The Supreme Court announced on Wednesday that it will form a bench to hear pleas from mineral-rich states like Jharkhand, which are seeking to recover royalty and tax dues on mineral rights and mineral-bearing lands worth thousands of crores from the Centre and mining companies.
On July 25, a nine-judge bench led by Chief Justice DY Chandrachud, in an 8:1 ruling, determined that the power to tax mineral rights belongs to the states, not Parliament. In a follow-up order on August 14, the court clarified that the judgment applies retroactively, allowing states to recover dues from April 1, 2005, over a 12-year period.
During the hearing, senior advocate Rakesh Dwivedi, representing Jharkhand, requested that the bench address the legal issues and recovery of dues. “This is regarding subsequent steps after the nine-judge bench judgement. All the matters are now put together,” Dwivedi said.
Senior lawyer Abhishek Singhvi, representing some private mining companies, acknowledged that states are now seeking payment.
Chief Justice Chandrachud responded, “I will assign (the bench), preferably one of the judges who was with us on the (Constitution) bench to hear it.”
After the July 25 judgment affirmed states’ authority to levy taxes and royalties, Dwivedi pointed out legal hurdles Jharkhand faces in taxing minerals and mineral-bearing lands. He noted that Jharkhand’s law to collect royalty, previously set aside, needs to be upheld for the state to proceed.
“Unless the Act is declared valid, we cannot collect taxes on minerals and mineral-bearing land. Please list it expeditiously before the appropriate bench,” Dwivedi stated, alongside senior advocate Tapesh Kumar Singh for Jharkhand.
The reference was to a 1993 decision by the Ranchi bench of the Patna High Court, which had struck down Section 89 of the Mineral Area Development Authority Act of 1992. This section allowed the state to tax not only mineral-bearing lands but also those used for commercial or industrial purposes.
The July 25 ruling reversed a 1989 judgment that had given the Centre exclusive power to impose royalties on minerals and mineral-bearing land. Following the ruling, several opposition-ruled states sought refunds of royalties and taxes collected by the Centre from mining companies since the 1989 decision.
