Odisha, Centre not on same page over Supreme Court judgment on States' right to levy mining cess

A nine-judge Bench of the Supreme Court was on Wednesday privy to an interesting turn of events when the Odisha State government and the Central government, both headed by the Bharatiya Janata Party (BJP), took opposing stands in a crucial case [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 was hearing the case concerning levy of cesses on mining and mineral-use activities.The Court had earlier held that the royalty paid by mining operators to the Central government is not a tax and that States have the power to levy cesses on mining and mineral-use activities.The same bench is currently considering whether the said judgment should apply retrospectively or prospectively..The Central government through Solicitor General (SG) Tushar Mehta argued today that the judgment should apply only prospectively, meaning thereby that past transactions will be unaffected.However, Odisha Advocate General (AG) Pitambar Acharya argued that the judgment should be retrospective, contrary to the Union government's take.This conflicting stands between the two caused considerable consternation in the courtroom with both the SG and the Bench questioning the Advocate General.The AG initially chose to trace some history."We have a very specific case. The Odisha Act is closely linked with social welfare measures and the Odisha population in mining bearing areas are scheduled tribes because we have nine districts as scheduled areas. The socio economic development of the area was of paramount consideration due to which the 2004 enactment was passed. The rule was framed in 2005. I have a specific stand. This while implementing provisions of the rule we have to keep in mind certain developments which took place by way of 2015 amendments," the AG said."Odisha act came into force from 1.2.2005 and it was struck down on 5.12. 2005. What happened after that," the CJI asked."After the legislation was struck down, following India Cements judgment, we could not proceed further. Now subsequent clauses have been enacted after the MMRDA Amendment Act was passed. While implementing the 2005 rule we have to keep some subsequent developments in mind like introduction of ad valorem rate of royalty since August 13, 2009. Introduction of auction for allocation of mines by 2015 amendment and auction premium is additional payment. DMF is also paid for social welfare measures," the AG said.The SG said that Madhya Pradesh and Rajasthan support the Centre's stance that the verdict should be prospective.The CJI then asked a pointed question to the AG on whether the State of Odisha wants the judgment to apply retrospectively."What is the state of Odisha saying? That it should not be made applicable without it being made prospective," the CJI put to the AG.The Odisha AG replied in the affirmative."That is correct that is correct. The bottom-line is that we have to work out what is the total implication," he said."So you are not supporting plea for prospective effect," the Bench again sought to clarify."If I say prospective then it will be burden (on the State). The (Odisha State) exchequer would be losing substantially. The economy of the State is in shambles. Now we have several commitments for socio economic development," the AG responded.Justice Oka then asked the AG whether those are the instructions he has received from State authorities.The AG said that he has not received any instructions and he has worked out the stance himself."I have not been informed. I have worked this out," he said."Do not pass on your dilemma to the court," the Bench said.The CJI said that Odisha government will have to make it stand clear."We (Court) will decide but you have to take a stand," he stated."The judgment will have cascading effects..SG has highlighted the effects," the AG replied."So do you support that or not? You have to tell us," the CJI persisted.The AG said that the State can take a contradictory stance from the Centre."Situation in Odisha has changed now. There can be contradictory stands," he said.The SG then objected."This is not the way," he said."So you support him (SG ) or not," the CJI once again asked the AG."I have to protect my exchequer because we have socio economic commitments," the AG made it clear."Everyone is protecting everyone's exchequer. Question is whether the windfall which will ultimately be shared by common man be acceptable or not," the SG argued."But the common man should not be made to suffer because of.....I will pass on a note," the AG replied.He also reminded that he took over as AG only a few days back.Do mining operators need to pay GST or Service Tax on royalty? Supreme Court to decide.Various States and the Centre said that judgment should be strictly prospective to avoid commercial losses for public sector companies.The Bench eventually proceeded to reserve its verdict in the matter."States should neither demand levy retrospectively and neither any PSU or any undertaking should demand any refund of the money. This balances the equities," the SG argued..As the hearing drew to a close, Justice Roy remarked,"Very strong battles fought. One side says no refund, and no demand. This reminds me of a famous martial law theory: No retreat, no surrender.".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.It then posted the case for further hearing today to decide on whether the judgment should be applied prospectively or retrospectively.