Supreme Court Settles 35-Year Mineral Revenue Dispute

The Supreme Court has resolved a 35-year-old legal issue impacting the revenue generation from mineral resources by states. A nine-judge bench led by Chief Justice DY Chandrachud ruled that states have the legislative power to tax mineral rights and clarified that royalty is not a tax.

The Supreme Court on Thursday settled a long-standing 35-year-old legal debate about how the Centre and states generate revenue from mineral resources. A nine-judge Constitution bench headed by Chief Justice DY Chandrachud declared that the legislative power to tax mineral rights lies with the states, thereby overruling a seven-judge bench verdict from 1989.

The bench, which included Justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, also stated that royalties should not be considered as taxes. However, Justice B V Nagarathna dissented from the majority opinion.

The 1989 India Cement Ltd vs. State of Tamil Nadu verdict had initially deemed royalty as a tax, limiting state power to levy taxes on mineral rights. This was followed until a 2004 ruling in the State of West Bengal vs. Kesoram Industries Ltd case which identified an error in the 1989 decision and clarified that royalty is indeed not a tax. With over 80 petitions regarding related legislative competencies over the years, the matter was referred to a nine-judge bench in 2011 for a final decision.