Ch. Muhammad Iqbal, J:- This single judgment shall decide the titled Writ Petition [No.49176/2024], Writ Petition No.49175/2024, Writ Petition No.49912/2024 and Writ Petition No.50231/2024 as common questions of law and facts are involved in these cases.
2. Brief facts of these Writ Petitions are that the petitioners run business of manufacturing and selling of Cement. They extract and use different minerals including Clay, Limestone etc. for manufacturing the Cement under the designated leased mining areas under the Regulation of Mines & Oil Fields and Mineral Development (Government Control) Act, 1948 and Punjab Mining Concessions Rules, 2002 made under the Act ibid. As per the notification dated 26.08.2021, the Provincial Government receives royalty as per agreement between the petitioners and Provincial Government. The Government of Punjab introduced amendment in Rule 66 of the Rules ibid vide notification dated 01.08.2024 and on the basis whereof also issued another notification on the same day (01.08.2024) whereby the amount of royalty was increased. Both above said notifications are assailed through the Writ Petitions as the same are issued in violation of the Act ibid as well as the Constitution of the Islamic Republic of Pakistan, 1973. The petitioners also challenged the decision of the Provincial Cabinet in this petition and has made therein following prayer: "... it is most respectfully prayed that the titled petition may graciously be allowed and that this honourable Court may declare and direct following: a. The impugned notification No.SOT(M&MD)5-3/2007 (Vol-II) as well as Notification No.SOT(M&M)3-1/2015 (Vol-II) both dated 01.08.2024 issued by the Respondent Secretary and all associated actions including imposition and collection of royalty thereunder are without lawful authority, wholly without jurisdiction, bad in law, in violation of The Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948 as well as the Punjab Mining Concessions Rules, 2002; the same are ultra vires the Constitution of the Islamic Republic of Pakistan, 1973. As a result, the impugned Notification and all actions associated therewith may graciously be struck down. b. During the pendency of the present petition, the operation of the impugned Notifications dated 01.08.2024 and all associated actions may graciously be stayed/suspended. The Respondents be restrained from taking any coercive/adverse actions against the Petitioners under the afore impugned Notifications and/or any other instruments."
The respondents have filed report and para-wise comments raising preliminary objection and also defended these petitions on factual and legal parlances.
3. Arguments heard. Record perused.
4. The main controversy centered around the issue that whether the Government has jurisdiction under Mineral Development (Government Control) Act, 1948 to amend the Rule 66 of the Rules ibid and enhance the amount of the receivable royalty. Under Section 2 of the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948, the government is competent to make Rules for exploration, mining and other production activities including the determination of rates and the conditions subject to which the royalties, rents and taxes are to be paid by licensees, lessees and grantees of mining concessions. For ready reference, Section 2 of the Act ibid is reproduced as under: "2. Power to make rules.---It is hereby declared to be expedient in the public interest that the appropriate Government shall have power to make rules to provide for all or any of the following matters, namely:--
(1) the manner in which, and the authority to whom, application for the grant or renewal of an exploration or prospecting licence, a mining lease or other mining concession shall be made, and the prescribing of the fees to be paid on such application;
(2) the conditions in accordance with which the grant or renewal of an exploration or prospecting licence, a mining lease or other mining concession may be made, and the prescribing of forms for the execution or renewal of such licence, lease, and concession;
(3) the circumstances under which renewal of a licence, lease or concession as aforesaid may be refused, or any such licence, lease or concession whether granted or renewed may be revoked;
(4) the determination of the rates at which and the conditions subject to which royalties, rents and taxes shall be paid by licensees, lessees and grantees of mining concessions;
(5) the refinement of ores and mineral oils;
(6) the control of production, storage and distribution of minerals and mineral oils;
(7) the fixation of the prices at which minerals and mineral oils may be bought or sold; and
(8) any matter ancillary or incidental to the matters set out in the foregoing clauses of this section, and the appropriate Government may, by notification in the official Gazette, make rules accordingly."
At present, the Punjab Mining Concessions Rules, 2002 framed by the government are in force and Part-II of the Rules ibid deals with the financial large scale mining which has been defined as Project of Mining Involving a capital more than Rs.300 million. Chapter VIII of Part 2 of the Rules ibid deals with the financial aspect of the mining rights and payment of royalties. Rule 65 of the Rules ibid obligates that the holder of mining lease to pay royalty to the Government as determined in rules with respect to disposing of minerals. According to sub-Rule (2)(b) of Rule 65 of Rules ibid, any mineral treatment or other processing prior to appropriation is considered as disposing of for the purposes of the obligation to pay the royalties. Rule 66 of the Rules ibid provides for the charging of royalty in respect of any mineral/different categories of minerals on the basis of fair market value. Sub-rule (1)(a) of Rule 66 of the Rules ibid, the government is empowered to notify the rates of the minerals. In this way, the government is empowered to charge the royalty of the minerals as provided in sub-Rule (1) of Rule 66 and the rates of royalty for construction and industrial minerals are to be notified by the government whereas determination of fair market value is to be made under sub-Rule (2) of Rule 66 of the Rules ibid. For ready reference, Rule 66 (1) and (2) of the Rules ibid are reproduced as under: "66. Rate of royalties.- (1) Subject to these rules, royalty shall be charged, in respect of any mineral referred to in sub-rule (1) (a) or
(b) of rule 65 which is disposed of, on the following basis--
(a) in the case of coal, and the construction and industrial minerals group as specified in Schedule 3, at such rates as may be notified by the Government form time to time;
(b) in case of the precious stones group as so specified, ten per cent;
(c) in the case of the precious metals group and semi-precious stones group as so specified, three per cent;
(d) in the case of base metals group as so specified, two per cent;
(e) in the case of the rare metals as so specified, ten per cent; and
(f) in the case of any other mineral, one per cent, on thee fair market value of the mineral or group of minerals as provided in this rule.
2) For the purposes of sub-rule (1), the fair market value of a mineral or group of minerals is-
(a) where the mineral or group of minerals is disposed of in a sale at arm's length, the sale price;
(b) where the mineral or group of minerals is not so disposed of, the value established, in relation to the kind of disposal concerned, by reference to criteria for the determination of that value, in the mineral agreement or mineral title or under which or pursuant to which the mineral or group of minerals or group of minerals was won or mined; or
(c) where the minerals or group of minerals is not disposed of as provided in paragraph (a) and there are no such criteria as provided in paragraph (b) the amount, determined by the Licensing Authority, at the date of the disposal, which would in the opinion of the Licensing Authority, be paid on international markets or, as the case may be, domestic markets for such mineral or group of minerals in a sale at arm's length by a willing seller to a willing buyer."
In the light of Rule 66 (1)(a) of the Rules ibid, the rates of royalty for Limestone and Argillaceous Clay were notified by the government on the basis of determination as to the fair market value, however, through notification dated 28.06.2013 the rate of said minerals was fixed as Rs.20/MT and vide notification dated 16.07.2007, the royalty was fixed as Rs.120/MT. Thereafter, through notification dated 13.07.2023, the rates of these minerals were fixed as Rs.250/MT for the purpose of royalty. Now through notification dated 01.08.2024, the government has added a proviso to Rule 66(1)(a) of the Rules ibid providing basis for calculation of royalty as ex-factory sale price of Cement or clinker instead of independent fair market value of these minerals as well as the scheme previously before amendment. For ready reference, the Proviso is to Rule 66(1)(a) of the Rules ibid is reproduced as under: "(a) in sub-rule (1), in clause (a), at the end, for the "semi-colon", the expression "colon" shall be substituted and thereafter, the following shall be inserted: Provided that in the case of mineral titles holders having mining leases of Limestone and Argillaceous Clay granted for purposes of Cement manufacturing, calculation of royalty may be charged on the basis of ex-factory sale price of Cement or clinker as may be notified by the Government from time to time; and"
Perusal of the aforementioned amendments shows that the royalty has been fixed as ex-factory sale price of Cement, 6% approved rates of royalty per metric ton. The said amendment was approved by the Provincial Cabinet in its meeting held on 09.07.2024 after detail discussion in the light of dictum laid down by the Hon'ble Supreme Court of Pakistan in Messrs Mustafa Impex's case[1]. As per notification dated 01.08.2024, the rate of royalty has been fixed with reference to per metric ton quantity of the subject minerals. For ready reference, notification dated 01.08.2024 issued by the Mines & Mineral Department, Government of the Punjab is reproduced as under: "NO.SOT(M&MD) 5-3/2007(Vol-II):- In exercise of the powers conferred under section 2 of the Regulation of Mines & Oil Fields and Minerals Development (Government Control) Act, 1948 (XXIV of 1948) read with rule 65 & 66 of the Punjab Mining Concessions Rules, 2002 and in continuation of earlier notification of even number dated 01.07.2024, the Governor of the Punjab is pleased to determine rates of royalty of the following minerals produced and carried away from the licensed or leased areas, with effect from 01.07.2024, as follows: Sr.
No.Name of the Minerals Approved rates of royalty per metric ton
1. Limestone & Argillaceous Clay (For Mineral title holders having mining leases of Limestone and Argillaceous Clay under Large Scale Mining for the purpose of Cement manufacturing)6% of the ex-factory sale price of Cement of Clinker.
It is only percentage of ex-factory sale price of Cement which has been fixed as rate of the royalty for the reason that the said minerals are being exclusively used for manufacturing Cement and constitute 90% ingredients of the Cement. As such the royalty amount is not charged on the sale of Cement but only its rate has been determined with reference to the ex-factory sale price of Cement.
5. The Government under the Act, 1948 is competent to determine the rate of royalty. Moreover, admittedly an agreement between the parties was executed by the petitioners on 04.09.2004 and according to its Clause xxxii the Government is empowered to revise the rate of royalty from time to time and as per Clause xliv, the petitioners are bound to abide by all the provisions of the Rules, 2002 as amended or revised from time to time. For ready reference, aforesaid Clauses are reproduced as under: "(xxxii) That you will pay royalty at the flat rate of Rs.15/- per ton for all Limestone produced and carried away, not later than 30 days after the end of calendar month in which the mineral was disposed of, on monthly basis. This rate of royalty is subject to revision by the Government from time to time.
(xliv) That you will observe and abide by all the provisions of the Punjab Mining Concession Rules, 2002 (related to large Scale Mining) in force or as may be amended or revised from time to time."
6. As regard the argument of learned counsels for the petitioners that as per the amendment made by the provincial government, the royalty is a tax, suffice it to say that royalty is a share in produce reserved by the owner for permitting another person to explore and use the property. It is compensation and share of the product or profit reserved by the owner for permitting another person to use them. The Provincial Government is empowered to frame Rules for describing the conditions of Mining Lease and royalties to be paid for the same.[2] The amendment/notification has been made by the Provincial Government as per the mandate of Act, 1948, learned counsels for the petitioners could not convince us that any violation is made by the government of the Act ibid or Rules made thereunder. The rate of royalty is neither arbitrary nor unreasonable. Further, the government is competent to enact or amend the Rules.[3] The detail discussion and deliberations were made by the Provincial Government and thereafter, the amendments were approved. Thus, the argument of learned counsels for the petitioners is without any force and same is hereby repelled.
7. Even otherwise, the amendment made by the Provincial Government is neither excessive nor impermissible rather it was fair compatibility according to the changed fiscal scenario as well as devaluation of currency. The Provincial Cabinet approved the amendment and Rules, 2002 upon which the Provincial Government notified the same. Thus the amendment cannot be stigmatized as excessive delegation given the nature of mining operation and its peculiar details. The Hon'ble Supreme Court of Pakistan in a Messrs Pioneer Cement's case[4] has held as under: "3. The Lahore High Court had dismissed the petitioner's above mentioned writ petition after it had found that section 2 of the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act of 1948 did authorize the Government to frame rules and section 3 of the said Act further authorized the making of rules envisaging imposition of penalty. The learned High Court had also notices that Paras XIV and XXII of the contract of lease obliged the petitioner- Company to abide by all the provisions of Punjab Mining Concession Rules, 1986 and was obliged to pay all taxes, rates, etc. which were required to be paid to the Government."
The Hon'ble Apex Court has reiterated the aforesaid view in plethora of judgments.[5] In view of above, the amendment impugned by the petitioners through these Writ Petitions, made by the Government is declared intra vires of the Regulation of Mines & Oil Fields and Minerals Development (Government Control) Act, 1948, Punjab Mining Concessions Rules, 2002 and the Constitution of the Islamic Republic of Pakistan, 1973.[6]
8. As regard argument of learned counsels for the petitioners that while amending the Rules, 2002, the government did not afford hearing to the petitioners as such the said amendment/ notification is against the law, suffice it to say that as discussed above, the Provincial Government is competent to frame/amend the Rules, 2002. Further, as per the terms & conditions of the agreement settled between the parties, the Provincial Government can revise rate of royalty from time to time as such there is no need to hear the petitioners. It is prerogative of the government to fix the rate of royalty and to make or amend the Rules, hence the principle of audi alteram partem is not applicable in this case.[7] Thus, the argument of learned counsels for the petitioners being devoid of any force is hereby repelled.
9. Learned counsel for the petitioners has not been able to point out any illegality or material irregularity in the impugned notifications and has also not identified any jurisdictional defect calling for interference by this Court.
10. Resultantly, all these Writ Petitions being devoid of any merit are hereby dismissed.
1. Messrs Mustafa Impex, Karachi and others Vs. The Government of Pakistan through Secretary Finance, Islamabad and others (PLD 2016 SC 808)
2. Shaukat Ali Vs. Government of Punjab through Secretary, Industries and Mineral Department and 8 others (PLD 1992 Lahore 277) and Power Cement Limited and others Vs. Province of Sindh through Secretary, Mines and Mineral Development Department, Karachi and others (PLD 2024 Sindh 1)
3. Shafique Ahmed and others Vs. Government of Punjab and others (PLD 2004 SC 168) and Dr. Alyas Qadeer Tahir Vs. Secretary M/O Education (now M/O CADD), Islamabad and others (2014 SCMR 997)
4. Messrs Pioneer Cement Ltd. Vs. Secretary, Industries and Mineral Development Department, Lahore and others (2004 SCMR 576)
5. (1) The Province of East Pakistan etc. Vs. (1) Sirajul Huq Patwari etc. (PLD 1966 SC 854), Mian Rafi-ud-Din and 6 others Vs. The Chief Settlement and Rehabilitation Commissioner and 2 others (PLD 1971 SC 252), and Khawaja Ahmad Hassaan Vs. Government of Punjab and others (2005 SCMR 186)
6. Messrs Sui Southern Gas Company Ltd. and others Vs. Federation of Pakistan and others (2018 SCMR 802) and Mohammad Imran and others Vs. Province of Sindh through Chief Secretary and others (2019 SCMR 1132)
7. Muhammad Siddique Vs The Market Committee, Tandlianwala (1983 SCMR 785)