Today(11th Sept),The Supreme Court of India will form a special bench to address pleas from mineral-rich states like Jharkhand seeking recovery of royalty and tax dues from the Centre and mining firms. This follows a July 25 ruling affirming that states, not Parliament, hold the power to tax mineral rights.
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NEW DELHI: Today(11th Sept), The Supreme Court of India announced that it would constitute a special bench to hear ongoing pleas from mineral-rich states such as Jharkhand. These states are seeking the recovery of royalty and tax dues worth thousands of crores from the Central Government and various mining companies. The dispute centers around the collection of dues related to mineral rights and the use of mineral-bearing lands.
On July 25, a nine-judge bench of the Supreme Court, led by Chief Justice D Y Chandrachud, ruled in an 8:1 majority decision that the power to impose taxes on mineral rights lies with the states, not the Parliament. This ruling marked a significant shift in the legal framework governing mineral resources in India.
The verdict also overturned a 1989 Supreme Court judgment, which had previously granted the Centre exclusive rights to impose royalty and taxes on minerals and mineral-bearing lands. The ruling opened the door for mineral-rich states to demand compensation for taxes and royalties they had been unable to collect from mining companies and the Central Government for over three decades.
Clarification from the Court: August 14 Order
In a subsequent order issued on August 14, the Supreme Court further clarified that the July 25 judgment would not be applied prospectively. This means that states can recover royalty and tax dues on mineral rights retroactively from April 1, 2005, spanning a 12-year period. The Court gave states the green light to initiate steps to recover substantial amounts owed to them, potentially amounting to thousands of crores of rupees.
Jharkhand’s Plea and the Need for a New Bench
Today(11th Sept), senior advocate Rakesh Dwivedi, representing the state of Jharkhand, approached a bench consisting of Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra. Dwivedi requested that the Court expedite the allocation of cases concerning the recovery of these dues and resolve any legal challenges that might arise during the collection process.
“This is regarding subsequent steps after the nine-judge bench judgment. All the matters are now put together,”
-Dwivedi stated, emphasizing the need for the Court to address the recovery process and the legal hurdles that states like Jharkhand were facing.
On the other side, senior advocate Abhishek Singhvi, representing several private mining firms, voiced concerns regarding the states’ efforts to recover substantial amounts from the companies. He pointed out that states, particularly Jharkhand, were now demanding the realization of funds based on the July 25 ruling.
“I will assign (the bench), preferably one of the judges, who was with us on the (Constitution) bench to hear it,”
-Chief Justice Chandrachud responded, assuring both sides that the matter would be addressed promptly.
Despite the Supreme Court’s rulings in favor of state taxation rights on mineral resources, Jharkhand has encountered legal challenges in its attempts to levy taxes on minerals and mineral-bearing lands. Dwivedi highlighted these difficulties during the hearing, stating that Jharkhand’s law, which allowed the state to collect royalties, had previously been invalidated.
“Unless the Act is declared valid, we cannot collect taxes on minerals and mineral-bearing land,”
– Dwivedi argued, urging the Court to list the matter before an appropriate bench for a swift resolution.
Dwivedi’s argument referred to the Ranchi bench of the Patna High Court, which had earlier struck down Section 89 of the Mineral Area Development Authority Act of 1992 in a judgment dated March 22, 1993. Section 89 of the Act had empowered the then-undivided Bihar state (of which Jharkhand was part) to impose taxes not only on mineral-bearing lands but also on lands used for industrial or commercial purposes.
The Supreme Court’s landmark July 25 decision is expected to have a far-reaching impact on India’s mineral-rich states, particularly those governed by opposition parties, which have been seeking compensation for years of lost revenue. The ruling empowers states to claim substantial dues from mining companies and the Central Government, shifting the balance of fiscal power in favor of state governments.
Many mineral-rich states, including Jharkhand, Chhattisgarh, and Odisha, have already begun taking steps to recover these dues. They are demanding refunds for royalty payments that were previously levied by the Centre and seeking to impose new taxes on companies that have extracted minerals from their lands.
