On Day 2, the Supreme Court’s 9-judge Bench scrutinized if the MMDR Act imposes limits on states’ authority to tax mineral rights. State representatives emphasized tax authority preservation, and legal experts provided nuanced insights on Entry 50 complexities.
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![[DAY-2] Supreme Court's 9-Judge Bench Reviewed on Mineral Rights under MMDR Act](https://i0.wp.com/lawchakra.in/wp-content/uploads/2024/02/image-392.png?resize=820%2C461&ssl=1)
NEW DELHI: On 29th February, The Supreme Court‘s 9-judge Constitution Bench, led by Chief Justice DY Chandrachud, continued its scrutiny of the intricate taxation matter pertaining to mineral-bearing lands. The focus remains on crucial questions surrounding the constitutional distribution of powers. Chief Justice Chandrachud raised a pivotal query during the session, pondering the potential impact of a tax on mineral-bearing land on mineral development.
He questioned-
“If a tax is a land tax, obviously entry 23 of List I does not impose any fetters. But if the tax on land is albeit a tax on mineral-bearing land, can it not be postulated that the levy of the tax will have some impact on the development of minerals?”
This query brings forth the complex interplay between Entry 23 of List I and Entry 49 of List II.
Background:
The Supreme Court is addressing the complex taxation matter of mineral-bearing lands, focusing on the nature and scope of royalty under the Mines and Minerals (Development and Regulation) Act, 1957. The 9-judge bench was convened in 2011 to resolve conflicting decisions, and the current discussions involve petitions challenging additional taxes imposed on mineral-bearing lands.
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The post-lunch session saw Chief Justice Chandrachud delving into the nature of the levy, questioning whether it is a tax solely on mineral rights or a combination of land and mineral rights.
He remarked-
“For us to put forth that proposition which I was trying to say earlier, we will then have to say that the levy itself is not under land but is a tax on mineral rights or that it is a tax on land and mineral rights. It’s sort of a ragbag legislation.”
The discussions encompassed arguments from various state governments on the purpose and scope of Entry 50 List II. Senior Advocate Rakesh Dwivedi, representing Jharkhand, emphasized the need for explicit statements from Parliament when introducing limitations on Entry 50. He cautioned against undermining the state’s taxing power, asserting-
“It is of very vital importance, the state’s taxing power, so it cannot sub-silentio while prescribing some fees/royalty/surface rent etc take away a vital power of the taxing rent.”
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Justice Nagarathna and Justice Roy underscored the importance of aligning limitations imposed by Parliament with the overarching interest of mineral development. Justice Roy referenced historical context, stating-
“The debate in the constituent assembly will have to be given some meaning and some emphasis.”
Senior Advocate Dwivedi’s key arguments were highlighted, emphasizing the exclusive nature of Entry 49 List II in taxing power related to land and buildings. He argued for the competence of state legislatures to impose taxes on land and buildings, especially in the case of mineral-bearing land.
Senior Advocate S Niranjan Reddy discussed the constitutional nuances, pointing out that Entry 50 empowers states not only to tax but also to impose an impost. He argued that if an impost shares characteristics with a tax, it should be treated as such.
Senior Advocate Hansaria, representing UP’s mineral development authority, asserted that Entry 50 doesn’t grant the Union the power to tax mineral rights but acts as a limitation on the state’s authority.
Senior Advocate Harish Salve, representing the Union, provided historical context, emphasizing the unique language of Entry 50 for holistic national welfare. He outlined three balances in Union and State legislation: Occupied Field, Denudation, and Repugnancy.
The Supreme Court will further explore the interplay between Entry 50 and 49 of List II in the upcoming hearings, addressing the multifaceted taxation matter related to mineral-bearing lands.