Exploring Mineral Land Taxation: Supreme Court’s 9-Judge Bench

Inauguration of Hearings

The Supreme Court’s 9-judge Constitution Bench commenced hearings on February 27, diving deep into the complexities surrounding the taxation of mineral-bearing lands.

Focus on Royalty Characterization

The focal point of the discussions revolves around the characterization of royalty under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), particularly examining whether it qualifies as a tax.

Bench Composition and Petitions

Led by Chief Justice DY Chandrachud, the bench, consisting of Justices Hrishikesh Roy, Abhay Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, SC Sharma, and AG Masih, addressed petitions challenging the Bihar Coal Mining Area Development Authority (Amendment) Act, 1992, and related regulations.

Background and Escalation

The current hearings stem from 2011 when a three-judge bench framed eleven pivotal tax law questions, prompting the escalation of the issues to the 9-judge bench. These questions included whether ‘royalty’ equates to tax and the authority of state legislatures to base tax on land value linked to production.

Senior Advocate’s Inquiries

A Senior Advocate, representing Jharkhand, posed five key inquiries delving into royalty’s essence, its classification as a tax, and the constitutional framework governing taxation powers between the central and state governments.

Ambiguity in Judicial Precedent

Discussions brought to light an ambiguity in paragraph 34 of the Kesoram Industries case judgment, sparking a dialogue on conflicting views regarding the taxation status of royalty and its implications on mineral rights

Constitutional Provisions Exploration

The bench explored Entry 50 of the State List in the Constitution, which permits states to tax mineral rights with possible limitations imposed by Parliament, emphasizing the nuanced interpretation of ‘limitation’ to strike a balance between national interests and state autonomy.

Case Under Discussion

Mineral Area Development v. M/S Steel Authority Of India & Ors (CA N0. 4056/1999)

The case delves into the distribution of legislative power between the Union and the States, particularly states’ authority to levy taxes on mineral rights within the regulatory framework established by Parliament.