July 25 Judgment of top Court, States have the power to levy tax on mining and mineral-use activities, to apply retrospectively from April 01, 2005: Supreme Court

Today (August 14, 2024), the Supreme Court (SC) of India held that its July 25 judgment upholding the powers of the State to tax mineral rights and mineral-bearing lands will apply retrospectively but with respect to transactions after April 01, 2005. On July 25, 2024, the nine-judge bench of the SC with a majority of 8:1 delivered the verdict, Mineral Area Development Authority & Anr. vs. M/S Steel Authority of India & Anr etc., stating that ‘royalty’ is not the same as ‘tax’ and the States have the power to levy tax on mining and mineral-use activities. After the pronouncement of the judgment, counsel for the assesses submitted that the judgment may be given prospective effect. Therefore, the proceedings were listed for hearing submissions on whether or not the judgment should be given prospective effect. The eight-judge bench (majority bench of July 25 ruling) constituting Chief Justice of India DY Chandrachud, Justice Hrishikesh Roy, Justice Abhay S Oka, Justice JB Pardiwala, Justice Manoj Misra, Justice Ujjal Bhuyan, Justice Satish Chandra Sharma, and Justice Augustine George Masih heard the matter. After hearing the contentions, the SC bench rejected the argument and concluded that, 

1. “The submission that MADA (Mineral Area Development Authority) should be given prospective effect is rejected.
2. Bearing in mind the consequences that would emanate from the past period, the following conditionalities are directed to prevail:
   • While the States may levy or renew demands of tax, if any, pertaining to Entries 49 and 50 of List II of the Seventh Schedule in terms of the law laid down in the decision in MADA the demand of tax shall not operate on transactions made prior to 1 April 2005;
   • The time for payment of the demand of tax shall be staggered in installments over a period of twelve years commencing from 1 April 2026; and
   • The levy of interest and penalty on demands made for the period before 25 July 2024 shall stand waived for all the assesses.”