The Supreme Court’s judgment on July 25, 2024 freed States from the restrictions of the Centre and was in tune with the federalist principles of governance. File
| Photo Credit: Shashi Shekhar Kashyap
The Centre on July 31 opposed in the Supreme Court a plea of the mineral-rich States seeking a refund of the royalty levied by it on mines and mineral-bearing land since 1989, saying any such order asking it to pay the alleged dues with retrospective effect will have a “multipolar” impact.
In a significant verdict on July 25, a nine-judge Constitution Bench headed by Chief Justice D.Y. Chandrachud, by a majority 8:1 verdict, held that the legislative power to tax mineral rights vests with the States and the royalty paid on minerals is not a tax.
The landmark verdict, which gave a huge revenue boost to mineral-rich States, however, led to another dispute with regard to the operation of the verdict.
Some Opposition-ruled mineral-bearing States urged the Supreme Court to make the verdict operational with retrospective effect so that they can seek refund of royalty from the Centre.
However, the Centre opposes any such order saying it will have a “multipolar impact.
Editorial | Fiscal federalism: On taxing mineral rights
Many firms involved in mining activities also support the Centre’s view on refund of royalties to mineral-bearing States.
Solicitor General Tushar Mehta, appearing for the Centre, said States like Madhya Pradesh and Rajasthan, which are ruled by the BJP, wanted the judgment to be made applicable prospectively. The hearing is underway.
The 200-page majority verdict was penned by the CJI for himself and on behalf of Justices Hrishikesh Roy, Abhay S. Oka, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih.
“Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears,” the majority verdict had said.
However, Justice B.V. Nagarathna had dissented and said the Centre has the power to levy royalty.
