In a landmark judgment delivered on Thursday, the Supreme Court of India ruled that states have the legislative authority to impose taxes on lands bearing mines and minerals under the Constitution. This decision, rendered by a nine-judge Constitution bench with a majority of 8:1, marks a significant shift in the interpretation of mineral rights and taxation.

Clarification on Mineral Royalties

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. This distinction is crucial, as it separates the concept of royalty from taxation, which has broader implications for how mineral resources are managed and regulated.

The CJI emphasized that Parliament does not have the power to tax mineral rights under Entry 50 of List II of the Constitution. This entry pertains to the taxation of mineral rights but is subject to any limitations imposed by Parliament through legislation concerning mineral development. The ruling thus underscores the scope of states' authority in taxing lands with mines and minerals.

Overturning the 1989 Verdict

The Supreme Court's recent decision overturns its own 1989 ruling made by a seven-judge Constitution bench. The 1989 verdict had previously held that royalty on minerals was a tax, a position that the current bench has now deemed incorrect in its interpretation. This reversal represents a significant shift in legal precedent regarding mineral rights and taxation.

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The judgment represents a setback for the Central Government, which had sought to retain authority over the taxation of mineral rights. By affirming the legislative competence of states in this domain, the ruling may have far-reaching implications for the governance and economic management of mineral resources across India.

Two Separate Verdicts and Dissenting Opinions

The bench delivered two separate verdicts on this contentious issue. Justice BV Nagarathna provided a dissenting opinion, stating that states do not have the legislative competence to levy taxes on lands bearing mines and minerals. This dissent highlights the complexity of the legal questions addressed and the varied interpretations of constitutional authority in this area.

The Supreme Court's decision focused on whether the royalty payable on minerals, under the Mines and Minerals (Development and Regulation) Act, 1957, constitutes a tax and whether this power is exclusive to the Centre or if states also have the authority to impose such levies.

Members of the Bench

The nine-judge Constitution bench included justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, alongside Chief Justice DY Chandrachud and Justice BV Nagarathna.

Conclusion

The Supreme Court's ruling affirms the authority of states to tax lands with mines and minerals, a significant development in the legal landscape of mineral rights and taxation in India. By overturning the 1989 verdict and clarifying the distinction between royalty and tax, the Court has set a new precedent that will influence the administration and regulation of mineral resources. The decision reaffirms states' legislative competence while presenting a challenge to the Centre’s previously held position on mineral taxation. As the implications of this ruling unfold, it will be essential to observe how it affects the management of mineral resources and state-federal relations in the context of mineral rights.

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