The Supreme Court has clarified that states in India can levy and renew demands for taxes on mineral rights retrospectively from April 1, 2005. This ruling follows the court’s July 25 judgment, which affirmed the states’ power to tax mineral rights and mineral-bearing lands. The decision rejects the contention that such taxation should only apply prospectively from the date of the judgment.
In the landmark judgment, the Constitution Bench of the Supreme Court, led by Chief Justice DY Chandrachud, upheld the states’ authority to impose taxes on mineral rights, asserting that the Mines and Minerals (Development and Regulation) Act of 1957, a Union law, does not curtail this power. The central government, along with several mining companies, had argued that any new tax levies should only apply from the date of the judgment and not be enforced retrospectively.
The Supreme Court, however, dismissed this argument, emphasizing that the tax demands could be applied retroactively but limited to transactions from April 1, 2005, onward. The court made it clear that the judgment in the Mineral Area Development Authority (MADA) case should not be given prospective effect, effectively allowing states to collect taxes that were previously in dispute.
The nine-judge Constitution Bench, which included Justices Hrishikesh Roy, Abhay Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, also set forth specific conditions regarding the implementation of these tax demands. According to the court, payments for these tax demands will be staggered over a 12-year period, beginning on April 1, 2026. Additionally, the court ruled that no interest or penalty should be imposed on the demands made for the period before the July 25, 2024, verdict.
Solicitor General Tushar Mehta, representing the central government, expressed concerns that the retrospective application of the judgment could disrupt established practices that had been in place for approximately 35 years, potentially leading to a cascading effect on prices and adversely impacting the general public.
Senior Advocate Rakesh Dwivedi, representing the state of Jharkhand, argued that applying the judgment retrospectively was necessary to ensure that state-enacted laws were not rendered ineffective until the July 25 ruling. Other states also supported the retrospective application of the tax.
The bench had reserved its verdict on July 31, and the final judgment now solidifies the states’ authority to levy taxes on mineral rights, bringing clarity to a long-standing legal dispute.
