SC dismisses pleas to review verdict upholding States’ right to tax mineral lands, quarries

The July 25 judgment had freed the States from the restrictions of the Centre; the court had found States’ liberty to tax mines and quarries a part of the federalist principles of governance

A nine-judge Bench of the Supreme Court, in a majority decision, has refused to review its July 25 judgment upholding the power of State legislatures to tax mineral-bearing lands and quarries.

The review was decided on September 24. It has reached public domain on Friday (October 4, 2024).

The majority led by Chief Justice of India D.Y. Chandrachud had ruled that the power to tax mineral lands and quarries was not the exclusive power of the Parliament.

In a replay of the July 25 judgment, the Review Bench, which would usually compose of the same judges, repeated the majority view. The sole dissenting judge on the Bench, Justice B.V. Nagarathna, continued to disagree with the majority view.

While the majority on the Bench dismissed the pleas of review by the Union government, Karnataka Iron and Steel Manfacturers Association, and others, Justice Nagarathna found a case for review.

The majority declared “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”.

In her separate opinion on the review petitions, Justice Nagarathna said they should be heard in open court and issued notice. The majority ruling on the review petitions would stand.

The July 25 judgment had freed the States from the restrictions of the Centre. The court had found States’ liberty to tax mines and quarries a part of the federalist principles of governance.

Fiscal federalism

“Any dilution in the taxing powers of the State legislatures will necessarily impact their ability to raise revenues… Fiscal federalism entails that the power of the States to levy taxes within the legislative domain carved out to them and subject to the limitations laid down by the Constitution must be secured from unconstitutional interference by Parliament,” Chief Justice Chandrachud had laid down in the judgment.

The verdict noted how mineral-rich States like Chhattisgarh, Jharkhand and Odisha continued to have per capita income below national averages and trail in economic development.

The court had further held that royalty paid to States by mining lease holders was not tax.

The majority judgment said the Parliament, through the Mines and Minerals (Development and Regulation) Act of 1957 or MMDR Act, could not restrict States from legislating on the taxation of mining lands and quarries within their jurisdiction.

On August 14, the nine-judge Bench had assembled again to clarify to assessees, including public sector undertakings, that it could not restrict the July 25 majority judgment to have only prospective effect.

The majority on the nine-judge Bench, with the exception of Justice Nagarathna, had held that prospective application of the July 25 judgment would run the risk of invalidating many State legislation.

Published - October 04, 2024 07:02 pm IST