Supreme Court Deliberates on Retrospective Taxation Effects on Mining Sector

The Centre opposed a demand by states for a refund of royalty levied on mines and minerals since 1989, citing a financial impact of Rs 70,000 crore. A Supreme Court bench, led by Chief Justice DY Chandrachud, is considering whether to apply its July 25 verdict prospectively or retrospectively. The verdict upheld states' power to tax mineral rights, overturning a 1989 decision that gave this power exclusively to the Centre.

The Centre on Wednesday opposed in the Supreme Court a demand by states for refund of royalty levied on mines and minerals since 1989, saying it will impact citizens and the PSUs will have to empty their coffers by Rs 70,000 crore according to initial estimates. A nine-judge constitution bench headed by Chief Justice DY Chandrachud reserved its orders on the issue of whether its July 25 verdict upholding the power of states to levy tax on mineral rights and mineral-bearing land should be given retrospective or prospective effect.

In a majority 8:1 verdict on July 25, the bench had held that legislative power to tax mineral rights vests with states, overturning a 1989 judgement that only the Centre had this power. Following the verdict, several opposition-ruled mineral-rich states are seeking a refund of the royalties and taxes levied since 1989 from mining companies.

Solicitor General Tushar Mehta, representing the Centre, warned that making the July 25 verdict retrospective would result in a financial burden of Rs 70,000 crore, which companies might pass on to citizens. The Chief Justice questioned the interim arrangements made by states like Odisha during the case. The Solicitor General emphasized the significant, widespread impact any retrospective ruling would have on the economy and urged the court to consider the decision carefully.