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Sai Keshava Enterprises & Ors had challenged the amendment and said that the government should not recover a fee on minerals that are excavated in other states. The Karnataka High Court struck down Rule 42 (7) of the Karnataka Minor Mineral Concession Rules, 1994, holding it to be unconstitutional and ultra vires to the Mines and Minerals (Development and Regulation) Act, 1957. The Government was collecting 70 rupees per metric ton from the people who transported the materials like aggregates or jelly, boulders, size stone, M-sand, and similar from other states to the state of Karnataka.
The petitioners argued that the Act of 1957 already covers the regulation of minerals and the transportation area, the enacted rules of 1994 has no power to interfere in the law which is already passed by the Parliament. The states have the power to frame rules which shall be as per Sections 15 and 23-c. The highlighted rule 42 (7) nowhere describes the object and the nature of the fees, but only states that a sum must be payable by transporters who are not from the state of Karnataka. The petitioners also contended that said rule is not covered under Section 15 or Section 23-c of said Act.
The petitioner also said that the contention of the state government that such a fee is regulatory cannot be approved as they are not receiving any service in exchange. Hence, the impugned fee is not a regulatory fee but a compensatory fee. If the alleged object of the recovery of the fee is to check illegal transportation of minerals both from outside and within the state, Then the fee cannot be charged only for outside transportation. The charge of the fee is violative of Article 14 and 301 of the Constitution of India.
Advocate General Prabhuling K Navadgi, appearing for the state, opposed the petitions arguing that the State is vested with the power to making rules under clause (o) of sub-section (1A) of Section 15. The AG also stated that the state of Karnataka is concerned and wants to prevent illegally excavated minerals from entering the State of Karnataka. The bench of Chief Justice Abhay S. Oka and Justice S. Vishwajith Shetty relied on the Supreme Courts' judgment in the State of Gujarat & Ors Vs. Jayeshbhai Kanjibhai Kalathiya where it was held that Section 23-c of the said Act vested no power to the state to make rules regulating the transportation of excavated minerals. Also, that the clauses of Section 15 do not allow the State government to form rules for regulating the minerals.
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