Orissa HC Sets Aside Royalty Demand on Brick Kiln Unit for Lack of Due Process

Raja Bricks Vs State Of Odisha And Others (Orissa High Court)

Orissa High Court has intervened in a dispute concerning the imposition of royalty and other charges on stacked sand and soil found at a brick kiln unit, setting aside a demand letter issued by the Mining Officer (in-charge), Balasore. The court’s decision underscores the fundamental importance of natural justice in administrative proceedings, particularly the right of an affected party to be heard before an adverse order is passed.

The petitioner, M/s Raja Bricks, had challenged an order dated June 3, 2025, from the Mining Officer, which directed the firm to deposit a substantial sum of Rs. 14,17,850. This demand comprised various components: Rs. 42,000 for Royalty and Additional Charge on 600 cubic meters of soil, Rs. 6,300 for District Mineral Foundation (DMF) and Rs. 1,050 for Environmental Management Fund (EMF) related to soil. For 2000 cubic meters of sand, the demand included Rs. 8,44,000 for Royalty and Additional Charge, Rs. 21,000 for DMF, and Rs. 3,500 for EMF. Crucially, a significant penalty of Rs. 5,00,000 was also levied.

Mr. Prafulla Kumar Rath, learned Senior Advocate representing Raja Bricks, argued before the High Court that the demand lacked “foundational fact” and was issued without adhering to the principles of natural justice. He asserted that the sand and soil found stacked at the brick kiln unit had been legitimately purchased from various authorized persons or licensees of sairat (minor mineral sources) for use in the brick manufacturing process. The petitioner contended that the Mining Officer failed to provide an opportunity to substantiate this claim, thereby unjustly imposing the liability for royalty, additional charges, DMF, EMF, and penalty. Such a demand, issued merely through a letter, was deemed “untenable in the eye of law” due to the absence of procedural fairness.

In response, Mr. Saswat Das, learned Additional Government Advocate, presented the Department’s position based on instructions from the Mining Officer. He stated that during a spot visit, soil and sand were indeed found stacked at the kiln unit, and the source of their acquisition was not explained at that moment. The Department relied on Rule 51(4) of the Odisha Minor Minerals Concession Rules, 2016, as amended by the 2023 Amendment Rules. This rule, according to the Department, empowers the Mining Officer to recover royalty, rent, or tax from any person who “wins the mineral or disposes of such mineral.” The Additional Government Advocate maintained that since the petitioner did not produce documentary evidence at the spot inspection, there was no legal requirement for a prior show cause notice before issuing the demand letter.

However, a critical concession was made by the Department’s counsel during the hearing: he acknowledged that Rule 51(4) of the Odisha Minor Minerals Concession Rules, 2016, does not empower the Mining Officer to impose a penalty. This admission significantly weakened the Department’s stance on the penalty component of the demand.

The High Court, after a thorough perusal of the records, sided with the petitioner on the crucial aspect of natural justice. The court noted that Raja Bricks had, in fact, enclosed documents (Annexure-22 series) with its writ petition, which prima facie disclosed the source of acquisition of the minor minerals from different persons over a period. The court emphasized that when a decision is taken that adversely affects a party, the well-established principles of natural justice mandate that an explanation be called for from that party.

The principle of audi alteram partem – “hear the other side” – is a bedrock of administrative law in India, consistently upheld by the Supreme Court and various High Courts. This principle requires that no person should be condemned unheard. It encompasses several key elements: providing adequate notice of the allegations, giving a reasonable opportunity to present one’s case, and allowing the party to rebut any adverse evidence. The Orissa High Court found that by issuing a direct demand without a show cause notice or an opportunity for Raja Bricks to furnish its documents and explain its position, the Mining Officer had clearly violated this fundamental principle.

The court observed that had a proper notice been issued, the petitioner could have demonstrated that it neither “won” the minerals (extracted them) nor “disposed” of them in a manner that would attract royalty liability under Rule 51(4), given that they were acquired from legitimate sources for internal consumption in brick manufacturing. The presence of transit passes and other documents in Annexure-22 series further reinforced the need for the authorities to have provided an opportunity for their submission and consideration.

In light of these findings, the Orissa High Court set aside the demand letter dated June 3, 2025. The court directed Raja Bricks to appear before the Mining Officer (in-charge), Balasore, on July 28, 2025. During this appearance, the petitioner is permitted to furnish all necessary evidence to justify its non-liability for royalty, additional charges, DMF, and EMF. The Mining Officer is then mandated to appreciate the submitted evidence, afford a proper opportunity of hearing, and proceed to take a fresh decision strictly in accordance with the law. This ruling serves as a vital reminder to administrative authorities about the mandatory observance of procedural fairness, ensuring that no demand or adverse action is initiated without providing the affected party a proper chance to explain and defend their position.

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

This matter is taken up through hybrid mode.

2. The Petitioner has questioned the propriety of the order dated 03^rdJune, 2025 passed by the Mining Officer (in-charge), Balasore directing the business concern (petitioner) to deposit the following amounts towards Royalty, Additional Charges, DMF & EMF coupled with penalty with respect to sand and soil found stacked in the business premise:

(Rupees Fourteen lakhs seventeen thousand eight hundred fifty only)

3. Mr. Prafulla Kumar Rath, learned Senior Advocate appearing for the Petitioner submitted that the said direction to deposit is without any foundational fact. It is stated that purchase of the sand/soil found stacked were brought from various persons/licensees of sairat for making use in Brick Kiln Unit. Instead of granting opportunity to the Petitioner to substantiate its claim that it has no liability to pay the Royalty, Additional Charges, DMF & EMF on sand/soil being found stacked. The authority is not legally justified to issue letter dated 3rd June, 2025 (Annexure-1). He further submitted that such a demand by way of letter is untenable in the eye of law for want of adherence to the principles of natural justice.

4. Mr.  Saswat Das, learned Additional Government Advocate on written instruction received from the Mining Officer, Minor Minerals, Balasore (opposite party No.2) submitted that on spot visit, it was found that soil and sand remained stacked in the Kiln Unit. The source of acquisition of such soil and sand was not explained at the spot, which led to issue of letter dated 3^rdJune, 2025 (Annexure-1). He submitted that in view of Rule 51(4) of the Odisha Minor Minerals Concession Rules, 2016 (in short “the Rules”), as amended by virtue of the Odisha Minor Minerals Concession (Amendment) Rules, 2023, the Mining Officer is competent to recover the royalty, rent or tax etc. from the person who wins the mineral or disposes of such mineral. He also contended that since the Petitioner did not submit any documentary evidence to show the source of acquisition of such soil and sand found stacked on spot inspection to the Unit of the Petitioner, it cannot be said that issue of letter dated 03^rd June, 2025 requesting the Petitioner to deposit the amount stated therein towards the Royalty and additional charges in addition to DMF and EMF is untenable.

5. Heard Mr. Prafulla Kumar Rath, learned Senior Advocate assisted by Ms. S.Das, learned counsel for the petitioner and Mr. Saswat Das, learned Addl. Government Advocate.

6. Perusal of record reveals that the Petitioner by way of documents enclosed at Annexure-22 series disclosed the source of acquisition of Minor Minerals from different persons during a period of time. As submitted by Mr. Prafulla Kumar Rath, learned Senior Advocate, had the Mining Officer issued show cause notice and/or afforded an opportunity to the Petitioner to submit copies of such documents, the same would have been done to substantiate that the Petitioner is not liable for Royalty, Additional Charges, DMF & EMF.

7. It is conceded by Mr. Saswat Das, learned Addl. Government Advocate that Rule 51(4) of the Odisha Minor Mineral Concession Rules, 2016 does not empower the Mining Officer to impose penalty. However, he submitted that there was no necessity for issuance of any show cause notice to the Petitioner as he failed to produce any document, as stated to have been in his possession vide Annexure-22 series, at the spot inspection. As decision is taken affecting adversely the petitioner with respect to liability to pay royalty, etc. by the authority concerned, the principles of natural justice demands at least an explanation to be called for from the party. This Court is satisfied that there has been violation of principles of natural justice. To ascertain whether, at all, the petitioner is liable to pay Royalty, Additional Charges, DMF & EMF, a notice should have been issued calling upon to furnish documents. In such event, it was open for the petitioner to demonstrate that he neither won the minerals nor disposed of the sand/soil, which were found stacked on spot inspection. Copies of the transit passes issued by the competent authority during the relevant period enclosed to writ petition at Annexure-22 series ex facie shows acquisition of sand/soil by the Petitioner from different sources.

8. Therefore, in order to return factual finding in this regard and to ascertain whether the stacking of mineral in the Brick Kiln Unit by the Petitioner falls within the scope of Rule 51(4) of the Rules to demand Royalty, Additional Charges, DMF & EMF, this Court by setting aside the order/direction contained in letter dated 03^rdJune, 2025 issued by the Mining Officer (in-charge), Balasore (Opposite Party No.2), directs the Petitioner to appear before the said authority on 28^th July, 2025. The Petitioner may demonstrate by furnishing necessary evidence before the said Mining Officer to justify its non-liability. Upon appreciation of evidence and after affording an opportunity of hearing, the Mining Officer may proceed to take a decision thereon strictly in accordance with law.

9. With the aforesaid observation and direction, the writ petition stands disposed of.