The Supreme Court has affirmed its earlier decision granting states the authority to tax mineral rights, dismissing pleas that sought a review of the landmark verdict from July 25. The decision was scrutinized by an eight-judge bench led by Chief Justice D.Y. Chandrachud, which found no compelling reasons to reconsider the ruling, emphasizing the absence of any evident errors on the record.
This verdict reiterated that the power to levy taxes on mineral rights lies with the states, not the central government. The court’s decision, supported by Justices Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, concluded that no case for review under Order XLVII Rule 1 of the Supreme Court Rules, 2013, had been established.
However, Justice B.V. Nagarathna, who dissented in the original ruling, maintained her stance that only the central government should have the power to tax mineral rights. She issued a separate order allowing for the possibility of an open court hearing of the review petitions, contrasting with the majority’s decision against such a hearing.
The majority verdict from July 25 had delineated that the royalty paid on minerals does not constitute a tax and therefore, does not fall within the purview of Parliament under Entry 54 of List I of the Constitution, which regulates mines and mineral development. This interpretation significantly boosts potential revenue for mineral-rich states and aligns with Entry 50 of List II, which allows for state taxes on mineral rights subject to any limitations imposed by Parliament concerning mineral development.
This clarification by the Supreme Court has significant implications, allowing states to potentially recover substantial amounts in royalty and tax dues from both the central government and mining companies dating back to April 1, 2005. The court has facilitated this recovery by staggering the payment schedule over 12 years, beginning April 1, 2026, and has also waived interest and penalties on demands made for the period before July 25, 2024.
