Judgment on States' right to levy tax on mining to apply retrospectively from 2005: Supreme Court

A nine-judge Bench of the Supreme Court on Wednesday held that its July 25 judgment enabling State governments to tax mining and related activities, will apply retrospectively but with respect to transactions after April 1, 2005 [Mineral Area Development Authority etc vs Steel Authority of India and ors].A Bench of Chief Justice of India (CJI) DY Chandrachud with Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih delivered the verdict..States can levy and renew demand for taxes but the demand of tax shall not operate on transactions made prior to April 1, 2005Supreme Court.The Court said that the time for payment of demand for tax shall be staggered in instalments over a period of 12 years commencing from April 1, 2026. The Court also ordered that levy of interest and demand of penalty made on or before July 25, 2024, shall stand waived.Justice Nagarathna did not sign the judgment since she had dissented in the main judgment of July 25..Odisha, Centre not on same page over Supreme Court judgment on States' right to levy mining cess.The nine-judge bench had on July 25 held that royalty paid by mining operators to the Central government is not a tax and that States have the power to levy cess on mining and mineral-use activities.The matter was then listed and heard again to decide whether the judgment would apply prospectively or retrospectively. .The case involved the issue of whether State governments are denuded of powers to tax and regulate activities concerning mines and minerals in view of the enactment of the Mines and Minerals (Development & Regulation) Act (Mines Act).In 1989, the Supreme Court had held in the case of India Cement Ltd v State of Tamil Nadu that the royalty is a form of 'tax' under the Mines Act and that the imposition of cesses on such royalty was beyond the States' legislative competence.In February 1995, a three-judge Bench of the Supreme Court in State of Madhya Pradesh v Mahalaxmi Fabric Mills Ltd upheld Section 9 of the Mines Act and reiterated the 1989 decision. In January 2004, a five-judge Bench in State of West Bengal v Kesoram Industries Ltd by a 3:2 majority held that the 1989 Bench had made a typo and only meant to say that cess on royalty is a form of tax and not the royalty itself. .In March 2011, a three-judge bench held that there was a “prima facie” conflict between the decisions in the India Cements (1989 judgment) and Kesoram Industries (2004) cases, leading to the reference of the matter to a nine-judge Bench.In a judgment rendered on July 25, the apex court through a 8:1 majority, held that States are not denuded of powers to levy cess on mining or related activities.Today, it decided on whether the judgment should be applied prospectively or retrospectively. .Various States and the Centre had argued that judgment should be strictly prospective to avoid commercial losses for public sector companies..Attorney General R Venkataramani, Solicitor General Tushar Mehta and Additional Solicitor General Aishwarya Bhati appeared for the Union of India, and public sector companies.Senior Advocates Rakesh Dwivedi, S Niranjan Reddy, Vijay Hansaria, Harish Salve, Dr. Abhishek Manu Singhvi, Darius Khambata, AK Ganguly, SK Bagaria, Arvind Datar, and Sujit Ghosh, and Advocate Sansriti Pathak, appeared for the State governments.Advocate General Pitambar Acharya appeared for the State of Odisha..[Read order]