The Supreme Court of India is currently wrestling with a complex legal issue related to the categorization of royalties in the realm of mining activities. The case, known as Mineral Area Development v. M/S Steel Authority of India & Ors (2024), has been escalated to a nine-judge bench after 9,044 days since its initial filing, making it one of the longest pending cases in the court’s annals. The crux of the matter revolves around the question of whether royalties should be classified as taxes, a question that carries significant implications for both state and central jurisdictions.
Origins of the Dispute
The legal conflict can be traced back to the Bihar Coal Mining Area Development Authority (Amendment) Act, 1992, which levied additional cess and taxes on land revenue from mineral-rich lands. This controversial legislation sparked a series of legal challenges, culminating in the present case.
The 2011 Case
In the case of Mineral Area Development Authority v. M/s Steel Authority of India & Ors. (2011), the main issue centered around the nature of royalties determined under Sections 9/15(3) of the Mines and Minerals (Regulation & Development) Act, 1957, and whether they constituted a form of taxation. After much deliberation, the Supreme Court decided to refer the matter to a bench of Nine Judges to resolve several intricate legal questions. These questions involved the interpretation of constitutional provisions regarding taxation on mineral rights and the relationship between state and central legislative powers in matters concerning mineral development.
The 2004 Judgment
In the case of State of West Bengal v. Kesoram Industries Ltd. And Ors (2004), the Supreme Court clarified the classification of a cess as either tax or fee, confirming it as a fee. It differentiated royalty as not being a tax, rectifying a previous judgment’s typographical error. Highlighting parliamentary supremacy, it curtailed the state’s power to levy taxes on tea, coal, and mineral rights. The court upheld taxation on land as a unit and declared certain state-imposed cesses on tea estates and mineral rights as invalid. The case of India Cement Ltd v. State of Tamil Nadu (1989) was challenged for an alleged typographical mistake.
Referral to Nine-Judge Bench
Due to the complexity and significance of the issues involved, the case was referred to a nine-judge bench consisting of Chief Justice of India (CJI) DY Chandrachud and Justices Hrishikesh Roy, Abhay Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, SC Sharma, and AG Masih.
Issues at Stake
The case involves several critical questions, including the interpretation of constitutional provisions related to taxation powers, such as Entries 49 and 50 of the State List, and the extent of Parliament’s authority under Entry 54 of the Union List.
Implications and Potential Outcomes
The verdict of this case will have far-reaching implications for the taxation framework governing mining activities across the nation. It will also clarify the respective powers of states and the central government in matters of mineral resource management, thereby shaping the legal landscape for future disputes and policy formulation.
