab Minor Mineral Concession Rules, 1964
  • Rule 54B, Punjab Minor Mineral Concession Rules, 1964
  • Rule 54C, Punjab Minor Mineral Concession Rules, 1964
  • Rule 54F, Punjab Minor Mineral Concession Rules, 1964
• Mining Law
  • Minor Minerals
  • Royalty
  • State Government Powers

FAQ

Q: Can the State Government levy royalty on brick earth extracted from private land?
A: Yes, the Supreme Court has clarified that the State Government can levy royalty on brick earth, even if the land is privately owned, once it is declared a minor mineral under the Mines and Minerals (Regulation and Development) Act, 1957.

Q: Does the ownership of the land matter for the levy of royalty on brick earth?
A: No, the ownership of the land is not a determining factor. The State’s right to levy royalty stems from the declaration of brick earth as a minor mineral and the relevant mining regulations, not from land ownership.

Q: What do brick kiln owners need to do to comply with the law?
A: Brick kiln owners need to obtain a certificate of approval for mining operations under the Punjab Minor Mineral Concession Rules, 1964, and comply with the rules regarding the submission of returns and payment of royalty.

Q: What if a brick kiln owner disagrees with the assessment of royalty?
A: The Punjab Minor Mineral Concession Rules, 1964, provide an appeal mechanism under Rule 54F to challenge the assessment of royalty.

Q: What is the significance of the declaration of brick earth as a minor mineral?
A: The declaration of brick earth as a minor mineral under the Mines and Minerals (Regulation and Development) Act, 1957, empowers the State Government to regulate its extraction and levy royalty on it.