SC Upholds States'' Power to Tax Mineral Rights

New Delhi, Oct 4 (PTI) The Supreme Court has dismissed pleas seeking review of its July 25 verdict that ruled legislative power to tax mineral rights vests with the states.

The eight judges led by Chief Justice DY Chandrachud who perused the review petitions in chamber did not find merit in them.

Besides the CJI, the review order was signed by Justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih.

"Having perused the review petitions, there is no error apparent on the face of the record. No case for review under Order XLVII Rule 1 of the Supreme Court Rules 2013 has been established. The review petitions are, therefore, dismissed," the eight judges said in the order passed on September 24 but uploaded recently.

Justice BV Nagarathna, who had dissented from the majority in the July 25 verdict by holding that only the Centre has the power to levy the tax on mineral rights, passed a separate order in the review petitions also.

"Having perused the review petitions, a case for review under Order XLVII Rule 1 of the Supreme Court Rules, 2013 is made out," she ordered while issuing notice to the Centre and the states.

The eight judges led by the CJI rejected the prayer for open court hearing of the review petitions while Justice Nagarathna allowed the prayer for open court hearing.

On July 25, in 8:1 majority verdict, the top court in a landmark decision held that the legislative power to tax mineral rights vests with the states and the royalty paid on minerals was not a tax.

The majority verdict, which gave a huge revenue boost to mineral-rich states. said Parliament does not have the legislative competence to tax mineral rights under Entry 54 of List I of the Constitution which pertains to regulation of mines and mineral development by the Centre.

The top court, however, said that Parliament can still legislate to impose "any limitations" on states' power to levy tax on mineral rights.

It had referred to the term "any limitations" under Entry 50 of List II and said its scope is wide enough to include imposition of "restrictions, conditions, principles, as well as a prohibition".

Entry 50 of List II pertains to taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.

Justice Nagarathna, in her dissenting verdict had said royalty is in the nature of a tax or an exaction and the Centre and not states have the power to levy it.

On August 14, in a major victory for mineral-rich states, the top court allowed them to recover from the Centre and mining companies royalty and tax dues on mineral rights and mineral-bearing lands worth thousands of crore of rupees since April 1, 2005 over a period of 12 years.

It had said the time for payment of the demand of tax by the states shall be staggered in instalments over a period of 12 years commencing from April 1, 2026.

The bench had further said bearing in mind the consequences that would emanate from the past, it has imposed the conditionalities and directed that the levy of interest and penalty on demands made for the period before July 25, 2024 shall stand waived for all the assessees.