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Regional Training Regional Training Institute, RanchiInstitute, RanchiRegional Training Regional Training Institute, RanchiInstitute, Ranchi

Audit of Mining ReceiptsAudit of Mining Receipts

Structured Training Courseware Structured Training Courseware on State Receipts Auditon State Receipts Audit

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Session ObjectivesAt the end of these sessions, the participants

will be able to • Define the type of minerals and the nature

of mining receipts• Licensing mechanism• Understand the procedures for assessment

and collection of mining receipts and• List audit checks relating to mining receipts

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Major and Minor Minerals

• Governing Statutes– Mines and Minerals (Development

and Regulation) Act, 1957– Mineral Concession Rules, 1960

• Major Minerals– Central Govt. Legislative Control– Coal, Iron Ore, Copper, Bauxite etc.

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Major and Minor Minerals (Contd.)

• Minor Minerals– State Government Legislative Control– Building Stones, Gravel, Ordinary Clay etc.

• Specified Major Minerals– Hydrocarbon/ energy– Atomic– Metallic and Non-metallic

• Revenues from both Major and Minor Minerals to State Government

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Licensing – Major Minerals

• Types– Reconnaissance Permit– Prospecting License

• To ascertain quantity and quality of ores• Not for commercial removal• Preference for Mining Lease

– Mining Lease• Commercial Mining Activities• 20-30 years; renewal for not more than 20 years

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Licensing – Major Minerals (Contd.)

• Application– Indian national– Area to be specified

• Central Government role for specified major minerals– Prior approval of permit/license/lease– Power to revise any State Government

order

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Licensing – Minor Minerals• Mining Lease

– Granted by DC for up to 10 years– Sand auctioned on annual basis

• Quarrying permits– District/ Asst. Mining Officer– Specified quantities on royalty pre-payment

• Control on works contractors purchasing minor minerals only from lessees etc.– To prevent illegal mining

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Mining Receipts• Royalty

– Flat or ad valorem rates– Different rates for different grades/ qualities

• Dead rent (if higher than royalty)• Surface rent• Local cess• Application fees• Fines, penalties and interest• Compensation for loss of forest area

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Organisational SetupCommissioner

Director

Addl. Director

Deputy Director

DMOs/ AMOs

Inspectors

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Responsibilities• Director of Mines

– Recommendations on grant/ renewal of licenses

– Write-off proposals– Revision of assessments

• Dy. Director of Mines (DDMs)– Appellate authority for assessments– Certificate Officer for arrears

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Responsibilities (Contd.)

• Distt. Mining Officer (DMO) / Asst. Mining Officer (AMO)– Assessment, levy and collection of

royalty etc.– Receipt and processing of applications– Receipt and processing of Grant Orders– Monitoring compliance with license/ lease

conditions

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Responsibilities (Contd.)

• Inspector of Mines– Verify/ Survey/ Demarcate areas

• Applied• Notified for lease• Lease area

– Inspection of leasehold and mines bearing areas

– Verification of stock of minerals

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Important Registers and Records

• Licenses and Leases– Register of applications for Reconnaissance

Permits– Register of Reconnaissance Permits– Register of applications for Prospecting

Licenses– Register of Prospecting Licenses– Register of applications for Mining Leases– Register of Mining Leases

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Important Registers (Contd.)

• Financial Registers– Register of Demand and Collection– Daily Receipt Register– Register of Raising and Despatch– Surface Rent Register– Bank Draft Register / Challan Register– Register of Refunds

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Important Registers (Contd.)

• Other Registers– Register of Analysis– Register of Transit Passes– Half-Yearly Verification/ Inspection

Reports– Register of Illegal Mining– Registers relating to Certificate cases

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Assessment• Important factors are Quantity, Grade,

Rate Payable• Stacking of minerals• Mineral content analysis by State

Geological Laboratory• Verification of stocks by Inspector• Permits for removal + lorry transit

passes

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Assessment (Contd.)• Monthly return of mineral raised and

royalty due• Monthly return of cess due• Assessment of monthly returns by DMO• Dead-rent on half-yearly basis for non-

working leases• Surface rent at rates specified by DC

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Collection• Bank Drafts entered into Register of

Bank Drafts• Deposited into Treasury• Challans entered into Register of Daily

Receipts– Demand and Collection Register also

• Verify total receipts with AG figures

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Audit Checks• Certificate of Approval

– Applications supported by specified fees for correct period

– Renewal application prior to expiry

• Grant of License/ Permit/ Lease– Applications containing relevant information

• Area specified

– Indian national– Certificate of Approval + Income Tax Clearance

Certificate– Grant/ renewal in accordance with statute

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Audit Checks (Contd.)– Delay, and financial implications thereof– Lease deeds executed in prescribed

period, correct format, detailed map– Security deposit + Compensation for loss

of forest area– For lease transfer

• Approval of Central Government• Addl. Benefits beyond main lease• Premium for transferer

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Audit Checks (Contd.)• Prospecting License

– Monthly Returns & Periodic Verification

– Weighment of Minerals– Free Allowance– Royalty for Addl. Clearance/

Commercial Use

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Audit Checks (Contd.)• Operations

– Surface/dead rent at correct rate from correct date

– Water used exclusively for mining operations

– Cost recovery for soil and other minerals

– Demand for dead rents

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Audit Checks (Contd.)• Royalty

– Monthly Returns, checked with original lessee records• Quarterly by Inspector• Half-yearly by DMO/ AMO

– Weighbridges and weighments– Tare weights of wagons, lorries– Cross-check ore consumption with lessee

records

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Audit Checks (Contd.)• Dispatches with DMO permission, transit

passes• Cross-verification of dispatch with other data

– RR weight, returns to IBM, receipts by purchasing organisation, toll gate records etc.

• Procedures for sampling and grading• Joint sampling for ore of marginal grades

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Audit Checks (Contd.)• Correct royalty rate from correct date• Local cess properly assessed• Cess returns compared with royalty

returns• Beneficiated minerals – royalty on input• Interest payable

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Audit Checks (Contd.)• Expired / Terminated Leases

– Detailed survey after 6 months– Compensation for damage– Notice for removal of left-over property– Lease of buildings on land– Auction of left-over machinery, equipment

and scrap

– Disposal of left-over mineral

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Audit Checks (Contd.)• Unauthorized Mining

– Cases of prior removal or after lease expiry

– Reports of clandestine removal, and prompt action thereon

– Penal action or compounding of offence by authorized officer

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Audit Checks (Contd.)• Refunds

– Actual payment or excess payment– For refund of application fee, refusal by

Government and sanction of refund– Correct calculation– Verify refund payments at Treasury for

selected month with authorizations by DMO/AMO

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Audit Checks (Contd.)• Minor Minerals

– Valid Quarrying Permits/ Mining Leases– Correct Assessment, Timely Demand– Monthly Returns– Cross-verification of amount of minerals

raised– Penal action for illegal removal– Certificate Proceedings for arrears