New Delhi: The Supreme Court on Thursday gave a big decision regarding royalty on mining. The court said that the states have the right to impose tax on mineral land. The court said that there is no royalty tax on this. A nine-judge Supreme Court bench headed by Chief Justice DY Chandrachud, by a majority of 8-1, repealed many of its own old decisions, which has given relief to these states. However, the court also clarified that Parliament also has the right to impose limits, restrictions and bans on taxing extracted minerals. Justice BV Nagarathna disagreed with the majority decision.
1989 decision overturned
The Supreme Court was hearing an important issue under the Mines and Minerals (Development and Regulation) Act, 1957. The case was whether the royalty payable on minerals is a tax and whether only the Central Government has the right to levy such a tax or the state governments can also levy it on mineral land in their area. The Supreme Court said in its verdict that the 1989 decision of the seven-judge Constitution Bench was wrong, which said that royalty on minerals is a tax. Chief Justice Chandrachud, while delivering the verdict, said that Parliament does not have the right to impose tax on mineral rights under Entry 50 of the Second List of the Constitution.
These states will get relief after the decision
The judgment, written by CJI Chandrachud and concurred by Justices Hrishikesh Roy, AS Oka, JB Pardiwala, Manoj Mishra, Ujjwal Bhuiyan, SC Sharma and AG Masih, states that royalty on extracted minerals is not a tax. The decision will benefit mineral-rich states like Odisha, Jharkhand, West Bengal, Chhattisgarh, Madhya Pradesh and Rajasthan. Now the nine-judge bench will again consider on Wednesday whether their decision will be retrospective or not. If this decision is implemented retrospectively, the states may have to pay huge tax dues. The states want this decision to be implemented retrospectively, while the central government wants it to be implemented for the future.
What was the decision of the Constitutional Bench of seven judges in 1989?In 1989, a seven-judge Constitution bench had held that the Central government has primary jurisdiction over the “regulation of mines and mineral development” under Entry 54 of the Union List (List I) as per laws such as the MMDRA made by Parliament. States are empowered only to collect royalty under the MMDRA and cannot levy any other tax on mining and mineral development. The court had also said, “We are of the view that royalty is a tax, and as such, cess on royalty is a tax on royalty, which is beyond the competence of the State Legislature as Section 9 of the Central Act covers this field.”
