Lagatar24 Desk
New Delhi: In a significant ruling, the Supreme Court on Thursday declared that the royalty payable on minerals does not constitute a tax, delivering a setback to the Centre. The nine-judge bench, led by Chief Justice of India D.Y. Chandrachud, included Justices Hrishikesh Roy, A S Oka, J B Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, who agreed with the majority opinion.
Chief Justice Chandrachud, speaking for himself and seven other judges, stated that Parliament does not have the authority to tax mineral rights under Entry 50 of List II of the Constitution. Entry 50 pertains to taxes on mineral rights, with certain limitations imposed by Parliament regarding mineral development. The Chief Justice also pointed out that the 1989 Supreme Court decision, which classified royalty as a tax, was incorrect.
Justice B V Nagarathna was the sole dissenting judge. She argued that the Centre holds the exclusive right to tax mineral rights in the country and that allowing states to impose an additional levy on the royalty paid by miners would create an anomalous situation, undermining the legislative competence of the states.
This decision resolves the contentious issue of whether the royalty payable on minerals constitutes a tax under the Mines and Minerals (Development and Regulation) Act, 1957. It also clarifies whether only the Centre has the power to impose such charges or if states also have the authority to levy taxes on mineral-bearing lands within their territories.
The ruling redefines the division of power between the Centre and the states regarding mineral rights, affirming that states have the competence to impose taxes in this area.
The bench will reconvene on July 31 to determine whether the judgment should be applied retrospectively or prospectively. A retrospective application could benefit state governments, including those in West Bengal, Odisha, and Jharkhand, which have local laws to impose additional levies on miners.
