NEW DELHI: The Supreme Court on Wednesday reserved its order on the issue of as to whether the Centre, which had levied taxes and royalty on mines and mineral-bearing lands since 1989, will be refunded to the states prospectively or retrospectively.
The nine-judge Constitution bench headed by Chief Justice D Y Chandrachud, on Wednesday reserved its order after hearing from petitioners and respondents, including the Centre.
Earlier on July 25, in a significant ruling the stated that states have competence and power to levy tax on mineral bearing lands. The majority verdict 8:1 authored by the Chief Justice led bench D Y Chandrachud, said that the payments made to the government cannot be deemed to be a tax merely because a statute provides for its recovery in arrears.
In the significant verdict on July 25, the top court, had held that the legislative power to tax mineral rights vests with the states and the royalty paid on minerals is not a tax. The apex court also would pronounce the order on the issue of as to whether the amount collected by the Centre so far, from states, would be returned to them prospectively or retrospectively, as the SC has held that states have competence and power to levy tax on mineral bearing lands. The verdict, which gave a huge revenue boost to mineral-rich states, however, led to another dispute with regard to the operation of the verdict.
During the course of the hearing, the Centre on Wednesday opposed a plea of the mineral-rich states seeking refund of the royalty levied by it on mines and mineral-bearing land since 1989, saying any such order asking it to pay the alleged dues with retrospective effect will have a "multipolar” impact.
Earlier on July 25, the apex court ruled in favour of states and held that states have the rights to collect taxes with respect to mines and minerals in its area. "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. ruled that royalty on extracted mineral is not a tax," the apex court's nine-judge bench ruled on Thursday.
The other judges, who also were unanimous and agreed to the CJI's views were; Justices Hrishikesh Roy, Abhay S Oka, J B Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra C Sharma and A G Masih. The only judge who was dissenting was Justice B V Nagarathna, who had a different view on the issue.
"I hold royalty is in nature of the tax. States have no legislative competence to impose any tax or fee on mineral rights. Entry 49 is not related to mineral-bearing lands. I hold India cement decision was correctly decided," Justice Nagarathna said. "The legislative power to tax mineral rights lies with the State legislature and the Parliament does not have the legislative competence to tax mineral rights," the top court said in its ruling.
The SC also made it clear that the Parliament could not use its residuary power regarding this subject matter. So the State legislature has the legislative competence under Article 246 read with Entry 49 of List 2 to tax mineral bearing lands.
The Supreme Court had on March 14 reserved its verdict on the controversial issue of whether the royalty payable on minerals is a tax under the Mines and Minerals (Development and Regulation) Act, 1957, and if only the Centre is vested with the power to levy such exaction or states also have the authority to impose levies on mineral bearing land in their territory.
The nine-judge bench of the top court, headed by CJI Chandrachud heard the matter on eight days, while dealing with a batch of 86 appeals filed by different state governments, mining companies and public sector undertakings.
During the hearing, the top court had said the Constitution vests the power to impose tax on mineral rights not in Parliament alone but also the states and underlined that such authority should not be diluted.