Editor's Pick | States have unlimited right to tax mineral-rich lands: SC

A nine-judge Constitution Bench, headed by Chief Justice of India D.Y. Chandrachud, on Thursday held by an 8:1 majority that Parliament cannot limit the power of State legislatures to tax mineral-bearing lands and quarries. The judgment, freeing States from the restrictions imposed by the Centre, is in tune with the federalist principles of governance. “Any dilution in the taxing powers of the State legislatures will necessarily impact their ability to raise revenues, which in turn will impede their ability to deliver welfare schemes and services to the people. The ability of the State governments to invest in physical infrastructure, health, education, human capacity, and research and development is directly correlated to the raising of government revenues... Fiscal federalism entails that the power of the States to levy taxes within the legislative domain carved out to them and subject to the limitations laid down by the Constitution must be secured from unconstitutional interference by Parliament,” the Chief Justice said. The verdict noted how mineral-rich States such as Chhattisgarh, Jharkhand and Odisha continue to have per capita income below the national average. The judgment said Parliament, through the Mines and Minerals (Development and Regulation) Act of 1957, which was amended in 2021, cannot restrict the States from legislating on the taxation of mining lands and quarries. The court further held that royalty paid to the States by mining lease holders is not a tax. “Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights,” the Chief Justice said. The judgment came in a batch of 86 appeals filed by different State governments, mining companies and public sector undertakings. The case has its roots in a dispute between India Cements Ltd. and the Tamil Nadu government. India Cements had secured a mining lease in Tamil Nadu and was paying royalty to the State government. Chief Justice Chandrachud said State legislatures derive their power to tax mines and quarries under Article 246 read with Entry 49 (tax on lands and buildings) in the State List of the Seventh Schedule of the Constitution. “Mineral-bearing lands fall within the description of ‘lands’ in Entry 49,” Chief Justice Chandrachud held. In the sole dissenting opinion on the Constitution Bench, Justice B.V. Nagarathna said the States’ power to tax under Entry 49 of List II did not include “mineral-bearing lands”. However, the Justice agreed with the majority on the Bench that royalty was not a tax. The Centre had argued that Entry 50 in the State List had allowed Parliament to impose “any limitations” on taxes on mineral rights through laws relating to mineral development, in this case, the MMDR Act. However, the Chief Justice responded in the judgment to the argument by noting that Entries 50 and 49 of the State List “deal with distinct subject matters and operate in different fields”. The limitations imposed by Parliament in a law like the MMDR Act, which related to mineral development, did not operate on or influence State taxation of mining lands under Entry 49 in the State List for the sole reason that “there is no specific stipulation in the Constitution to that effect”. The Chief Justice said: “Entry 50 of List II does not constitute an exception... The power to tax mineral rights vests in the State Legislatures. The Parliament does not have the legislative competence to tax mineral rights, with Entry 54 of the Union List (Regulation of mines and minerals development declared by parliamentary law to be expedient in the public interest) being only a general entry. Power to tax mineral rights is enumerated in List II. The Parliament cannot use its residuary powers with respect to that subject matter.” Justice Nagarathna argued that the MMDR Act, especially the provision which allows the Centre to take “control of the regulation of mines and the development of minerals” on expediency in public interest, denuded or limited the scope of a State’s right to tax. She termed Entry 50 of the State List a “unique Entry” by which the taxing powers of a State legislature were subjected to limitations imposed by Parliament by law relating to mineral development. The Hindu’s Editorials ​More for more: On the Union Budget and allocations ​Sporting extravaganza: On the Olympic Games Paris 2024 The Hindu’s Daily Quiz During the recently held T20 series in Zimbabwe, which of the following cricket players led the team? Abhishek Sharma Shubman Gill Rinku Singh Shivam Dube To know the answer and to play the full quiz, click here. [logo] Editor's Pick 26 July 2024 [The Hindu logo] [EP Logo] Editor's Pick 26 July 2024 In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [View in browser]( [More newsletters]( States have unlimited right to tax mineral-rich lands: SC [A nine-judge Constitution Bench, headed by Chief Justice of India D.Y. Chandrachud, on Thursday held by an 8:1 majority that Parliament cannot limit the power of State legislatures to tax mineral-bearing lands and quarries](. The judgment, freeing States from the restrictions imposed by the Centre, is in tune with the federalist principles of governance. “Any dilution in the taxing powers of the State legislatures will necessarily impact their ability to raise revenues, which in turn will impede their ability to deliver welfare schemes and services to the people. The ability of the State governments to invest in physical infrastructure, health, education, human capacity, and research and development is directly correlated to the raising of government revenues... Fiscal federalism entails that the power of the States to levy taxes within the legislative domain carved out to them and subject to the limitations laid down by the Constitution must be secured from unconstitutional interference by Parliament,” the Chief Justice said. The verdict noted how mineral-rich States such as Chhattisgarh, Jharkhand and Odisha continue to have per capita income below the national average. The judgment said Parliament, through the Mines and Minerals (Development and Regulation) Act of 1957, [which was amended in 2021]( cannot restrict the States from legislating on the taxation of mining lands and quarries. The court further held that royalty paid to the States by mining lease holders is not a tax. “Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights,” the Chief Justice said. The judgment came in a batch of 86 appeals filed by different State governments, mining companies and public sector undertakings. The case has its roots in a dispute between India Cements Ltd. and the Tamil Nadu government. India Cements had secured a mining lease in Tamil Nadu and was paying royalty to the State government. Chief Justice Chandrachud said State legislatures derive their power to tax mines and quarries under Article 246 read with Entry 49 (tax on lands and buildings) in the State List of the Seventh Schedule of the Constitution. “Mineral-bearing lands fall within the description of ‘lands’ in Entry 49,” Chief Justice Chandrachud held. In the sole dissenting opinion on the Constitution Bench, Justice B.V. Nagarathna said the States’ power to tax under Entry 49 of List II did not include “mineral-bearing lands”. However, the Justice agreed with the majority on the Bench that royalty was not a tax. The Centre had argued that Entry 50 in the State List had allowed Parliament to impose “any limitations” on taxes on mineral rights through laws relating to mineral development, in this case, the MMDR Act. However, the Chief Justice responded in the judgment to the argument by noting that Entries 50 and 49 of the State List “deal with distinct subject matters and operate in different fields”. The limitations imposed by Parliament in a law like the MMDR Act, which related to mineral development, did not operate on or influence State taxation of mining lands under Entry 49 in the State List for the sole reason that “there is no specific stipulation in the Constitution to that effect”. The Chief Justice said: “Entry 50 of List II does not constitute an exception... The power to tax mineral rights vests in the State Legislatures. The Parliament does not have the legislative competence to tax mineral rights, with Entry 54 of the Union List (Regulation of mines and minerals development declared by parliamentary law to be expedient in the public interest) being only a general entry. Power to tax mineral rights is enumerated in List II. The Parliament cannot use its residuary powers with respect to that subject matter.” Justice Nagarathna argued that the MMDR Act, especially the provision which allows the Centre to take “control of the regulation of mines and the development of minerals” on expediency in public interest, denuded or limited the scope of a State’s right to tax. She termed Entry 50 of the State List a “unique Entry” by which the taxing powers of a State legislature were subjected to limitations imposed by Parliament by law relating to mineral development. The Hindu’s Editorials [Arrow][​More for more: On the Union Budget and allocationsÂ]( [Arrow][​Sporting extravaganza: On the Olympic Games Paris 2024]( The Hindu’s Daily Quiz During the recently held T20 series in Zimbabwe, which of the following cricket players led the team? - Abhishek Sharma - Shubman Gill - Rinku Singh - Shivam Dube To know the answer and to play the full quiz, click [here](. 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