SC Dismisses Petitions To Review Judgment On Allowing States To Tax Mineral Rights

Bhubaneswar: The Supreme Court on Friday dismissed the petitions to review its judgment which held that the royalty paid by the mining operators to the Centre is not a tax and the states have the power to levy tax on mining and mineral activities.

The judgment was delivered by a Bench comprising Chief Justice of Supreme Court DY Chandrachud with Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih. Justice BV Nagarathna dissented from the majority.

“Having perused the review petitions, there is no error apparent on the face of the record. No case for review under Order XLVII Rule 1 of the Supreme Court Rules 2013 has been established,” the judgment stated as reported by Bar and Bench.

A 9-judge bench of the apex court in Mineral area Development Authority vs Steel Authority of India had delivered the judgment on July 25. Justice BV Nagarathna had held that a case for review is made out.

“Having perused the review petitions, a case for review under Order XLVII Rule 1 of the Supreme Court Rules, 2013 is made out,” Justice Nagarthna observed ordering the issuance of notice on the review petition to the respondents returnable within eight weeks.

However, dismissing the review petitions and reading out the majority judgment, Chief Justice Chandrachud said, “Royalty is not in the nature of tax…We conclude that the observation in India Cements judgment stating that royalty is tax is incorrect…Payments made to the government cannot be deemed to be a tax merely because a statute provides for its recovery in arrears.”

The Bench ruled that unless the Parliament imposes a limitation, the state’s plenary right to impose taxes on mineral rights is unaffected. Its other observations are as follow:

• The Parliament can impose limitations under Entry 50 of List 2 of the Constitution by means of statutory instruments. The scheme of the MMRDA Act cannot be stretched to impinge upon the taxing rights of the States.
• Since the royalty paid under Section 9 is not a tax on mineral rights, any limitation on the enhancement of royalty is not an imposition of a tax under Entry 50 of List 2. Section 9 limits power of the centre and it does not govern tax.
• The expression “land” includes land of every description. It can be used to grow tea leaves or extract minerals. Thus we hold that the State legislature is competent to design a levy under Entry 49 of List 2 to tax lands which comprise of mines and quarries. In other words, mineral-bearing lands also fall under the expression of “land” under Entry 49 of List 2.