Khushi Bhuta, Pune
The Supreme Court of India is set to hear mining companies as they argue against the validity of a state imposed royalty charge and whether states have the authority to impose it today for the fourth day. The nine-judge bench is headed by Chief Justice of India (CJI) Dhananjaya Y. Chandrachud. The bench also comprises Justices Hrishikesh Roy, Abhay Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, S.C. Sharma, and A.G. Masih.
The court is to hear a batch of 86 appeals demanding clarification on the legislative capacity of the state to impose the aforementioned taxes since mineral rights are in the context of mineral development. The appeals argue that any law concerning mineral development is to be imposed only by the Centre, and the States don’t possess the authority to do so. Examining the nature and extent of royalties as specified by Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is the primary concern of the court.
The CJI noted during an earlier hearing, in the context of the Seventh Schedule of the Constitution, that the States always retain the authority to tax minerals by stating, “The States have very few areas of taxation; most of the taxing powers under the constitution are given to the Union; we must not dilute those areas.” According to Justice Nagarathna, the state must first determine whether a central law on mineral development exists before imposing any taxes on minerals. Should the Center impose any limitations, those must be addressed first. She also drew conclusions on the Entry 50 List II provision that emphasizes on ‘subject to limitations imposed by the Parliament.’
The dispute was referred to a nine-judge bench in March of 2011 due to the discrepancies. The Supreme Court discovered a discrepancy between two earlier rulings on this matter; thus, in March 2011, the case was sent to a nine-judge panel. One was the ruling in the 1989 India Cements Limited v. State of Tamil Nadu case, wherein a seven-judge bench concluded that royalty was taxable under the MMDR Act. In the State of West Bengal versus Kesoram Industries case, a five-judge bench ruling from 2004 was the other ruling. It concluded that the court in India Cements had incorrectly said “royalty is a tax” when it should have said “cess on royalty is a tax” due to a typographical error.