The Supreme Court is deliberating over eighty cases on the issues of whether mining royalty fees are taxes and whether state legislatures have the authority to enact laws. The legality of state statutes that impose mineral rights-related taxes is being decided by the Supreme Court's nine-judge panel.
Senior barrister Harish Salve, speaking on behalf of a group of mining corporations, opposed the state regulations that put an additional financial burden on private miners, arguing that the state's ability to tax would be undermined if taxing mineral rights became incompatible with the framework of the law governing mineral development.
The bench headed by Chief Justice of India (CJI) Dhananjaya Y Chandrachud, which began hearing a batch of over 80 appeals last week, asked Salve, that they then have to form a prediction that any power to tax impinges on mineral development.
Salve, speaking on behalf of the Eastern Zone Mining Association, stated that leaving it up to each state to impose an additional financial burden will have an impact on the development of mining resources. The protection of minerals is taken into consideration by the Mines and Minerals (Development and Regulation) Act, 1957.
Salve backed the Center, which had argued last week that states cannot impose taxes on minerals because the Constitution never intended for such a thing. This is because doing so would unfairly benefit states that are rich in minerals, driving up the cost of those minerals, which are essential to the growth of important industries in the economy and contribute to inflation. The disagreements started on this for the fourth day.
There can be many types of exaction on mineral rights, according to the bench, which also included justices Hrishikesh Roy, AS Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih. Entry 23 (mine control and mineral development) and Entry 50 (tax on mineral rights) are subject to any laws pertaining to List 1 (Union List) or laws enacted by Parliament.
The Center asserted that Entry 54 of List 1, which addresses mining regulation and mineral development, is the root of its authority over minerals. The MMDR Act, which controls the field, was adopted by Parliament under this provision, and provision 54 places restrictions on the ability of governments to demand or impose comparable levies or charges.
Salve acknowledged this point of contention and stated that although states own minerals, the Union is solely responsible for their development. The state's authority under Entry 23 and any other entry pertaining to minerals is negated if Entry 54 declares that the Center is in charge of mineral development and regulation.
He went on to say that under the current Indian legal structure, mining rights typically belong to the state, therefore a tax on mineral rights in and of themselves cannot be imposed in addition to the MMDR Act, a law passed by Parliament that exempts mineral rights and requires royalty payments.
Mineral rights are owned by the state as the sovereign, however, they may be ceded under a lease that complies with the MMDR Act. The state represents the Union government as a delegate under the Act. On Wednesday, Salve will carry on with his talks.
The Court is considering a backlog of over eighty appeals, all of which center on whether the royalty levied by the Center is a tax or not, as well as whether governments have the authority to impose additional taxes on minerals and mineral-bearing properties.
The problem has broader ramifications for the state's ability to generate income and its sovereignty over minerals that are taken out of its territory.
In March 2011, the dispute was submitted to a nine-judge bench because the Supreme Court had uncovered a discrepancy in two earlier rulings on the subject. One was a 1989 ruling by a seven-judge bench in the India Cements Limited v. State of Tamil Nadu case, which held that royalty is taxable under the MMDR Act.
The other ruling was a 2004 5-judge bench ruling in the State of West Bengal against Kesoram Industries case. It concluded that the court in India Cements had erroneously written that "royalty is a tax" when, in fact, it should have said "cess on royalty is a tax."
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