2024-07-26 16:49:13
New Delhi : The Supreme Court has given a historic verdict in the 35-year-old dispute related to tax on mineral resources. In the decision given by a majority of 8-1, the apex court has clarified that the states have the right to impose tax on mineral resources. In this way, the Supreme Court rejected the decision of the 7-judge bench given in 1989. The constitutional bench led by the CJI said in its order that royalty is not a tax. Justice B.V. Nagarathna disagreed with this in the decision. Why is the Supreme Court’s decision historic? Why is it a boon for the states rich in mineral wealth but economically backward? It is really going to open the doors of the treasury for them. Let us understand in detail the Supreme Court’s decision related to royalty on minerals and tax on mineral land.Who is in the bench delivering the verdict?
The Constitutional Bench headed by CJI D.Y. Chandrachud comprised Justices Hrishikesh Roy, Abhay S. Oka, J.B. Pardiwala, Manoj Mishra, B.V. Nagarathna, Ujjwal Bhuiyan, Satish Chandra Sharma and Augustine George Masih. The bench said that royalty is not a tax. However, Justice B.V. Nagarathna, who was part of the bench, expressed disagreement with this in his decision.
How old is the case?
Over 80 petitions were filed in the Supreme Court over the years. Since the case was decided by a 7-judge bench of the Supreme Court in 1989, the then CJI referred the case to a 9-judge Constitution bench on March 30, 2011.
What was the issue?
This case was about the income from minerals. States get royalty from minerals. The central government said that this royalty is a kind of tax and the Parliament has the right to control it. But the Supreme Court rejected this argument. The court said that in the list of the Constitution, the states have been given the right to impose tax on land and buildings. This also includes land with minerals. Regarding royalty, the court said that it is a contract between the state governments and mining companies. It is not a tax. The Supreme Court said, ‘Tax is not a contract between the government and the taxpayer.’ The lawyers of Jharkhand, Andhra Pradesh, Uttar Pradesh and Odisha also gave the same argument.
The State List in the Constitution clarifies which subjects fall under the jurisdiction of state governments. Entry 49 says that states can levy taxes on ‘lands and buildings’. Entry 50 gives state legislatures power to make laws to levy taxes on mines and minerals provided they are within limits prescribed by Parliament. The issues were 1. whether ‘land’ includes ‘mineral land’ and 2. whether royalties paid by mining companies to states count as taxes.
Which states benefit?
This historic decision of the Supreme Court is like finding a treasure for the mineral-rich states. States like Jharkhand, West Bengal, Odisha, UP, MP, Karnataka, Goa will get an additional source of revenue in addition to mineral royalty. Anyway, states are always looking for extra cash. After GST, states want to get extra cash from somewhere.
What are the major minerals found in India?
These include coal, ores of metals such as iron, copper, aluminium, zinc, lead, manganese, besides limestone, gold and diamonds.
What was the reasoning behind the majority’s decision?
The first argument is that ‘land’ in Entry 49 includes ‘all kinds of land’, and hence includes mineral-bearing land. Second, their royalties are part of contracts between state governments and mining companies, and hence they cannot be considered mineral-bearing land.
What about ‘parliamentary boundaries’?
The judgment said that the parliamentary limits on the power of the states to tax minerals in Entry 50 are effective. But no such limits were imposed by Parliament in the 1957 law related to mines and minerals. The most important thing in the judgment is that the Supreme Court held that only the states have the power to tax minerals, the Center does not have this power.
What was the Centre’s argument?
The central government argued that if only mineral-rich states were given the right to levy taxes, it would create imbalance in the federal structure. Some states would have more money while others would have less. But the court rejected this argument as well. Among the judges on the bench, only Justice Nagarathna agreed with this argument.
What do the mining companies say?
He opposed the arguments of mineral-rich states. His argument was that the royalty they pay is a tax. Now if the states impose more tax, it will be an additional burden on them. This will ultimately affect the consumers.