In a contentious legal battle, the Central Government on Wednesday articulated its opposition in the Supreme Court against the pleas of several mineral-rich states demanding a retrospective refund of royalties collected on minerals since 1989. The states argue that following a landmark ruling, they are entitled to these funds, which have historically been collected by the Centre.
On July 25, a nine-judge constitution bench of the Supreme Court, led by Chief Justice D.Y. Chandrachud, delivered a pivotal 8:1 majority verdict. The court declared that the legislative authority to impose royalties on mineral rights resides with the states, not the central government, and clarified that these royalties should not be considered a tax.
This ruling significantly boosts potential revenue for states rich in minerals but has also sparked a new dispute regarding its temporal application. States governed by opposition parties are pushing for the decision to be applied retroactively, which would enable them to claim refunds for royalties paid over decades.
However, the Centre, represented by Solicitor General Tushar Mehta, argued against this retrospective application. The central government contends that fulfilling these refund demands could have a “multipolar” impact, affecting various sectors and stakeholders within the economy, including numerous mining firms that have supported the Centre’s stance.
During the court proceedings, it was revealed that BJP-ruled states like Madhya Pradesh and Rajasthan favor a prospective application of the judgment, which would limit the financial implications to future transactions.
The landmark verdict, which encompasses a comprehensive 200-page rationale, was penned by Chief Justice Chandrachud. The majority opinion emphasized that royalty payments are contractual and arise from the conditions stipulated in mining leases, arguing that these should not be misconstrued as taxes due to their method of collection.
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Despite the majority ruling, Justice B.V. Nagarathna presented a dissenting opinion, supporting the Centre’s authority to levy royalties.
