Trying to resolve royalty and tax dispute with mineral-rich states, Centre tells SC

The Centre is trying to resolve the dispute over royalty and tax dues on mineral rights and mineral-bearing lands between it and several mineral-rich states, it told the Supreme Court on Thursday (March 20).

The top court has deferred to April 24 the hearing on subsequent pleas of several mineral-rich states such as Jharkhand seeking to recover the said royalty and tax dues worth thousands of crores of rupees from the Centre and the mining firms.

A special three-judge bench comprising Justices Abhay S Oka and MM Sundresh and Ujjal Bhuyan said it will decide on the sequence in which the pleas of several mineral-rich states would be heard.

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2024 SC verdict

Solicitor General Tushar Mehta, appearing for the Centre, said efforts were on to find a settlement of the issue and the pleas may be listed in the first week of May.

Senior advocate Rakesh Dwivedi, appearing for Jharkhand, said a settlement can be arrived at any stage and the hearing should not be delayed.

On July 25 last year, a nine-judge bench headed by the then Chief Justice DY Chandrachud (since retired), in a majority 8:1 verdict, ruled that the legislative power to tax mineral rights vests in states and not Parliament. The verdict overruled a 1989 judgement, which held that only the Centre has power to impose royalty on minerals and mineral-bearing land.

In a subsequent order on August 14, the top court clarified that the judgement will not have prospective effect and permitted mineral-rich states to recover from the Centre and mining firms the royalty and tax dues on mineral rights and mineral-bearing lands worth thousands of crores of rupees since April 1, 2005, over a period of 12 years.

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Further legal impediments

Later, a special bench headed by Justice Oka was set up to resolve the subsequent dispute between several states and the Centre. Dwivedi had urged the court to allocate to a bench states’ pleas relating to the recovery of dues and the legal impediments in realising them.

After the July 25 judgement last year, Dwivedi had referred to legal impediments coming in the way of Jharkhand in levying tax on minerals and mineral-bearing lands. He had said one issue still remained and that was Jharkhand’s law to collect royalty on minerals and mineral-bearing land, which was set aside earlier, needed to be upheld now.

“Unless the [Mineral Area Development Authority] Act is declared valid, we cannot collect taxes on minerals and mineral-bearing land. Please list it expeditiously before the appropriate bench,” Dwivedi had said.

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1993 Patna HC verdict

He was referring to a decision of the Ranchi bench of the Patna High Court that had struck down Section 89 of the Mineral Area Development Authority Act of 1992 vide its judgment dated March 22, 1993.

Section 89 of the Mineral Area Development Authority Act empowered the state government of then undivided Bihar to levy tax on not only mineral-bearing land but also land used for commercial or industrial purposes.

Some Opposition-ruled mineral rich states also then sought a refund of the royalty levied by the Centre and taxes from mining companies since the 1989 verdict.

(With agency inputs)