Centre files curative plea on SC’s mineral tax order
The Union government filed a curative petition to review a Supreme Court ruling allowing states to tax minerals, raising concerns over legislative powers.
The Union government has moved a curative petition urging the Supreme Court to reconsider its July 2024 judgment that granted states the legislative authority to impose taxes on minerals and mineral-bearing land, in addition to the royalty collected by the Centre.
Solicitor General Tushar Mehta, appearing in an unrelated case, informed a bench of justices Vikram Nath and Sandeep Mehta of this development, stating that the petition was filed “with all seriousness”.
A nine-judge bench, by an 8-1 majority, ruled against the review in October 2024, stating that there is no error apparent on the face of the record and therefore, no case for review has been established.
The Centre, along with some mining companies, had sought reconsideration of the July 2024 verdict, arguing that the judgment misinterpreted the concept of land, asserting that the ruling unjustifiably broadened the states’ legislative powers. According to the Centre, the judgment implied that states could legislate on any subject under the guise of regulating land and buildings, which the petition called a “constitutional anathema.”
Chief Justice of India Dhananjaya Y Chandrachud led the majority, along with justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih. Justice BV Nagarathna, who had dissented in the original judgment, remained consistent with her stance, stating that a case for review existed.
{{/usCountry}}Chief Justice of India Dhananjaya Y Chandrachud led the majority, along with justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih. Justice BV Nagarathna, who had dissented in the original judgment, remained consistent with her stance, stating that a case for review existed.
{{/usCountry}}The July 2024 decision had clarified that royalty paid for mining is not a tax but a contractual payment for mineral extraction, and this distinction allowed states to levy additional taxes or surcharges on mineral rights, providing them with a significant revenue source. However, the court maintained that Parliament retains the authority to impose limits on states’ taxation powers through legislation, though no such restrictions had been enacted under the Mines and Minerals (Development and Regulation) Act (MMDRA) of 1957.
{{/usCountry}}The July 2024 decision had clarified that royalty paid for mining is not a tax but a contractual payment for mineral extraction, and this distinction allowed states to levy additional taxes or surcharges on mineral rights, providing them with a significant revenue source. However, the court maintained that Parliament retains the authority to impose limits on states’ taxation powers through legislation, though no such restrictions had been enacted under the Mines and Minerals (Development and Regulation) Act (MMDRA) of 1957.
{{/usCountry}}Justice Nagarathna, in her dissent, maintained that the Centre alone had the exclusive right to tax mineral rights in the country.
Subsequently, by an order on August 25, 2024, the bench allowed states to impose taxes on minerals and land holding minerals, effective from April 1, 2005, a windfall for mineral-rich states in the country but a blow for mining companies, which now face the prospect of hefty financial liabilities due to the retrospective application of these taxes. Industry executives said this could cost the industry ₹1.5 lakh crore to ₹2 lakh crore, and the Union government told the court that public sector undertakings would face a ₹70,000 crore-odd hit.
The court ordered that the mining companies will be required to make payments to the states over the next 12 years, commencing from April 1, 2026, a financial boon for states such as Jharkhand, Odisha, Chhattisgarh and Rajasthan.
Despite requests from the Centre and the mining industry for the judgment to be applied prospectively, given its significant financial ramifications, the court refused to alter its decision. However, it did offer partial relief to the mining sector by ruling that states could not impose penalties or additional interest for past tax demands.
The July 2024 ruling resolved a long-standing legal dispute that stemmed from conflicting judgments by the Supreme Court. In 1989, a seven-judge bench ruled in the India Cements case that the Centre held primary regulatory authority under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and that states could collect royalties but not impose additional taxes or cess on mining and mineral development. However, a five-judge bench in 2004, while hearing a similar dispute in the Kesoram case, noted a typographical error in the 1989 judgment, clarifying that “royalty is not a tax” but “cess on royalty is a tax”. The nine-judge bench ultimately sided with the latter interpretation, marking a pivotal shift in the fiscal autonomy of states over mineral resources.
