Supreme Court To Clarify Tomorrow Whether Judgement Upholding Powers Of States To Tax Mineral Rights Be Given Only Prospective Effect

The Supreme Court Constitution Bench will tomorrow pronounce its order clarifying whether its judgment upholding the rights of States to tax mineral rights will apply only prospectively. 

The Constitution Bench on July 25 held by an 8:1 majority that States have the power to levy tax on mineral rights and that the Union law - Mines and Minerals (Development and Regulation) Act 1957 - do not limit such power of the States.

The 9-judge bench which delivered the judgement was headed by CJI DY Chandrachud and comprises Justices Hrishikesh Roy, Abhay Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, SC Sharma and AG Masih. 

Chief Justice of India DY Chandrachud wrote the judgment on behalf of himself and seven colleagues. Justice BV Nagarathna delivered a dissenting judgment.

During the hearing on the said issue of prospective application, Solicitor General of India Tushar Mehta requested the Court to clarify that the judgment will not enable recoveries for the period before the date of pronouncement. He pointed out that the judgment in India Cements Ltd. v. State of Tamil Nadu (1990) 1 SCC 12 [34], which was overruled by the 9-judge bench, had held the field for over 35 years and the positions which the parties had been following bona fide based on that precedent would be upset if the judgment is made retrospective.

Allowing retrospective demands by States would have a cascading effect on prices and ultimately the common man would bear the brunt, as almost all industries are dependent on minerals. 

While on the other hand, Senior Advocate Rakesh Dwivedi, for the State of Jharkhand, submitted that the judgment should be given the full effect by making it retrospective. He submitted that allowing the judgment only a prospective effect would mean that the laws validly enacted by the States would be deemed ineffective till July 25.

Pointing out that the Jharkhand law was enacted in 1994, Dwivedi submitted that to make this law inoperative on the basis of the overruled India Cements judgment, would be a "travesty of justice." He also pointed out that in 2004, the judgment in State of West Bengal v. Kesoram Industries Ltd(which differed from India Cements) came. Therefore, the Court would be now forced to get into another issue whether India Cements or Kesoram would govern the period before the 9-judge bench verdict.

Responding to the concerns raised by the other side regarding financial implications, Dwivedi suggested that the past arrears could be paid in a staggered manner in instalments. 

Other relevant reports on the decision can be read here.