‘Royalty is not tax’, says Supreme Court; frees States from Centre’s restrictions on taxing mining lands and quarries.

A significant judgment delivered in a 8:1 ratio by a nine-judge Constitution Bench headed by Chief Justice of India D.Y. Chandrachud on July 25 held that the power of State Legislatures to tax mining lands and quarries is not limited by the Parliament’s Mines and Minerals Act of 1957. The majority judgment pronounced by Chief Justice Chandrachud said that State Legislatures derive their power to tax mines and quarries under Article 246 read with Entry 49 in the State List of the Seventh Schedule of the Constitution. The limitations imposed by the 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 merely for the reason that “there is no specific stipulation in the Constitution to that effect”. “The MMDRA wholly occupies the field and provides for a complete code covering every aspect of ‘regulation’ and ‘development’ of mines and minerals, including any Government exaction/ imposition in relation to mines and minerals thereby necessarily limiting a State Legislature’s competence to impose any other levy beyond what is stipulated under MMDRA and the rules framed thereunder,” he had submitted.