A Notional Formula Cannot Replace What The Scales Actually Recorded
Karnataka demanded hundreds of crores in limestone royalty from a cement plant by assuming how much stone it must have used. The Chief Justice's bench has set the demand aside.
The Court held the State may assess consumption on a norm only where there is a credible challenge to the reported figures, or the lessee cannot substantiate them. There was no credible challenge to the weighment data, and an expert team had physically verified consumption at the plant. The State also could not disregard a 2019 revisional order. The demand was set aside, portal access and a lease deed ordered, and deposits refunded.
- Actual weighment is the starting point. A norm is a fallback, not a default.
- An empirical study cannot simply be rejected — the expert team had checked the plant on the ground.
- Revisional orders bind the State; it cannot keep issuing demands that ignore them.
- The lease is safe: the State must execute the supplementary deed without first demanding a no-dues certificate.
- Court
- High Court of Karnataka at Bengaluru
- Bench
- Justice CHIEF JUSTICE, Justice K.S. HEMALEKHA
- Citation
- W.P. No. 25298 of 2024 and connected petitions
- Case
- W.P. No. 25298 of 2024 and connected petitions
- Decided
- 8 September 2026
- Outcome
- ACC's petitions allowed; demand set aside and State's petition dismissed
How the dispute grew
The case concerns a cement company's limestone mining leases for its works at Wadi in Kalaburagi district, deemed extended to 31 March 2030 by Section 8A(5) of the MMDR Act.
At a 2012 meeting, where a study by the National Council for Cement and Building Materials was placed, it was decided that royalty should be calculated on actual production and weighment of limestone. Despite that, the Mines and Geology Department kept issuing demands on normative consumption — one in 2018 for about Rs 215.61 crore with 24 per cent interest.
The Revisional Authority in the Ministry of Mines sent that back in 2019 to be reconsidered in line with the 2012 decision. The Department later computed arrears of about Rs 492.51 crore as of March 2023, assuming a fixed ratio of limestone to clinker. The Revisional Authority held that unjustified; the State challenged that order, and the company challenged a fresh 2025 demand and the blocking of its lease portal.
When a norm is allowed
The Court accepted that the State can assess consumption of limestone on the basis of a norm — but only if there is a credible challenge to the actual consumption reported, or the lessee cannot substantiate the quantity consumed.
If the State concludes that the clinker produced could not possibly have come from the limestone reported, it may apply a scientifically determined norm. Here there was no credible challenge to the accuracy of the weighment data, and no material to show the reported consumption could not have produced the output.
On the contrary, the expert team had physically verified consumption at the plant and reported on an empirical basis. The State could not simply reject it, nor disregard the 2019 revisional order requiring it to follow the 2012 decision.
The directions
The demand notice was set aside, and the State and Department were directed to give full access to the lease management portal and not block it.
The State's challenge to the revisional order was rejected. The authorities must execute a supplementary lease deed in the company's favour without insisting on a no-dues certificate.
The State must refund what the company deposited under the Court's interim order of October 2024. Two of the petitions were allowed and the State's petition dismissed.
Who argued it
Appearances as recorded in the judgment of the Court.
Frequently asked
Can royalty on limestone be charged on a notional formula?
Only where there is a credible challenge to reported consumption or the lessee cannot substantiate it. Otherwise actual weighment governs.
Can the State withhold a lease deed until royalty dues are cleared?
Here the Court directed the supplementary lease deed to be executed without insisting on a no-dues certificate.
Answering a royalty demand built on a norm
- Keep weighbridge records and dispatch data complete; they are the first line of defence.
- Ask what credible material the department has against your actual figures before it switches to a norm.
- Commission or rely on an independent plant-level study where one exists.
- Hold the department to earlier revisional orders; repeated demands that ignore them are open to challenge.
Source. High Court of Karnataka at Bengaluru, W.P. No. 25298 of 2024 and connected petitions, decided 8 September 2026 by Justice CHIEF JUSTICE, Justice K.S. HEMALEKHA. This explainer is written from the judgment text as reported.
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