In a significant development, the Supreme Court on Thursday ruled that states possess the legislative authority to impose taxes on lands bearing mines and minerals under the Constitution. The verdict, delivered by a nine-judge Constitution bench, saw a majority decision of 8:1. Chief Justice DY Chandrachud, speaking for himself and seven other judges on the bench, clarified that the royalty payable on minerals does not constitute a tax. The CJI, while reading the operative part of the majority verdict, stated that Parliament does not have the power to tax mineral rights under Entry 50 of List II of the Constitution.
SC affirms states' taxing authority
This specific entry relates to taxes on mineral rights, but it is subject to any limitations imposed by Parliament through laws concerning mineral development. In a notable aspect of the judgment, the Supreme Court overturned its own 1989 decision made by a seven-judge Constitution bench, which had previously held that royalty is a tax. The recent ruling categorically declares that the 1989 verdict was incorrect in its interpretation.
This decision marks a setback for the Centre, which had sought to retain the authority to tax mineral rights. The judgment reinforces the legislative competence of states in this domain, potentially leading to significant implications for the governance and economic management of mineral resources across India.
Two separate verdicts by SC bench
At the outset, the CJI said the bench has delivered two separate verdicts and Justice BV Nagarathna has given dissenting views. Reading out her verdict, Justice Nagarathna said the states do not have the legislative competence to levy taxes on mines and minerals-bearing lands.
The bench decided the hugely contentious 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. Besides the CJI and Justice Nagarathna, the other members of the bench are justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih.
(With inputs from PTI)
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