New Delhi, Jul 25 (PTI) The Supreme Court on Thursday settled a 35-year-old legal conundrum having far-reaching ramifications for the Centre and states as to how they generate revenue from mineral resources.
A nine-judge Constitution bench headed by Chief Justice DY Chandrachud held that the legislative power to tax mineral rights vests with the states and overruled a seven-judge bench verdict delivered in 1989.
The bench, also comprising Justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih, also held that royalty is not a tax.
Justice B V Nagarathna, who was also a part of the bench, delivered a dissenting verdict.
In the 1989 verdict in the India Cement Ltd versus State of Tamil Nadu case, a seven-judge bench had held that royalty is tax and the state legislatures lack competence to levy taxes on mineral rights because the subject matter is covered by the Mines and Minerals (Development and Regulation) Act (MMDRA) .
Several high courts started following the 1989 verdict until 2004, when a five-judge bench of the apex court held in the State of West Bengal versus Kesoram Industries Ltd case that the decision in India Cement case stemmed from an “inadvertent error” and clarified that “royalty is not a tax”.
In the aftermath of the India Cement and Kesoram Industries verdicts, state legislatures exercised their legislative powers to impose taxes on mineral bearing land in pursuance of Entry 49 of List II of the Constitution by applying the mineral value or royalty as the measure of the tax.
States such as Rajasthan and Uttar Pradesh also sought to impose environment and health cess and fees for transporting coal and coal dust collected from mines.
The constitutional validity of these levies were challenged before different high courts on the ground that they were beyond the legislative competence of the states. The levies were also assailed on the ground that they were in violation of the law laid down in the India Cement verdict.
More than 80 petitions were filed in the top court over the years, and as the India Cement matter was dealt with by a seven-judge bench, the matter was referred to a nine-judge bench on March 30, 2011 for an authoritative pronouncement. PTI MNL ABA SJK MNL SK SK
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