Mining Companies Challenge State Tax on Minerals in Supreme Court

 

The Dispute:

• Mining companies are contesting the legality of state laws imposing taxes on mineral rights in India.
• They argue that such taxation conflicts with the central government's exclusive authority over mineral development.

Arguments against State Tax:

• Harish Salve, representing mining companies, argues:
  • State taxation on mineral rights creates an additional financial burden on private miners.
  • It hinders mineral development, which is solely under central government control according to the Mines and Minerals (Development and Regulation) Act, 1957.
  • It potentially leads to price inflation of minerals due to uneven enrichment of mineral-rich states.

Central Government's Position:

• Supports the mining companies' arguments.
• Claims their right to regulate mineral development stems from Entry 54 of the Constitution's Union List.
• The central government enacted the MMDR Act, which governs mineral development, and this act supersedes any similar state legislation.

Legal Precedent:

• The Supreme Court is examining conflicting judgments on this issue:
  • 1989: A 7-judge bench ruled that royalty on minerals is a tax under the MMDR Act (India Cements case).
  • 2004: A 5-judge bench clarified that the previous case referred to a "cess on royalty" as a tax, not royalty itself (State of West Bengal vs. Kesoram Industries).

Court's Response:

• The nine-judge bench is considering whether:
  • Any form of "exaction" (financial demand) on mineral rights is prohibited for states.
  • Royalty imposed by the central government under the MMDR Act acts as a substitute for all other levies related to minerals.

Next Steps:

• Harish Salve will continue his arguments for the mining companies.
• The Supreme Court's decision will have significant implications for:
  • State revenue generation from mineral resources.
  • Power dynamics between the central and state governments regarding mineral rights.

Overall, this case highlights a complex legal battle concerning the division of authority and taxation rights between the central and state governments in India, particularly regarding the management of mineral resources.