8:1 Majority: SC Upholds Power Of States To Levy Tax On Mineral Bearing Lands
The Supreme Court of India, in a significant ruling, has upheld the constitutional authority of states to impose taxes on mines and mineral-bearing lands. In a verdict delivered by a nine-judge bench, led by Chief Justice DY Chandrachud, an 8-1 majority affirmed the power of states to levy taxes on mineral resources.
Chief Justice D Y Chandrachud emphasized that royalty payable on minerals does not constitute a tax and clarified that Parliament does not hold the power to tax mineral rights under Entry 50 of List II of the Constitution. This entry pertains to taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.
Furthermore, the Chief Justice highlighted a 1989 seven-judge Constitution bench ruling, which had deemed royalty as a tax, as being incorrect. The bench delivered two separate verdicts, with Justice B V Nagarathna dissenting.
The crux of the matter revolved around the contentious question of whether royalty payable on minerals is a tax under the Mines and Minerals (Development and Regulation) Act, 1957, and whether the authority to impose such levies rests solely with the Centre, or if states also have the power to impose taxes on mineral-bearing land within their territories.
This ruling comes in the wake of conflicting decisions by different high courts, prompting the referral of the matter to a larger nine-judge bench. The inconsistencies arose due to a 1989 seven-judge bench verdict in India Cements Limited v. State of Tamil Nadu, which held that royalty was a tax, and a 2004 five-judge bench ruling in State of West Bengal v. Kesoram Industries Limited, which contradicted the earlier decision by stating that royalty was not a tax.
This momentous decision is likely to have far-reaching implications for the taxation and regulation of mineral resources across the country.
