SC allows states to seek refund of royalty on minerals from Centre, mining firms from 2005 onwards

The Supreme Court on Wednesday, 14 August rejected the Centre’s plea for prospective effect of its 25 July verdict, which upheld the power of states to levy tax on mineral rights and mineral-bearing land, and allowed them to seek refund of royalty from 1 April, 2005 onwards.

A nine-judge Constitution bench headed by Chief Justice DY Chandrachud said the argument for prospective effect of the 25 July ruling is rejected.

The bench also comprising justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih, however, said there will be conditionalities on payment of past dues.

It said payment of dues by the Centre and mining companies can be made to mineral-rich states in a staggered manner over the next 12 years.

The bench, however, directed the states to not impose a penalty of any kind on payment of dues.

The Centre has opposed the demand of states for refund of royalty levied on mines and minerals since 1989, saying it will impact the citizens and the PSUs will have to empty their coffers by Rs 70,000 crore according to initial estimates.

CJI Chandrachud said this verdict will be signed by eight-judges of the bench who by majority decided the 25 July judgement giving the state’s power to levy taxes on mineral rights.

He said that Justice Nagarathna will not sign Wednesday's verdict as she had given a dissenting view in the 25 July verdict.

In a majority 8:1 verdict on 25 July, the bench had held that legislative power to tax mineral rights vests with states.

The verdict had overruled a 1989 judgement, which held that only the Centre has power to impose royalty on minerals and mineral-bearing land.

Some opposition-ruled mineral rich states then sought refund of royalty levied by the Centre and taxes from the mining companies since the 1989 verdict.

The matter of refund was heard on 31 July and order was reserved.