Explanation: Will Supreme Court's decision on mineral royalty further worsen Centre-State relations?

What did the Supreme Court say in its decision

The Supreme Court said that the states have the capacity and power to levy tax on mineral-rich land. This will greatly benefit Odisha, Jharkhand, West Bengal, Chhattisgarh, Madhya Pradesh and Rajasthan. Chief Justice Chandrachud said that royalty comes from mining leases. Royalty is fixed based on the amount of minerals extracted in mining. The obligation of royalty depends on the terms of the contract between the lessor and the lessee. Whatever payment is made for this is not for public purposes, but for special use charges. In such a situation, the payment made to the government for the contract cannot be considered as tax. The owner takes royalty for separating minerals. Royalty is seized from the lease deed and tax is imposed. We believe that it is wrong to call royalty a tax in the India Cements decision.

SC On Mineral Tax: Royalty tax will not be levied on minerals, big decision of Supreme Court, big blow to the Center

What was that section 9, on which the Supreme Court gave a big decision

There were two important questions before the Supreme Court. Can 'royalty' be treated as a tax? Can the State Legislature adopt a taxation measure based on the value of the produce of land while levying tax on land? In fact, the Supreme Court came up with a case to examine the nature and scope of royalty mentioned in Section 9 of the MMRDA Act, 1957.
According to Supreme Court advocate Shivaji Shukla, Section 9 states that it is mandatory for the person taking a mining lease to pay royalty on minerals. This subject is in the second schedule. It states that the central government has the right to amend the royalty rates through notification. However, such a change cannot be made more than once every three years.

The court had said- States also have the right to impose tax

In the last hearing on March 14, the Supreme Court had said that the right to levy tax on mineral wealth is not only with the Constitution but also with the states. In such a situation, their right cannot be suppressed.

Center's argument- the right to royalty should be with the center

Attorney General R Venkataramani, appearing for the Centre, had argued that the Centre has more power to levy taxes on mines and minerals. Solicitor General Tushar Mehta had said that the Mines and Minerals (Development and Regulation) Act (MMRDA Act) puts limits on the legislative power of the states to levy taxes on minerals and only the Central Government has the right to fix royalty.

Supreme Court's big decision on mining royalty, know which state has the highest dues

Justice Nagarathna said… then the federal system will collapse

Apart from Chief Justice DY Chandrachud, this bench of 9 judges included Justice Hrishikesh Roy, Justice Abhay S Oka, Justice BV Nagarathna, Justice JB Pardiwala, Justice Manoj Mishra, Justice Ujjwal Bhuiyan, Justice Satish Chandra Sharma and Justice Augustine George. Justice Nagarathna believed that the nature of royalty is similar to tax. In such a situation, in the case of tax on royalty of minerals under the MMDR Act, the states do not have the right to impose tax on minerals. Giving the right to tax minerals to the states will not maintain uniformity on national resources. This will increase unfair competition among the states. This will destroy the federal system.

Centre's argument- Indian minerals will become expensive, foreign money will not come into mining

The central government had filed an affidavit in the Supreme Court opposing the imposition of higher taxes than royalty on minerals by the state governments. The Center had told the court that the states should not be allowed to impose taxes higher than royalty. The central government had told the Supreme Court that the tax imposed by mineral-rich states would increase inflation. Foreign direct investment in the mining sector would be hampered. Indian minerals would become expensive. The international market would become less competitive due to increased trade deficit and uneven economic development between states.

Mamta Banerjee government is also in Supreme Court against CBI investigation

Earlier on July 10, the Supreme Court had agreed to hear the petition of the Mamta Banerjee government against the CBI investigation in West Bengal. The next hearing in this case is to be held on August 13. The Supreme Court said that the West Bengal government has raised a legal aspect which needs to be considered. When the state government has withdrawn the permission given for the CBI investigation, then why is the agency registering cases there. In fact, the Mamta Banerjee government has filed this petition in the Supreme Court citing Article 131 of the Constitution.

So what is the Centre-State relationship, which has been the subject of controversy time and again?

Supreme Court advocate Shivaji Shukla says that the Indian Constitution calls India a 'Union of States' rather than a federal state. The Indian Constitution has a clear division of legislative, administrative and financial powers between the Centre and the states. The subjects of legislative powers are divided into three lists. These are the Union List, State List and Concurrent List. The original Union List has 97 subjects, including defence, foreign relations, currency, communications and financial matters. The State List has 66 subjects, which include subjects of local importance such as law and order, public health, administration. The Concurrent List contains more than 40 subjects on which both the Centre and the states can make laws. However, no state government can make laws in opposition to or contrary to the laws and policies made by the Centre.

Ambedkar was also in favour of strengthening the centre

According to Advocate Shivaji Shukla, Constitution maker Baba Saheb Bhimrao Ambedkar was in favour of a strong government at the Centre. He feared that casteism is more powerful at the local and provincial levels. In such a situation, the government cannot protect the interests of the lower castes under pressure from the upper castes. Since the national government is less affected by these pressures, it will ensure the protection of the lower castes. He also feared that minorities, who are the most vulnerable group in the country, could turn into political minorities. Therefore, the democratic rule of 'one person one vote' is not enough and minorities should be guaranteed a share in power. He was against the 'majoritarianism syndrome' and ensured several safeguards for minorities in the Constitution.

Minerals are a state list subject, but there was a problem regarding royalty

According to the Constitution, minerals and their regulation are a subject of the State List in the Seventh Schedule of the Constitution. At the same time, minerals related to nuclear energy come under the subjects included in the Central List. However, the matter of royalty is different. Here the issue of royalty of minerals was related to the Center. There have been repeated disputes regarding this.

Articles 245 to 255 deal with legislative matters

Articles 256 and 255 of the Constitution give powers to the Centre. At the same time, articles 245 to 255 of Part XI of the Constitution describe the legislative relations between the Centre and the states. Articles 256 to 263 describe the administrative relations between the Centre and the states. Apart from this, articles 268 to 293 included in Part XII of the Constitution mention the Centre-State financial relations.