A bench headed by Chief Justice of India D.Y. Chandrachud and comprising Justices Hrishikesh Roy, Abhay Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, S.C. Sharma and A.G. Masih continued hearing the issue for the fourth day.
The key issue is to examine the nature and scope of royalty as prescribed under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and whether it could be termed as tax.
The question could impact thousands of crores rupees of revenue for mineral-rich States of India.
The matter was referred to a nine-judge bench in 2011 when a three-judge bench headed by Justice S.H. Kapadia had framed eleven questions to be referred to the nine-judge bench on whether ‘royalty’ can be considered as being like tax and can the State Legislature, while levying a tax on land, adopt a measure of tax based on the value of the produce of land.
The 1989 verdict in the case of India Cements Limited versus State of Tamil Nadu by a seven-judge bench of the apex court, which held that royalty was a tax.
However, a five-judge bench of the apex court ruled in 2004 in the State of West Bengal versus Kesoram Industries Limited case that there was a typographical error in the 1989 verdict and that royalty was not a tax. The dispute was then referred to a larger nine-judge bench.
The court is hearing a batch of 86 appeals filed by mining companies, public sector undertakings (PSUs) and state governments arising from conflicting verdicts passed by different high courts on the issue.
Analysing the entries under the Seventh Schedule of the Constitution, Chief Justice Chandrachud said in the previous hearing that taxing power always remains with States in relation to minerals and it is never with the Union. “The States have very few areas of taxation, most of the taxing powers under the constitution are given to the Union, we must not dilute those areas,” he said.
The Court’s deliberation revolved around Entry 50 List II, which grants states the power to levy taxes on mineral rights, but subjects it to limitations imposed by Parliament through laws related to mineral development.
Justice Nagarathna said that if the State has to impose a tax on minerals, it shall first see whether there is a central law on mineral development. If there happens to be a limitation imposed by the Centre, that has to be looked into. She further placed reliance on the phrase ‘subject to limitations imposed by the Parliament’ as prescribed under Entry 50 List II.
Entry 50 List II provides States with the authority to levy taxes on mineral rights within their territories, but it is subject to limitations that can be imposed by Parliament through laws related to mineral development. The limitations imposed by Parliament may influence the extent to which states can exercise their taxing powers concerning minerals.
Senior Advocate Harish Salve, representing the Eastern Zone Mining Corporation, emphasized that there is no denudation of power under Entry 50; instead, the denudation pertains to regulatory power under Entry 23 due to the declaration under the Mines and Minerals (Development and Regulation) Act (MMDR Act).
The arguments continued for the fourth day today.
The Union Cabinet, chaired by Prime Minister Narendra Modi, recently gave its nod for the amendment of the Second Schedule to the Mines and Minerals (Development and Regulation) Act, 1957, to specify the royalty rates for 12 critical and strategic minerals.
This decision includes minerals such as beryllium, cadmium, cobalt, gallium, and several others that are pivotal for the nation’s strategic sectors, including defence, electronics, and renewable energy.
First Published: Mar 05 2024 | 11:43 PM IST