'States have legal right to collect royalty on minerals', Supreme Court gives blow to central government
Supreme Court on Mines Royalty: The Constitution Bench of nine judges of the Supreme Court ruled by a majority of 8:1 that the royalty paid in exchange for minerals is not a tax. Chief Justice DY Chandrachud, while reading out the verdict on behalf of himself and seven judges of the bench, said that Parliament does not have the right to impose tax on mineral rights under Entry 50 of List II of the Constitution.
The court on Thursday gave a blow to the central government and said that the states have the legislative (legal) right to collect royalties on mines and mineral-rich land under the Constitution. The Constitution Bench of nine judges ruled by a majority of 8:1 that the royalty paid in exchange for minerals is not a tax.
Chief Justice DY Chandrachud, while reading out the verdict on behalf of himself and seven judges of the bench, said that Parliament does not have the right to impose tax on mineral rights under Entry 50 of List II of the Constitution. Entry 50 of List II of the Constitution deals with regulations relating to mineral development and taxes on mineral rights.
Reading out the majority verdict, the Chief Justice said the 1989 verdict of a seven-member Constitution Bench of the apex court was erroneous in holding that royalty was a tax. Earlier, as the hearing began, the Chief Justice said the bench had given two different verdicts and Justice BV Nagarathna dissented. Reading out his verdict, Yamurthy Nagarathna said states do not have the legislative competence to levy taxes on mines and mineral-bearing land.
The bench decided the highly contentious issue of whether royalty payable on minerals is a tax under the Mines and Minerals (Development and Regulation) Act, 1957, and whether only the Centre has the power to levy such tax or states also have the power to levy it on mineral-bearing land in their territory?
Other members of the Constitution Bench include Justice Hrishikesh Roy, Justice Abhay S Oka, Justice JB Pardiwala, Justice Manoj Mishra, Justice Ujjal Bhuiyan, Justice Satish Chandra Sharma and Justice George Masih.
