M/S Sri Durga Bhavani Granites vs. The State Of Andhra Pradesh

Held

The Court held that the show cause notice was untenable for two primary reasons. Firstly, the amended Rule 26(3)(ii) of the Andhra Pradesh Minor Mineral Concession Rules, 1966, prescribes penalties including imprisonment for a term up to two years, or a fine up to Rs. 5,00,000/- along with the market value of the mineral and seigniorage fee, or both. The Court found that the power to impose such punishments, including imprisonment, rests exclusively with courts of competent jurisdiction and cannot be exercised by departmental officers like the Assistant Director of Mines & Geology. The Court noted that the counter-affidavit did not address the petitioner's contention that only a criminal court could impose these penalties. Secondly, the Court found the method of estimating the quantity of minor mineral based solely on electricity consumption to be unscientific and lacking statutory backing. Citing the Division Bench judgment in Sreerama Oil Company, the Court highlighted that electricity consumption can be affected by numerous variables (machinery age, material density, worker skill, ambient temperature, etc.) and that without considering these and conducting proper test checks, such an assessment cannot form the basis of a demand. The Court also held that the writ petition was maintainable because the show cause notice was issued without statutory support and the respondent had usurped powers exclusively vested in the courts. The show cause notice dated April 5, 2020, was set aside. The respondents were left open to evolve an appropriate method to take action strictly in accordance with law.

Facts

The petitioners, M/s. JMB Rocks, M/s. Sri Durga Bhavani Granites, and M/s. Salasr Granites, filed writ petitions challenging show cause notices dated April 15, 2020, issued by the Assistant Director of Mines & Geology. These notices demanded payment of seigniorage fee, market value, and penalty for alleged unaccounted consumption or possession of minor minerals. The notices referenced Rule 26(3) of the Andhra Pradesh Minor Mineral Concession Rules, 1966, as amended in March 2016. The petitioners contended that the notices were untenable as the amended Rule 26(3)(ii) prescribed penalties, including imprisonment, which could only be imposed by a criminal court. They also argued that the demand was based on an unscientific estimation of mineral quantity derived from electricity consumption charges. The respondents argued that the petitioners had not furnished records, necessitating an alternative calculation method, and that a writ petition against a show cause notice with an alternative remedy was not maintainable.

Key Issues

1. Whether the show cause notice, demanding seigniorage fee, market value, and penalty under Rule 26(3)(ii) of the Andhra Pradesh Minor Mineral Concession Rules, 1966 (as amended in 2016), is legally tenable when the amended rule prescribes penalties, including imprisonment, which are exercisable only by a court of competent jurisdiction, and not by a departmental officer? (Question of law) 2. Whether the estimation of the quantity of minor mineral, and consequently the demand for seigniorage fee, market value, and penalty, based solely on electricity consumption charges, is a scientifically sound and statutorily backed method? (Question of mixed law and fact) Petitioner's arguments: The petitioners argued that the amended Rule 26(3)(ii) makes unaccounted mineral consumption a penal offense punishable by imprisonment or fine, which can only be imposed by a criminal court after due trial, not by a departmental officer. They contended the show cause notice was issued without jurisdiction. They further argued that the estimation based on electricity consumption was unscientific and lacked application of mind, citing the Division Bench judgment in Sreerama Oil Company v Commissioner of Commercial Taxes and L. Venkateswara Rao v Singareni Collieries. The petitioners also raised concerns about ulterior motives and the unavailability of records due to the GST Department. Revenue/State's arguments: The respondents argued that the petitioners had not furnished records, forcing them to adopt an alternative calculation method based on electricity consumption. They cited Rule 8(IV) of A.P. Mineral Dealers License Rules, 2017, authorizing penalty imposition. They contended that a show cause notice cannot be challenged and that an effective alternative remedy exists, making the writ petition not maintainable.