NEW DELHI: In significant ruling on Thursday the Supreme Court of India declared that states possess the legislative authority to impose taxes on lands bearing mines and minerals. The decision was delivered by a nine-judge Constitution bench. It concluded with a majority decision of 8:1. Chief Justice DY Chandrachud speaking for himself and seven other judges. He emphasized that the royalty payable on minerals does not constitute tax.
The Chief Justice noted that Parliament lacks authority to tax mineral rights under Entry 50 of List II of the Constitution. Entry 50 pertains to taxes on mineral rights. It is subject to any limitations imposed by Parliament through laws concerning mineral development. This recent judgment overturns a 1989 Supreme Court decision. It was by a seven-judge Constitution bench. That decision had previously deemed royalty to be a tax.
The new ruling asserts the 1989 verdict was flawed. It misinterpreted the law. The decision represents setback for the central government. It had sought to retain power to tax mineral rights. It reinforces the legislative competence of states in this domain. This could lead to significant implications. It would affect governance and economic management of mineral resources across India.
Chief Justice Chandrachud indicated that the bench delivered two separate judgments. Justice BV Nagarathna presented a dissenting opinion. Justice Nagarathna argued that states do not have legislative competence to levy taxes on lands bearing mines and minerals.
The bench addressed the contentious issue, whether the royalty payable on minerals is considered tax. The Mines and Minerals (Development and Regulation) Act 1957 was discussed. Only the Centre has the power to levy such charges. The question of states holding this authority also arose.
Besides Chief Justice Chandrachud and Justice Nagarathna the bench included other members. These were Justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala. Others were Manoj Misra Ujjal Bhuyan. Satish Chandra Sharma and Augustine George Masih.
This landmark ruling could reshape the regulatory landscape for mineral resources in India. It grants states more control over their economic exploitation. It also grants more control over governance. The judgment underscores the evolving interpretation of constitutional provisions concerning state and central powers. This is particularly true in realm of mineral rights and taxation.
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