Case Background
The appellant is a company incorporated under the Companies Act and engaged in construction and infrastructure development.
It had been awarded a contract by the Central Public Works Department for construction of a State Highway in Bihar under the RSVY Scheme in the district of Jamui. Under this project, the company had to construct and widen the roads from Jamui to Jhajha to Chakai till the border of the State of Jharkhand.
To carry out this road work, the company set up a stone crusher machine. Before doing so, it obtained necessary permission from the District Magistrate, Jamui and from the Circle Officer, Chakai. It also secured a No Objection Certificate from the Bihar State Pollution Control Board.
In the consent letter issued by the Bihar State Pollution Control Board, there was a typographical error regarding the output of the crusher. The correct output was 80 metric tonnes per hour. However, due to a mistake, the letter mentioned 80 metric tonnes per day.
Later, the Mines Department realised that the licence fee earlier charged from the appellant for establishing the crusher had been calculated on the basis of the lower output as wrongly shown in the letter. Taking the view that the crusher was actually of higher capacity, the department issued a demand notice to the company, asking it to pay Rs. 83.41 lakhs as fee for running a crusher of 80 metric tonnes per hour.
Before this dispute arose, when the Department had first asked the appellant to pay Rs. 3.25 lakhs as licence fee, the appellant had deposited that amount. It had also paid renewal charges of Rs. 5,000 per year. After timely completion of the road project, the crusher machine was removed.
The demand notice for Rs. 83.41 lakhs and a revisional order confirming that demand were challenged in the writ petition. The learned single judge of the Patna High Court, however, sustained the demand notice. Aggrieved by that decision, the company filed the present Letters Patent Appeal before a Division Bench of the Patna High Court.
What the Court Examined and Decided
The Division Bench, consisting of Hon’ble Mr. Justice Ashutosh Kumar and Hon’ble Mr. Justice Anjani Kumar Sharan, heard the appeal. The core question was whether the Mines Department could validly demand Rs. 83.41 lakhs from the appellant for the crusher machine based on its actual higher output capacity.
The appellant argued that under the Bihar Minerals (Prevention of Illegal Mining, Transportation and Storage) Rules, 2003, a licence is required only for carrying on the business of major minerals beyond the leasehold area. According to the appellant, at the time when it operated the crusher, there was no prohibition on installing or operating a stone crusher outside the leasehold area in the manner it had done.
The appellant pointed out that an amendment was made in 2014 in the 2003 Rules by adding a proviso to Rule 7. This proviso prohibits any person from erecting, installing or operating a stone crusher outside the leasehold area, or from stocking stone minerals in any form outside the leasehold area for the purpose of being used by the stone crusher.
The appellant’s crusher had been operated between 2007 and 2009. The appellant therefore contended that this 2014 amendment could not be applied to its earlier operations. It stressed that it was not obligated to pay any licence fee for having erected the crusher during that period, as such activity was not prohibited at that time.
Despite that legal position, when the department first demanded Rs. 3.25 lakhs as licence fee, the appellant paid it without raising a dispute, and also paid the annual renewal charges. But the later, much larger demand of Rs. 83.41 lakhs was strongly challenged as being without authority.
The appellant further submitted that imposing licence fee and penalty for the earlier period, by treating its crusher as of higher output and relying on the subsequent rule change, amounted to giving ex-post facto effect to the 2014 amendment. According to the appellant, implementation of an ex-post facto law in this manner is not permissible in law.
Apart from the timing issue, the appellant also raised a second important point. It asserted that no schedule of fee had been prescribed under the Rules which linked the licence fee to the output or capacity of the crusher. In the absence of such a schedule, the assessment of any fee based on output was arbitrary.
On this basis, the appellant argued that even the original assessment of licence fee was questionable. However, since the appellant had already paid the initial Rs. 3.25 lakhs and did not seek to reopen that issue in the appeal, it limited its challenge to the subsequent demand notice and the penalty.
The appellant maintained that there was no false representation on its part. The error in the Pollution Control Board’s consent letter, showing 80 metric tonnes per day instead of 80 metric tonnes per hour, was purely typographical. The company’s stand was that it had not misled any authority and that, in any case, there was still no valid fee schedule linking licence fee to crusher output.
During the hearing of the appeal, the Division Bench specifically asked learned counsel for the Mines Department to explain this crucial issue. The Court wanted to know on what basis, in law and in the Rules, the department had demanded such a large amount linked to the crusher’s output when no such fee schedule appeared to exist.
However, according to the judgment, the counsel for the Mines Department could not satisfactorily answer this question. The counter affidavit filed on behalf of respondent nos. 1 and 3 merely reiterated Rule 7 clause (d) of the 2003 Rules. The Court recorded that this provision did not answer the poser regarding the output-based fee or provide any concrete basis for the huge demand.
The Division Bench noted that this central aspect had not been considered by the learned single judge. The single judge had upheld the demand notice without properly examining whether any schedule of fee existed, whether the demand could be legitimately tied to crusher output, and whether the 2014 amendment could affect operations carried out between 2007 and 2009.
In the considered opinion of the Division Bench, the omission to examine this core issue made the single judge’s order unsustainable in law. Once the department could not justify the legal basis for the enhanced demand and the revisional authority’s order, and given that there was no schedule of output-based fee before the Court, the demand could not stand.
Accordingly, the Division Bench set aside the order of the learned single judge. It also quashed the demand notice which had required the appellant to pay Rs. 83.41 lakhs and the revisional order which had sustained that demand. With these directions, the Letters Patent Appeal was allowed and disposed of.
Why This Judgment Matters
This judgment is significant for contractors, infrastructure companies, and small entrepreneurs who operate stone crushers or similar machinery for government projects in Bihar.
The Patna High Court has made it clear that government departments cannot raise huge financial demands without a clear legal basis and a properly prescribed fee structure. Demands linked to machine output or capacity must be supported by rules or fee schedules, not by assumption or later changes in law.
The decision also highlights that amendments brought in later, such as the 2014 change to Rule 7 of the 2003 Rules, cannot be applied to activities carried out in earlier years. Authorities cannot use later rules to retrospectively penalise or demand extra payments for past operations.
For citizens and companies, the ruling reinforces that they are entitled to question demand notices, especially when they appear arbitrary, excessive, or unsupported by clear legal provisions. Courts will look closely at whether the department has actually answered the core legal questions, rather than just repeating rule numbers.
Legal Issues and Answers
Issue: Could the Mines Department in Bihar demand Rs. 83.41 lakhs as licence fee and penalty for operating a stone crusher, based on its higher output, in the absence of a prescribed fee schedule and when the relevant prohibitory rule was amended only in 2014?
Answer: No. The Patna High Court held that without a clear schedule of fee based on crusher output and without considering that the 2014 amendment could not govern operations from 2007–2009, the demand notice and revisional order lacked legal foundation and were therefore quashed. The single judge’s order upholding the demand was set aside.
Cases Cited by the Court
- No prior judgments or case law are cited or relied upon in the text of this judgment.
Case Details
Case Number: Letters Patent Appeal No. 927 of 2019 in Civil Writ Jurisdiction Case No. 20638 of 2012
Case Title: SPML Infra Limited (Formerly known as Subhash Projects and Marketing Limited) vs. The State of Bihar & Ors.
Citation: 2022 (2) PLJR 413
Court: High Court of Judicature at Patna
Coram: Hon’ble Mr. Justice Ashutosh Kumar and Hon’ble Mr. Justice Anjani Kumar Sharan
Date of Judgment: 13-04-2022
Advocates: Mr. Harsh Singh, Advocate for the appellant; Mr. Gyan Prakash Ojha (GA-7) and Mr. Uday Shankar Pandey, AC to GA-7, for the respondents/State; Mr. Naresh Dixit, Advocate and Mr. Sumit Shekhar Pandey, Advocate for the Mines Department
Nature of the Case: Letters Patent Appeal against the order of a single judge in a civil writ jurisdiction case, challenging a demand notice and revisional order issued by the Mines Department
Link to Judgment: Click here to read the full judgment on the Patna High Court website
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
