District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – v. The Deputy Commissioner Of Income Tax (Tds), Raipur,Chhattisgarh

(Tax Case No.81/2025 and 27 other connected cases) Digitallysigned bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.06.2318:49:18+0530HIGH COURT OF CHHATTISGARH AT BILASPUR 2025:CGHC:24257-DB AFR TAXC No. 81 of 2025 (Assessment Year 2018-19) {Arising out of order dated 21-7-2023 passed by theIncome Tax Appellate Tribunal, Raipur Bench, Raipur inITA No.8/RPR/2023 and 37 others} District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 92 of 2025 (Assessment Year 2013-14) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhata, P.O. Dantewada,District South Bastar Dantewada, Chhattisgarh – 494449 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 85 of 2025(Assessment Year 2014-15) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus (Tax Case No.81/2025 and 27 other connected cases) The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 73 of 2025(Assessment Year 2017-18) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 100 of 2025(Assessment Year 2018-19) District Mining Officer, Bijapur, Collectorate Campus,Bijapur, Chhattisgarh – 494444 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent (Assessment Year 2019-20) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhatha, P.O. Dantewada,District South Bastar Dantewada, Chhattisgarh – 494449 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent (Tax Case No.81/2025 and 27 other connected cases) TAXC No. 93 of 2025 (Assessment Year 2015-16) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhata, P.O. Dantewada,District South Bastar Dantewada, Chhattisgarh – 494449 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 97 of 2025 District Mining Officer Bijapur, Collectorate Campus,Bijapur, Chhattisgarh – 494444 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 86 of 2025 (Assessment Year 2016-17) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 82 of 2025 (Assessment Year 2015-16) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus (Tax Case No.81/2025 and 27 other connected cases) The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 83 of 2025 (Assessment Year 2013-14) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 84 of 2025 (Assessment Year 2019-20) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 95 of 2025(Assessment Year 2019-20) Versus (Tax Case No.81/2025 and 27 other connected cases) The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 83 of 2025 (Assessment Year 2013-14) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 84 of 2025 (Assessment Year 2019-20) District Mining Officer, Bemetara Mining Office,Collectorate Campus, Bemetara, Chhattisgarh – 491335 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 95 of 2025(Assessment Year 2019-20) District Mining Officer, Bijapur, Collectorate Campus,Bijapur, Chhattisgarh – 494444 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 96 of 2025 (Assessment Year 2014-15) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhata, P.O. Dantewada,District South Bastar Dantewada, Chhattisgarh – 494449 --- Appellant (Tax Case No.81/2025 and 27 other connected cases) Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 101 of 2025 (Assessment Year 2016-17) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhata, P.O. Dantewada,District Sourth Bastar Dantewada, Chhattisgarh – 494449 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 99 of 2025(Assessment Year 2017-18) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhata, P.O. Dantewada,District South Bastar Dantewada, Chhattisgarh – 494449 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 94 of 2025 (Assessment Year 2018-19) District Mining Officer, Dantewada Mining Office,Collectorate Campus, Anwarbhata, P.O. Dantewada,District South Bastar Dantewada, Chhattisgarh – 494449 --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent (Tax Case No.81/2025 and 27 other connected cases) TAXC No. 102 of 2025(Assessment Year 2018-19) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 106 of 2025(Assessment Year 2016-17) Collector Mining, Kanker (Deputy Director MineralAdministration), Mining Office, Collectorate Campus,Kanker, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 109 of 2025 (Assessment Year 2014-15) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 110 of 2025 (Assessment Year 2017-18) Collector Mining, Kanker (Deputy Director MineralAdministration), Mining Office, Collectorate Campus,Kanker, Chhattisgarh --- Appellant (Tax Case No.81/2025 and 27 other connected cases) Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 112 of 2025 (Assessment Year 2013-14) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 107 of 2025(Assessment Year 2014-15) Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 110 of 2025 (Assessment Year 2017-18) Collector Mining, Kanker (Deputy Director MineralAdministration), Mining Office, Collectorate Campus,Kanker, Chhattisgarh --- Appellant (Tax Case No.81/2025 and 27 other connected cases) Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 112 of 2025 (Assessment Year 2013-14) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 107 of 2025(Assessment Year 2014-15) Collector Mining, Kanker (Deputy Director MineralAdministration), Mining Office, Collectorate Campus,Kanker, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 105 of 2025 (Assessment Year 2018-19) Collector Mining, Kanker (Deputy Director MineralAdministration), Mining Office, Collectorate Campus,Kanker, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent (Tax Case No.81/2025 and 27 other connected cases) TAXC No. 104 of 2025(Assessment Year 2017-18) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 108 of 2025 (Assessment Year 2016-17) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent TAXC No. 113 of 2025 (Assessment Year 2019-20) Collector Mining, Kanker (Deputy Director MineralAdministration), Mining Office, Collectorate Campus,Kanker, Chhattisgarh --- Appellant Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent (Assessment Year 2019-20) Deputy Director (Mineral & Administration), JagdalpurMining Office, Collectorate Campus, P.O. Jagdalpur,District Bastar, Chhattisgarh --- Appellant (Tax Case No.81/2025 and 27 other connected cases) Versus The Deputy Commissioner of Income Tax (TDS), Raipur,Chhattisgarh --- Respondent For Appellant : Mr. Rahul Tamaskar, Government Advocate.For Respondent : Mr. Amit Chaudhari and Mr. Ajay Kumrani,Advocates. Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Deepak Kumar Tiwari, JJ. Judgment on Board(16/06/2025) Sanjay K. Agrawal, J. 1.Since common question of law and fact is involvedand common substantial question of law has beenformulated in all these connected tax appeals, theyare tagged together and heard together and arebeing disposed of by this common judgment. and common substantial question of law has beenformulated in all these connected tax appeals, theyare tagged together and heard together and arebeing disposed of by this common judgment. --- Respondent For Appellant : Mr. Rahul Tamaskar, Government Advocate.For Respondent : Mr. Amit Chaudhari and Mr. Ajay Kumrani,Advocates. Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Deepak Kumar Tiwari, JJ. Judgment on Board(16/06/2025) Sanjay K. Agrawal, J. 1.Since common question of law and fact is involvedand common substantial question of law has beenformulated in all these connected tax appeals, theyare tagged together and heard together and arebeing disposed of by this common judgment. and common substantial question of law has beenformulated in all these connected tax appeals, theyare tagged together and heard together and arebeing disposed of by this common judgment. 2.This batch of tax appeals have been preferred underSection 260A of the Income Tax Act, 1961 (forshort, ‘the IT Act’) calling in question legality,validity and correctness of judgment & order dated21-7-2023 passed by the Income Tax AppellateTribunal (ITAT), Raipur Bench, Raipur in respectivetax appeals affirming the order of the Commissionerof Income Tax (Appeals), National Faceless AppealCentre (NFAC), Delhi, by which the ITAT hasSection 260A of the Income Tax Act, 1961 (forshort, ‘the IT Act’) calling in question legality,validity and correctness of judgment & order dated21-7-2023 passed by the Income Tax AppellateTribunal (ITAT), Raipur Bench, Raipur in respectivetax appeals affirming the order of the Commissionerof Income Tax (Appeals), National Faceless AppealCentre (NFAC), Delhi, by which the ITAT has (Tax Case No.81/2025 and 27 other connected cases) dismissed the appeals of the assessee upholding theorder of the CIT (Appeals) in which following common substantial question of law has been formulated separately in each appeal: - “Whether provisions of Section 206(1C) of theIncome Tax Act, 1961 are applicable forcollecting TCS from offenders who do illegalmining or transportation/storage withouthaving lease or license or have not enteredinto the contract for transfer of right inMines or Quarry and from whom CompoundingFine is collected as per provisions underRule 71(5) of the Chhattisgarh Minor MineralRules, 2015?” 3.For the sake of convenience, Tax Case No.81/2025 is taken as lead case. The aforesaid question of lawarises for consideration on the following factualbackdrop: - 4.On 24-9-2018, TDS Survey under Section 133A(2A) ofthe IT Act was conducted in the office of theDistrict Mining Officer, Bemetara, which is theMining Department of the State of Chhattisgarh.During the course of aforesaid proceeding, theIncome Tax Officers came across certain issues,viz., the assessee i.e. the appellant herein by notcollecting tax at source (TCS) on the amount ofcompounding fees/ fine that was recovered fromillegal miners and transporters of minerals hadviolated the provisions contained in Section (Tax Case No.81/2025 and 27 other connected cases) 3.For the sake of convenience, Tax Case No.81/2025 is taken as lead case. The aforesaid question of lawarises for consideration on the following factualbackdrop: - 4.On 24-9-2018, TDS Survey under Section 133A(2A) ofthe IT Act was conducted in the office of theDistrict Mining Officer, Bemetara, which is theMining Department of the State of Chhattisgarh.During the course of aforesaid proceeding, theIncome Tax Officers came across certain issues,viz., the assessee i.e. the appellant herein by notcollecting tax at source (TCS) on the amount ofcompounding fees/ fine that was recovered fromillegal miners and transporters of minerals hadviolated the provisions contained in Section (Tax Case No.81/2025 and 27 other connected cases) 206C(1C) of the IT Act, and two other issues, whichwere not being dealt with in the instant batch ofappeals, as they have been settled finally by theorder of the ITAT between the parties. Thereafter,on 1-7-2019, order under Sections 206C(1C), 206C(6)& 206C(7) of the IT Act was passed after treatingthe assessee as ‘assessee-in-default’ and saddledit with an obligation to make good the said non-collection of tax at source. The appellant hereinbeing aggrieved by the order of the AssessingOfficer preferred an appeal before the CIT(Appeals) on the issue of saddling it with theliability for failure to collect tax at source onthe amount of compounding fees received fromillegal miners/transporters of minerals on theground that the same is not contemplated underSection 206C(1C) of the IT Act, therefore, theappellant was not liable to collect tax as perSection 206C(1C) as it is not covered by the saidprovision, however, the appeal filed by theassessee before the CIT (Appeals) was dismissed bythe CIT (Appeals) on 17-11-2022 and feelingaggrieved against that order, the appellant herein/assessee preferred an appeal before the ITAT andthe ITAT though allowed the appeal with reference (Tax Case No.81/2025 and 27 other connected cases) to other issues which we are not concerned, butdismissed the appeal holding that the appellant/assessee was obliged to collect tax at source (TCS)as per the provisions contained in Section 206C(1C)of the IT Act. 5.Feeling dissatisfied and aggrieved against theorder of the ITAT, the appellant herein/assesseehas preferred these appeals calling in questionlegality, validity and correctness of the order ofthe ITAT, as the ITAT has upheld the demand of TCS,interest and penalty for the assessment year 2018-19. 6.Mr. Rahul Tamaskar, learned Government Advocateappearing for the State of Chhattisgarh/appellant/assessee, would submit that tax at source (TCS) has to be collected by the appellant/assessee underSection 206C(1C) of the IT Act from lease holder orlicense holder and person must be either leaseholder or license holder by which the assessee hasentered into a contract or otherwise transfers anyright or interest in whole or in part in anyparking lot or toll plaza or mine or quarry, toanother person, and in this case, the assessee mustbe liable to collect royalty. He would further (Tax Case No.81/2025 and 27 other connected cases) 6.Mr. Rahul Tamaskar, learned Government Advocateappearing for the State of Chhattisgarh/appellant/assessee, would submit that tax at source (TCS) has to be collected by the appellant/assessee underSection 206C(1C) of the IT Act from lease holder orlicense holder and person must be either leaseholder or license holder by which the assessee hasentered into a contract or otherwise transfers anyright or interest in whole or in part in anyparking lot or toll plaza or mine or quarry, toanother person, and in this case, the assessee mustbe liable to collect royalty. He would further (Tax Case No.81/2025 and 27 other connected cases) submit that in case of illegal mining, the offenderis neither a lease holder nor a license holder andthe assessee has not entered into contract or nothaving any personal right or interest. He wouldalso submit that the amount to be paid is not inthe form of royalty but a fine to drop theprosecution against the offender and as suchcompounding fees has been charged by virtue of theprovision contained in Section 23A of the Mines andMinerals (Development and Regulation) Act, 1957(for short, ‘the MMDR Act’) read with Rule 71(5) ofthe Chhattisgarh Minor Mineral Rules, 2015,therefore, the mandate of tax collection at sourceas contained in Section 206C(1C) of the IT Actwould not be applicable in the case of illegalmining lease and as such, the appellant/assesseecannot be branded as ‘assessee in default’ andraising demand with interest is completely illegal,arbitrary and beyond the scope of Section 206C(1C)of the IT Act. In the circumstances, the orderimpugned is liable to be set aside in all theappeals and the appeals deserve to be allowed. 7.Mr. Amit Chaudhari, learned counsel appearing forthe respondent/Revenue, would submit that the (Tax Case No.81/2025 and 27 other connected cases) provisions contained in Section 260C(1C) of the ITAct would also be applicable for collecting TCS from offenders who do illegal mining ortransportation/storage without having lease orlicense or have not entered into contract fortransfer of rights in mines or quarry. He wouldfurther submit that the obligation cast upon anassessee to collect tax at source (TCS) underSection 206C(1C) of the IT Act does not presupposesthe existence of a lease or license or a contract,but would also be applicable to a case where aperson had transferred any right or interest,either in whole or in part, inter alia, in a mineto another person. He would also submit that inthe instant case, it is not absolutely justified inholding that collecting compounding fees underSection 206C(1C) of the IT Act would be attractedand the ITAT is justified in dismissing the appealsupholding the demand, interest and penalty and assuch, all the appeals deserve to be dismissed. 8.We have heard learned counsel for the parties andconsidered their rival submissions made herein-above and also went through the record with utmostcircumspection. (Tax Case No.81/2025 and 27 other connected cases) 9. The sole and common substantial question of law involved, formulated and to be answered in this batch of tax appeals has been projected in the opening paragraph of this judgment. 10. In order to answer the substantial question of law,it would be appropriate to notice Section 206C(1C)of the IT Act which states as under: -it would be appropriate to notice Section 206C(1C)of the IT Act which states as under: - “206C. Profits and gains from the business oftrading in alcoholic liquor, forest produce,scrap, etc.—(1) xxxxxx xxxxxxxxx 8.We have heard learned counsel for the parties andconsidered their rival submissions made herein-above and also went through the record with utmostcircumspection. (Tax Case No.81/2025 and 27 other connected cases) 9. The sole and common substantial question of law involved, formulated and to be answered in this batch of tax appeals has been projected in the opening paragraph of this judgment. 10. In order to answer the substantial question of law,it would be appropriate to notice Section 206C(1C)of the IT Act which states as under: -it would be appropriate to notice Section 206C(1C)of the IT Act which states as under: - “206C. Profits and gains from the business oftrading in alcoholic liquor, forest produce,scrap, etc.—(1) xxxxxx xxxxxxxxx (1C) Every person, who grants a lease ora licence or enters into a contract orotherwise transfers any right or interesteither in whole or in part in any parking lotor toll plaza or mine or quarry, to anotherperson, other than a public sector company(hereinafter in this section referred to as“licensee or lessee’) for the use of suchparking lot or toll plaza or mine or quarryfor the purpose of business shall, at thetime of debiting of the amount payable by thelicensee or lessee to the account of thelicensee or lessee or at the time of receiptof such amount from the licensee or lessee incash or by the issue of a cheque or draft orby any other mode, whichever is earlier,collect from the licensee or lessee of anysuch licence, contract or lease of the naturespecified in column (2) of the Table below, asum equal to the percentage, specified in thecorresponding entry in column (3) of the saidTable, of such amount as income-tax: TABLE Sl.No.Nature of contract orPercentage (Tax Case No.81/2025 and 27 other connected cases) Explanation 1.—For the purposes of this sub-section, “mining and quarrying” shall notinclude mining and quarrying of mineral oil. Explanation2.—ForthepurposesofExplanation 1, “mineral oil” includespetroleum and natural gas.” 11. A careful perusal of the aforesaid provision wouldshow that tax at the rate of 2% has to be collectedby the assessee from the lease holder or licenseholder or with whom the assessee has entered intocontract or otherwise transferred any right orinterest either in whole or in part in any parkinglot or toll plaza or mine or quarry, on the amountof payment made by them to the appellant herein.The person must be lease holder or license holderor with whom the assessee has entered into contractor otherwise transferred any right or interest inthe mines or fields, meaning thereby the personfrom whom the TCS is collectable must be the personto whom the lease or license or otherwise anyexpress contract, right or interest has beentransferred by the assessee to any mine or quarryand royalty is payable by them to the State (Tax Case No.81/2025 and 27 other connected cases) Government through the District Mining Officer. Inthe instant case, mining lease must be granted interms of Section 9 of the MMDR Act which provides as under: - “9. Royalties in respect of mining leases.—(1) The holder of a mining lease grantedbefore the commencement of this Act shall,notwithstanding anything contained in theinstrument of lease or in any law in force atsuch commencement, pay royalty in respect ofany mineral removed or consumed by him or byhis agent, manager, employee, contractor orsub-lessee from the leased area after suchcommencement, at the rate for the time beingspecified in the Second Schedule in respectof that mineral. (2) The holder of a mining lease granted onor after the commencement of this Act shallpay royalty in respect of any mineral removedor consumed by him or by his agent, manager,employee, contractor or sub-lessee from theleased area at the rate for the time beingspecified in the Second Schedule in respectof that mineral. (2) The holder of a mining lease granted onor after the commencement of this Act shallpay royalty in respect of any mineral removedor consumed by him or by his agent, manager,employee, contractor or sub-lessee from theleased area at the rate for the time beingspecified in the Second Schedule in respectof that mineral. (2A) The holder of a mining lease, whethergranted before or after the commencement ofthe Mines and Minerals (Regulation andDevelopment) Amendment Act, 1972, shall notbe liable to pay any royalty in respect ofany coal consumed by a workman engaged in acolliery provided that such consumption bythe workman does not exceed one-third of atonne per month. (3) The Central Government may, bynotification in the Official Gazette, amendthe Second Schedule so as to enhance orreduce the rate at which royalty shall bepayable in respect of any mineral with effect (Tax Case No.81/2025 and 27 other connected cases) from such date as may be specified in thenotification: Provided that the Central Governmentshall not enhance the rate of royalty inrespect of any mineral more than once duringany period of three years.” 12.By virtue of Section 9(1) of the MMDR Act, the holder of a mining lease is obliged to pay royaltyin respect of any mineral removed or consumed byhim or by his agent, manager, employee, contractoror sub-lessee from the leased area at the rate forthe time being specified in the Second Schedule inrespect of that mineral and the Central Governmentis empowered to amend the Second Schedule so as toenhance or reduce the rate at which royalty shallbe payable in respect of any mineral with effectfrom such date as may be specified in thenotification. 13. Section 23A of the MMDR Act provides for compounding of offences, which states as under: - “23A. Compounding of offences.—(1) Anyoffence punishable under this Act or any rulemade thereunder may, either before or afterthe institution of the prosecution, becompounded by the person authorised undersection 22 to make a complaint to the courtwith respect to that offence, on payment tothat person, for credit to the Government, ofsuch sum as that person may specify: (Tax Case No.81/2025 and 27 other connected cases) Provided that in the case of an offencepunishable with fine only, no such sum shallexceed the maximum amount of fine which maybe imposed for that offence. (2) Where an offence is compounded under sub-section (1), no proceeding or furtherproceeding, as the case may be, shall betaken against the offender in respect of theoffence so compounded, and the offender, ifin custody, shall be released forthwith.” 14.By virtue of sub-section (1) of Section 23A of the MMDR Act, any offence punishable under this Act orany rule made thereunder may, either before orafter the institution of the prosecution, can becompoundable by the person authorised under Section22 to make a complaint to the court with respect tothat offence, on payment to that person, for creditto the Government, of such sum as that person mayspecify and sub-section (2) provides that where anoffence is compounded under sub-section (1), noproceeding or further proceeding, as the case maybe, shall be taken against the offender in respectof the offence so compounded, and the offender, ifin custody, shall be released forthwith, meaningthereby, once the offence is compounded by payingthe compounding fine, the offence punishable underthe MMDR Act i.e. the act of illegal mining standscompounded by the person authorised. Page 20 of 28 (Tax Case No.81/2025 and 27 other connected cases) Page 20 of 28 (Tax Case No.81/2025 and 27 other connected cases) 15. The State Government in exercise of the powersconferred by Section 15 of the MMDR Act has framedthe rules known as the Chhattisgarh Minor MineralRules, 2015 (for short, ‘the Rules of 2015’), whichshall apply to the grant and regulation of QuarryLeases and other mineral concessions in respect ofMinor Minerals and for purposes connected therewithin the State of Chhattisgarh only. Rule 71 of theRules of 2015 deals with penalty for unauthorizedextraction and transportation, which states asunder: - “71. Penalty for unauthorized extraction andtransportation.—(1) Whenever any person isfound extracting or transporting minerals oron whose behalf such extraction ortransportation is being made, otherwise thanin accordance with these rules, shall bepresumed to be a party to the illegalextraction of minerals and every such personshall be punishable with simple imprisonmentfor a term which may extend to one year orwith fine which may extend to twenty fivethousand rupees or with both. (2) Whenever any person is found extractingor transporting mineral in contravention ofthe provisions of these rules, the Collector/JointDirector/DeputyDirector/MiningOfficer/AssistantMiningOfficer/MiningInspector or any Officer authorised by him orZilaPanchayat/JanpadPanchayat/GramPanchayat, may seize the minerals and itsproducts together with all tools, equipmentsand vehicles used in committing such offence. (Tax Case No.81/2025 and 27 other connected cases) (3) The officer seizing such illegallyextracted or transported mineral or itsproduct, tools, equipments and vehicles shallgive a receipt of the same to the person fromwhose possession such things were so seizedand shall make report to the Magistratehaving jurisdiction to try such offence. (4) The property so seized under sub-rule (2)shall be released by the officer who seizedsuch property on execution of a bond to thesatisfaction of the officer by the personsfrom whose possession such property wasseized. It shall be produced at such timeand place when production is asked for bysuch officer : Provided that where a report has beenmade to a Magistrate under sub-rule (3) thenthe seized property shall be released onlyunder the orders of such Magistrate. (5) The Collector/Joint Director/DeputyDirector/Mining Officer or any officerauthorisedbyZilaPanchayat/JanpadPanchayat/Gram Panchayats may, either beforeor after the institution of the prosecution,compound the offence so committed under sub-rule (1) on payment of market value ofmineral so extracted or transported and suchfine which may extend to double the marketvalue of mineral so extracted or transported,but in no case it shall be less than fivethousand rupees or ten times of royalty ofminerals so extracted whichever is higher : Provided that in case of continuingcontravention, the Collector/Deputy Director/Mining Officer may, in addition to the fineimposed also recover an amount of onethousand rupees for each day till suchcontravention continues. xxxxxxxxxxxxxxxxxx” Page 22 of 28 (Tax Case No.81/2025 and 27 other connected cases) 16.Rule 71 of the Rules of 2015 also provides penaltyfor unauthorized extraction and transportation andsub-rule (5) of Rule 71 states that the Collector/Joint Director/Deputy Director/ Mining Officer orany officer authorised by Zila Panchayat/JanpadPanchayat/Gram Panchayats may, either before orafter the institution of the prosecution, compoundthe offence so committed under sub-rule (1) onpayment of market value of mineral so extracted ortransported and such fine which may extend todouble the market value of mineral so extracted ortransported, but in no case it shall be less thanfive thousand rupees or ten times of royalty ofminerals so extracted whichever is higher. xxxxxxxxxxxxxxxxxx” Page 22 of 28 (Tax Case No.81/2025 and 27 other connected cases) 16.Rule 71 of the Rules of 2015 also provides penaltyfor unauthorized extraction and transportation andsub-rule (5) of Rule 71 states that the Collector/Joint Director/Deputy Director/ Mining Officer orany officer authorised by Zila Panchayat/JanpadPanchayat/Gram Panchayats may, either before orafter the institution of the prosecution, compoundthe offence so committed under sub-rule (1) onpayment of market value of mineral so extracted ortransported and such fine which may extend todouble the market value of mineral so extracted ortransported, but in no case it shall be less thanfive thousand rupees or ten times of royalty ofminerals so extracted whichever is higher. 17.As such, by virtue of Section 23A of the MMDR Actread with Rule 71(5) of the Rules of 2015, theoffence is compounded and effect of compounding isalso contained in Section 23A(2) of the MMDR Act. read with Rule 71(5) of the Rules of 2015, theoffence is compounded and effect of compounding isalso contained in Section 23A(2) of the MMDR Act. 18. It is well settled position of law that fiscalstatutes are strictly construed. Long back, in thematter of Cape Brandy Syndicate v. IRC1, JusticeRowlatt explained the principles of strictconstruction of a taxing statutes in the followingmatter: -statutes are strictly construed. Long back, in thematter of Cape Brandy Syndicate v. IRC1, JusticeRowlatt explained the principles of strictconstruction of a taxing statutes in the followingmatter: - 1(1921) 1 KB 64 (Tax Case No.81/2025 and 27 other connected cases) “In a taxing Act one has to look merely atwhat is clearly said. There is no room forany intendment. There is no equity about atax. There is no presumption as to tax.Nothing is to be read in, nothing is to beimplied. One can only look fairly at thelanguage used.” 19. Further, the Supreme Court in the matter of CST v. Modi Sugar Mills Ltd.2 has observed as under: - “In interpreting a taxing statute, equitableconsideration are entirely out of place. Norcan taxing statutes be interpreted on anypresumptions or assumptions. The court mustlook squarely at the words of the statute andinterpret them. It must interpret a taxingstatute in the light of what is clearlyexpressed; it cannot imply anything which isnot expressed; it cannot import provisions inthe statutes so as to supply any assumeddeficiency.” 20. In the matter of CIT v. Calcutta Knitwears3, the Supreme Court has held that while interpretingfiscal statutes, the court must not add orsubstitute the word in the provision and theirLordships observed as under: - “28. This Court in Tata Consultancy Servicesv. State of A.P. [(2005) 1 SCC 308] hasascribed plain meaning to the terms“computer” and “computer programme” in afiscalstatuteandreiteratingtheproposition laid down in IRC case [IRC v.Rossminster Ltd., (1980) 1 All ER 80 (HL)],observed that a court should not be 2AIR 1961 SC 1047 3(2014) 6 SCC 444 (Tax Case No.81/2025 and 27 other connected cases) overzealous in searching ambiguities orobscurities in words which are plain. 29.In Prakash Nath Khanna v. CIT [(2004) 9SCC 686], this Court has explained that thelanguage employed in a statute is thedeterminative factor of the legislativeintent. The legislature is presumed to havemade no mistake. The presumption is that itintended to say what it has said. Assumingthere is a defect or an omission in the wordsused by the legislature, the Court cannotcorrect or make up the deficiency. Where thelegislative intent is clear from thelanguage, the Court should give effect to it.(Delhi Financial Corpn.v.Rajiv Anand[(2004) 11 SCC 625] and State of A.P. v. RoadRollers Owners Welfare Assn. [(2004) 6 SCC210] ) 3(2014) 6 SCC 444 (Tax Case No.81/2025 and 27 other connected cases) overzealous in searching ambiguities orobscurities in words which are plain. 29.In Prakash Nath Khanna v. CIT [(2004) 9SCC 686], this Court has explained that thelanguage employed in a statute is thedeterminative factor of the legislativeintent. The legislature is presumed to havemade no mistake. The presumption is that itintended to say what it has said. Assumingthere is a defect or an omission in the wordsused by the legislature, the Court cannotcorrect or make up the deficiency. Where thelegislative intent is clear from thelanguage, the Court should give effect to it.(Delhi Financial Corpn.v.Rajiv Anand[(2004) 11 SCC 625] and State of A.P. v. RoadRollers Owners Welfare Assn. [(2004) 6 SCC210] ) 30.In B. Premanand v. Mohan Koikal [(2011)4 SCC 266 : (2011) 1 SCC (L&S) 676] thisCourt has observed as follows: (SCC p. 273,para 24) “24. The literal rule of interpretationreally means that there should be nointerpretation. In other words, we shouldread the statute as it is, withoutdistorting or twisting its language. Wemay mention here that the literal rule ofinterpretation is not only followed byJudges and lawyers, but it is alsofollowed by the layman in his ordinarylife. To give an illustration, if aperson says ‘this is a pencil’, then hemeans that it is a pencil; and it is notthat when he says that the object is apencil, he means that it is a horse,donkey or an elephant. In other words,the literal rule of interpretation simplymeans that we mean what we say and we saywhat we mean. If we do not follow theliteral rule of interpretation, sociallife will become impossible, and we will (Tax Case No.81/2025 and 27 other connected cases) not understand each other. If we say thata certain object is a book, then we meanit is a book. If we say it is a book, butwe mean it is a horse, table or anelephant, then we will not be able tocommunicate with each other. Life willbecome impossible. Hence, the meaning ofthe literal rule of interpretation issimply that we mean what we say and we saywhat we mean.” 31.Thus, the language of a taxing statuteshould ordinarily be read and understood inthe sense in which it is harmonious with theobject of the statute to effectuate thelegislative animation. A taxing statuteshould be strictly construed; common senseapproach, equity, logic, ethics and moralityhave no role to play. Nothing is to be readin, nothing is to be implied; one can onlylook fairly at the language used and nothingmore and nothing less. (J. Srinivasa Rao v.State of A.P. [(2006) 12 SCC 607 : (2006) 13Scale 27] and Jagdambika Pratap Narain Singhv. CBDT [(1975) 4 SCC 578 : 1975 SCC (Tax)356 : (1975) 100 ITR 698].)” 21.Further, the Supreme Court in the matter of CIT v. Vatika Township P. Ltd.4 has quoted with approval the following observation of Lord Cairns in the5matter of Partington v. Attorney General: “As I understand the principle of all fiscallegislation it is this : If the person soughtto be taxed comes within the letter of thelaw he must be taxed, however, great thehardship may appear to the Judicial mind tobe. On the other hand, if the Crown, seekingto recover the tax, cannot bring the subjectwithin the letter of the law, the subject is 4(2014) 367 ITR 466 (SC) 5[1869] LR 4 HL 100 (Tax Case No.81/2025 and 27 other connected cases) free, however, apparently within the spiritof the law the case might otherwise appear tobe.” 22. Reverting to the facts of the present case in light Vatika Township P. Ltd.4 has quoted with approval the following observation of Lord Cairns in the5matter of Partington v. Attorney General: “As I understand the principle of all fiscallegislation it is this : If the person soughtto be taxed comes within the letter of thelaw he must be taxed, however, great thehardship may appear to the Judicial mind tobe. On the other hand, if the Crown, seekingto recover the tax, cannot bring the subjectwithin the letter of the law, the subject is 4(2014) 367 ITR 466 (SC) 5[1869] LR 4 HL 100 (Tax Case No.81/2025 and 27 other connected cases) free, however, apparently within the spiritof the law the case might otherwise appear tobe.” 22. Reverting to the facts of the present case in light of the aforesaid principles of law laid down bytheir Lordships of the Supreme Court the above-mentioned judgments (supra), the fact remains thatSection 206C(1C) of the IT Act only obliges theassessee to collect tax at source from the personto whom such right has been conferred and by whomroyalty is payable to the State Government throughthe District Mining Officer and obligation tocollect tax under Section 206C(1C) cannot beextended to the person involved in illegal miningor transporting illegal minerals. Section 206C(1C)of the IT Act specifically obliges to collect taxby the assessee from the lease holder or licenseholder or with whom the assessee has entered intocontract or otherwise transferred any right orinterest either in whole or in part in any parkinglot or toll plaza or mine or quarry. Similarly,there is no legislative mandate to collect tax atsource from the person who is involved in illegalmining or illegal transportation of minerals andsimilarly, compounding fees/fine is collectable in (Tax Case No.81/2025 and 27 other connected cases) terms of Section 23A of the MMDR Act read with Rule71(5) of the Rules of 2015 and the effect ofcompounding would be that on being compounded underSection 23A(1), no proceeding or further proceedingshall be taken and the offender, if in custody,shall be released forthwith. Similar provision hasbeen laid down in Section 320 of the Code ofCriminal Procedure, 1973, which deals withcompounding of offences and sub-section (8) ofSection 320 clearly mandates that the compooundingof an offence under Section 320 shall have theeffect of an acquittal of the accused with whom theoffence has been compounded. As such, compoundingfee/fine cannot be subjected to proceeding underSection 206C(1C) of the IT Act, as there is nolegislative mandate to collect tax at source (TCS)on compounding fee/fine collected under Section 23Aof the MMDR Act read with Rule 71(5) of the Rulesof 2015. As such, by virtue of the provisionscontained in Section 206C(1C) of the IT Act, thereis legislative command to collect TCS from theamount of royalty and simultaneously, there is nolegislative command to recover TCS from the amountof compounding fee/fine under Section 23A of theMMDR Act read with Rule 71(5) of the Rules of 2015, (Tax Case No.81/2025 and 27 other connected cases) as the royalty does not include the compoundingfee/fine and the terms “royalty” and “compoundingfee”, both, are mutually exclusive. Therefore, theITAT is completely unjustified in holding thatcompounding fee/fine (TCS) would be chargeableunder Section 206C(1C) of the IT Act by relyingupon the definition contained in Section 2(47) ofthe IT Act. Accordingly, we are unable to upholdthe judgment & order passed by the ITAT relying onSection 2(47) of the IT Act. (Tax Case No.81/2025 and 27 other connected cases) as the royalty does not include the compoundingfee/fine and the terms “royalty” and “compoundingfee”, both, are mutually exclusive. Therefore, theITAT is completely unjustified in holding thatcompounding fee/fine (TCS) would be chargeableunder Section 206C(1C) of the IT Act by relyingupon the definition contained in Section 2(47) ofthe IT Act. Accordingly, we are unable to upholdthe judgment & order passed by the ITAT relying onSection 2(47) of the IT Act. 23. In view of the above, the impugned judgment & orderdated 21-7-2023 passed by the ITAT making demandand levying interest & penalty for non-complianceof Section 206C(1C) of the IT Act cannot besustained and accordingly, it is set aside. Thesubstantial question of law is answered in favourof the assessee and against the Revenue. dated 21-7-2023 passed by the ITAT making demandand levying interest & penalty for non-complianceof Section 206C(1C) of the IT Act cannot besustained and accordingly, it is set aside. Thesubstantial question of law is an