Supreme Court 9-Judge Bench Reserves Judgment on Mining Royalties and States’ Powers in Key Mineral Rights Taxation Case.
The Supreme Court’s nine-judge constitution bench, chaired by CJI DY Chandrachud and including Justices Hrishikesh Roy, Abhay Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, SC Sharma, and AG Masih, concluded its deliberations on Thursday, March 14. The bench heard arguments over eight days concerning the classification of royalties on mining leases as a form of tax and whether states have the authority to impose such royalties/taxes on mineral rights. This inquiry centered around the interpretation of Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), aiming to determine the nature and extent of a royalty and its potential classification as a tax.
The legal challenge includes petitions against the Bihar Coal Mining Area Development Authority (Amendment) Act, 1992, and its accompanying regulations, which introduced additional cesses and taxes on revenues from lands containing minerals.
This judicial examination was prompted by a previous three-judge panel led by Justice SH Kapadia, which, in 2011, identified eleven critical questions for the nine-judge bench. This move directly to a larger bench was due to perceived discrepancies between past judgments related to state versus federal powers in taxing mineral rights.
The core issues presented to the bench encompassed the true nature and tax relevance of royalties under the MMDR Act, the specific legislative powers granted to the Parliament and states concerning mineral rights taxation, and the interpretation of relevant entries in the Constitution’s Seventh Schedule that pertain to legislative powers over minerals and lands.
Arguments from the appellants highlighted a nuanced interpretation of legislative entries, suggesting that royalties should not be explicitly seen as taxes but as a limitation on state authority by Parliament regarding mineral rights taxation. They emphasized diverging interpretations from prior judgments and argued for a harmonization that respects state powers.
Conversely, the Union government and its affiliates argued for a broad interpretation of parliamentary powers under the MMDR Act, emphasizing the need for uniform national policies on mineral management and revenue distribution. They disputed a narrow reading of legislative entries that could hamper a cohesive national approach to mineral resource management.
This landmark case, Mineral Area Development v. M/S Steel Authority Of India & Ors (CA N0. 4056/1999), stands to clarify significant legal and constitutional questions regarding the taxation of mineral rights and the distribution of legislative powers between the state and the federal government.