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Mineral Area Development Authority etc. v. M/S Steel Authority Of India

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Mineral Area Development Authority etc. v. M/S Steel Authority Of India

The case will decide whether the term "royalty" mentioned under the Mines and Minerals (Development and Regulation) Act, 1957 is a tax.

Petitioners Arguments
The State has the right to levy tax on minerals because a tax on the right to extract minerals, correlated to the value of the property (on an annual basis) could be imposed without it being a direct tax on the income, and was therefore competent under Entry 50 of List II to enact an additional tax. A tax upon the land, quantified on the basis of its produce is constitutional and doesn’t become excise duty merely on the basis of correlation. A central legislation to control or regulate (like in Entry 54 of List I ) does not deprive the state of its right to levy taxes that it is competent to. The taxes can exist within the regulatory framework without impinging on the regulation.
Responders Arguments
Entry 49 of List II was confined to a tax that was imposed directly on land as a unit, and that taxes on land must be direct and bear a definite relationship to it. The taxes in these cases are on the use of these lands for the specific purpose of mining, and there would be no tax if the land isn’t used for the same. That the power of the State Legislature under Entries 23 and 50 of List II are exercisable till the Parliament comes up with legislation under Entry 54 of List I ( Laxminarayana Mining Co. Bangalore v. Taluk Dev. Board (1972 SCC Kar 80) ), and the powers are denuded to the extent of regulation taken up by the parliamentary law. The Enactment of the Mines and Minerals (Development and Regulation) Act, 1957 (specifically Section 9, which deals with royalties on mining leases) clearly denudes any exercise of the State’s power.. The expression “any limitations” in Entry 50 of List II has to be given the widest scope as is afforded under the constitution and the Mines and Minerals (Development and Regulation) Act, 1957 constitutes a limitation as it occupies the field of legislation that is covered by Entries 23 and 50 of List II. Further, Section 2 of the Mines and Minerals (Development and Regulation) Act, 1957 makes the requisite declaration required under Entry 54 of List I, and any State legislation in this regard is contrary to the above.
Last Listed On
2024-08-14
Start Date
2011-03-30
End Date
2024-08-14
Card Stage Date
2024-08-14
Review Petition No
4056-4064/1999
Case Status
Archive
Bench Status
Constituted
Subject Matter
Tax Law
Comment
NA
Disposal Time
13 years, 4 months, 16 days

9 Judge Bench

Judgment delivered

Consider As Stage Of Pendency
false

Date of institution of case

Date of reference to 5 Judge Bench

Judgement pronounced

The present set of matters arise from the challenge of the Bihar Coal Mining Area Development Authority (Amendment) Act, 1992 and the rules framed thereunder, namely, the Bihar Mineral Area Development Authority (Land Use Tax) Rules, 1994, imposing additional cesses and taxes on land revenue due from mineral-bearing lands. These mineral-bearing lands are typically leased out to mining industries. The mining industries contend that State legislatures aren’t competent to impose such taxes in the exercise of their powers under Art. 246 of the Constitution. Substantial issues of constitutional interpretation about the nature and scope of certain fields of legislation set out in the Seventh Schedule (particularly, Entries 23, 49, 45, 50 of List II and 54 of List I etc) are to be considered. Constitutional benches dealing with similar matters, namely the seven-judge bench in India Cements v. State of Tamil Nadu ((1990) 1 SCC 12 ) and the five-judge bench in State of West Bengal v. Kesoram Industries ((2004) 10 SCC 201) seem to apparently disagree on whether “royalty” is a tax, which is an issue of immense commercial importance having service tax implications. In light of the direct conflict between the two Constitution Bench, the Court has referred the matter to the nine judge bench for a more authoritative pronouncement.

Whether “royalty” determined under Sections 9/15(3) of the Mines and Minerals (Development and Regulation) Act, 1957 is in the nature of a tax? Can the State Legislature while levying a tax on land under List II Entry 49 of the Seventh Schedule of the Constitution adopt a measure of tax based on the value of the produce of land? If yes, then would the constitutional position be any different insofar as the tax on land is imposed on mining land on account of List II Entry 50 and its interrelation with List I Entry 54? What is the meaning of the expression “Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development” within the meaning of Schedule VII List II Entry 50 of the Constitution of India? Does the Mines and Minerals (Development and Regulation) Act, 1957 contain any provision which operates as a limitation on the field of legislation prescribed in List II Entry 50 of the Seventh Schedule of the Constitution of India? In particular, whether Section 9 of the aforementioned Act denudes or limits the scope of List II Entry 50? What is the true nature of royalty/dead rent payable on minerals produced/mined/extracted from mines? Whether the majority decision in State of W.B. v. Kesoram Industries Ltd. [(2004) 10 SCC 201] could be read as departing from the law laid down in the seven-Judge Bench decision in India Cement Ltd. v. State of Tamil Nadu [(1990) 1 SCC 12] ? Whether “taxes on lands and buildings” in List II Entry 49 of the Seventh Schedule to the Constitution contemplate a tax levied directly on the land as a unit having a definite relationship with the land? What is the scope of the expression “taxes on mineral rights” in List II Entry 50 of the Seventh Schedule to the Constitution? Does the expression “subject to any limitations imposed by Parliament by law relating to mineral development” in List II Entry 50 refers to the subject matter in List I Entry 54 of the Seventh Schedule to the Constitution? Does List II Entry 50 read with List I Entry 54 of the Seventh Schedule to the Constitution constitute an exception to the general scheme of entries relating to taxation being distinct from other entries in all the three Lists of the Seventh Schedule to the Constitution as enunciated in M.P.v. Sundararamier & Co. v. State of Andhra Pradesh [AIR 1958 SC 468]? Whether in view of the declaration under Section 2 of the Mines and Minerals (Development and Regulation) Act, 1957 made in terms of List I Entry 54 of the Seventh Schedule to the Constitution and the provisions of the said Act, the State Legislature is denuded of its power under List II Entry 23 and/or List II Entry 50? What is the effect of the expression “… subject to any limitations imposed by Parliament by law relating to mineral development” on the taxing power of the State Legislature in List II Entry 50, particularly in view of its uniqueness in the sense that it is the only entry in all the entries in the three Lists (Lists I, II and III) where the taxing power of the State Legislature has been subjected to “any limitations imposed by Parliament by law relating to mineral development”?

Mines and Minerals (Development and Regulation) Act, 1957

There is an apparent conflict between the decisions in State of West Bengal v. Kesoram Industries and India Cements v. State of Tamil Nadu , decisions by a five-judge and a seven-judge bench respectively. Therefore, for an authoritative pronouncement on the issue, a nine-judge bench had to be constituted.

State of West Bengal v. Kesoram Industries [(2004) 10 SCC 201]

India Cements v. State of Tamil Nadu [(1990) 1 SCC 12]

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