REPORTABLE

2023INSC865
IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS 84-85 OF 2016

South Eastern Coalfields Ltd … Appellant

Versus

State of Madhya Pradesh & Ors … Respondents

WITH

CIVIL APPEAL NOS 91-92 OF 2016

CIVIL APPEAL NOS 89-90 OF 2016

CIVIL APPEAL NO 86 OF 2016

CIVIL APPEAL NOS 87-88 OF 2016

CIVIL APPEAL NO 93 OF 2016

ORDER

1 This batch of appeals arises from a judgment dated 21 July 2010 by a Division

Bench of the High Court of Madhya Pradesh in a set of petitions under Article

226 of the Constitution.

2 Section 132 of the Madhya Pradesh Municipal Corporation Act 1956 provides for

“taxes to be imposed under this Act”. Sub-section 6(n) empowers the

Corporation to levy “a terminal tax” on goods and animals exported from the

limits of the Corporation. A corresponding provision is contained in the Madhya

Signature Not Verified Pradesh Municipalities Act 1961; Section 127(6)(n) empowers the Municipal
Digitally signed by
NEETA SAPRA

Council to imposed “a terminal tax on goods or animals exported from the limits
Date: 2023.10.03
12:29:33 IST
Reason:
 2

of the Council”. In exercise of the statutory powers conferred by the two

statutes, the Terminal Tax (Assessment and Collection) on the Goods Exported

from Madhya Pradesh Municipal Limits Rules 1996 have been framed. Section

2(c) defines the expression “terminal tax” in the following terms :

“(c) "Terminal tax" means the terminal tax on goods exported

from the Municipal limit in accordance with the sanction of
State Government under clause (o) of sub-section (2) of
Section 132 of the Madhya Pradesh Municipal Corporation
Act, 1956 and the tax described in clause (xvi) of sub-section
(1) of Section 127 of the Madhya Pradesh Municipalities Act,
1961.”

3 The appellant is a company registered under the Companies Act, 1956 and owns

the coal mines of Jamuna & Kotma Colliery. The appellant moved the High Court

under Article 226 of the Constitution seeking to challenge the levy of terminal

tax within the limits of the Municipal Council. The plea was rejected by the High

Court on the ground that the land from where the appellant was carrying out its

coal mining operations fell within the limits of the Municipal Council which has

levied the terminal tax. The High Court held that the power of imposing tax was

granted by a State statute which was enacted with due legislative competence.

It was observed that no exceptions have been notified to the powers of the

Municipal Council under any provision of the Constitution. The judgment has

been carried in appeal.

4 Article 244 of the Constitution provides that the provisions of the Fifth Schedule

shall apply to the administration and control of Scheduled Areas and Scheduled

Tribes. A notification was issued on 29 February 2003 by the Union Ministry of

Law and Justice, in exercise of the powers conferred by Paragraph 6(2) of the

Fifth Schedule to the Constitution of India, by which the Scheduled Areas (States
 3

of Chhattisgarh, Jharkhand and Madhya Pradesh) Order, 2003 was promulgated.

The areas specified in the notification were redefined to be the Scheduled Areas

within the States of Chhattisgarh, Jharkhand and Madhya Pradesh.

5 Part IXA of the Constitution of India which was inserted by the 74 th amendment

provides for the Municipalities. Article 243-ZC stipulates that nothing contained

in the Part shall apply to the Scheduled Areas referred to in clause (1), and the

tribal areas referred to in clause (2) of Article 244.

6 Mr N Venkataraman, Additional Solicitor General, appears on behalf of the

appellant in support of the appeals. The first submission which has been urged

is that Article 243X empowers the Legislature of a State by law to authorise the

Municipalities to levy, collect and appropriate taxes, duties, tolls and fees. Since

Part IXA does not apply to Scheduled Areas, it was urged that power under

Article 243X is not available in relation to a Scheduled Area. As regards

Scheduled Areas, it was urged that by virtue of Paragraph 5 of the Fifth Schedule

to the Constitution of India, the Governor is entrusted with the power to direct

that any particular Act of Parliament or the Legislature of the State shall not

apply to a Scheduled Area or shall apply subject to such exceptions and

modifications as may be specified. On this foundation, it was urged that the

provisions of the two municipal laws which have been noticed above, would have

no application and hence, the levy of a terminal tax was ultra vires.

7 The second submission which has been urged by the Additional Solicitor General

is that Entry 89 of List I of the Seventh Schedule empowers Parliament to levy

terminal taxes on goods or passengers carried by railway, sea or air; and taxes

on railway fares and freights. Entry 56 of List II empowers the State Legislature
 4

to levy taxes on goods and passengers carried by road or on inland waterways.

Entry 52 of List II, as it stood at the material time, provided for taxes on the

entry of goods into a local area for consumption, use or sale therein. The

submission is that while the expression ‘terminal’ used in Entry 89 of List I, Entry

56 of List II does not use that expression and hence the Rules in the present case

and the levy of a terminal tax would be ultra vires.

8 We will deal with the two submissions independently.

9 Article 244(1) of the Constitution provides as follows :

“244. Administration of Scheduled Areas and Tribal Areas.—

(1) The provisions of the Fifth Schedule shall apply to the
administration and control of the Scheduled Areas and
Scheduled Tribes in any State other than the State of Assam
Meghalaya, Tripura and Mizoram.”

10 Part IX of the Constitution dealing with the Panchayats was inserted by the 73 rd

Constitutional Amendment. Part IXA dealing with the Municipalities was inserted

by the 74th Amendment. Article 243-ZC(1) indicates that nothing contained in

Part IXA would apply to the Scheduled Areas referred to in clause (1) of Article

244. However, clause (3) of Article 244 enables Parliament to extend the

provisions of Part IXA to the Scheduled Areas subject to such exceptions and

modifications as may be specified in such law.

11 The Fifth Schedule contains provisions for the administration and control of

Scheduled Areas and Scheduled Tribes. Paragraph 3 of the Fifth Schedule, inter

alia, provides that the Governor of each State having Scheduled Areas shall

annually or whenever so required by the President make a report to the

President regarding the administration of the Scheduled Areas in the State and
 5

the executive power of the Union shall extend to the giving of directions to the

State as to the administration of the said areas. Paragraph 5 of the Fifth

Schedule is in the following terms :

“5. Law applicable to Scheduled Areas.—(1) Notwithstanding

anything in this Constitution, the Governor may by public
notification direct that any particular Act of Parliament or of
the Legislature of the State shall not apply to a Scheduled
Area or any part thereof in the State or shall apply to a
Scheduled Area or any part thereof in the State subject to
such exceptions and modifications as he may specify in the
notification and any direction given under this sub-
paragraph may be given so as to have retrospective effect.

(2) The Governor may make regulations for the peace and
good government of any area in a State which is for the time
being a Scheduled Area.

In particular and without prejudice to the generality of the

foregoing power, such regulations may—

(a) prohibit or restrict the transfer of land by or among

members of the Scheduled Tribes in such area;

(b) regulate the allotment of land to members of the

Scheduled Tribes in such area;

(c) regulate the carrying on of business as money-lender

by persons who lend money to members of the
Scheduled Tribes in such area.

(3) In making any such regulation as is referred to in sub-

paragraph (2) of this paragraph, the Governor may repeal or
amend any Act of Parliament or of the Legislature of the
State or any existing law which is for the time being
applicable to the area in question.

(4) All regulations made under this paragraph shall be

submitted forthwith to the President and, until assented to
by him, shall have no effect.

(5) No regulation shall be made under this paragraph unless

the Governor making the regulation has, in the case where
there is a Tribes Advisory Council for the State, consulted
such Council.”
 6

12 Paragraph 5 of the Fifth Schedule commences with a non obstante provision. It

empowers the Governor to direct that any Act of Parliament or of the Legislature

of the State shall not apply to a Scheduled Area or a part of it in the State. The

second component of clause (1) of Paragraph 5 empowers the Governor to direct

that an Act of Parliament or of the State Legislature shall apply to a Scheduled

Area or any part in the State subject to such exceptions and modifications as he

may specify in the notification.

13 The High Court in the present case has observed that the appellant did not

produce any notification indicating that the statutes in question would not apply

to the Scheduled Areas in the State of Madhya Pradesh or that their provisions

would apply with exceptions and modifications disabling the power of the

municipality to levy a tax. Even before this Court, no such notification has been

produced. The consequence of paragraph 5(1) of the Fifth Schedule is that it

enables the Governor to direct either that a parliamentary or state law shall not

apply to a Scheduled Area in the State or that it would apply subject to

exceptions and modifications. Therefore, unless a notification has been issued

by the Governor indicating that (I) a parliamentary or state law shall have no

application to the Scheduled Area; or (ii) the parliamentary or state legislation

would apply subject to exceptions or modifications, there would be no hindrance

in the application of the law to the State.

14 The alternate submission of the Additional Solicitor General is that since Article

243ZC provides that Part IXA would have no application to a Scheduled Area, the

power which is conferred on the legislature of a State to authorise the

municipality to levy, collect and appropriate taxes would similarly have no

application.
 7

15 Article 243-X is in the following terms :

“243-X. Power to impose taxes by, and Funds of, the

Municipalities.—The Legislature of a State may, by law,—

(a) authorise a Municipality to levy, collect and appropriate

such taxes, duties, tolls and fees in accordance with such
procedure and subject to such limits;

(b) assign to a Municipality such taxes, duties, tolls and fees

levied and collected by the State Government for such
purposes and subject to such conditions and limits;

(c) provide for making such grants-in-aid to the

Municipalities from the Consolidated Fund of the State;
and

(d) provide for constitution of such Funds for crediting all

moneys received, respectively, by or on behalf of the
Municipalities and also for the withdrawal of such
moneys therefrom,

as may be specified in the law.”

16 The impact of Article 243-ZC is that Part IXA has no application to a Scheduled

Area. The inapplicability of article 243X did not denude the state legislature to

enact legislation for the State. A Scheduled Area governed by Article 244 of the

Constitution is subject to the provisions contained in the Fifth Schedule which

govern the administration and control of Scheduled Areas or Scheduled Tribes.

Paragraph 5 confers a power on the Governor, as noted above, to direct either

that parliamentary or state law shall not apply in the Schedule Area or that it

would apply subject to such exceptions or modifications as may be specified. As

the High Court noted, no such notification has been produced and none, we may

add, has been produced before this Court other than the notification dated 29

February 2003 specifying the Scheduled Areas. In this view of the matter, the

conclusion of the High Court cannot be faulted.

 8

17 On the second aspect, it needs to be noted that the Additional Solicitor General

has fairly drawn the attention of this Court to the judgment of the Constitution

Bench in Central India Spinning and Weaving & Manufacturing Co. Ltd.

The Empress Mills, Nagpur v. The Municipal Committee, Wardha 1,

(particularly paragraph 33). Since he fairly concedes that the issue which was

sought to be raised has been concluded in the above decision of the Constitution

Bench, no further submissions have been urged in that regard.

18 For the above reasons, we are of the view that only two issues which have been

raised in the course of the present appeals are lacking in substance.

19 The appeals shall accordingly stand dismissed.

20 Pending applications, if any, stand disposed of.

…...…...….......………………....…CJI.
[Dr Dhananjaya Y Chandrachud]

…...…...….......………………....…..J.
[J B Pardiwala]

…...…...….......………………....…..J.
[Manoj Misra]

New Delhi;
September 21, 2023
GKA

1 1958 SCR 1102