New Delhi, August 14, 2024: The Supreme Court has ruled that states can recover tax dues on mineral rights only for periods after April 1, 2005. This clarification came after a previous July 25 judgment upheld the power of states to levy taxes on mineral-bearing land, while ruling that royalty payments to the Centre are contractual, not a tax.
The apex court, led by Chief Justice DY Chandrachud, rejected arguments that the July 25 judgment should apply prospectively. Instead, the court mandated that tax arrears can be paid in installments over a 12-year period, starting from April 1, 2026. Additionally, no penalties or interest will be levied on dues accrued before July 25, 2024.
The ruling followed pleas regarding whether the court’s decision on state taxation powers should be applied retrospectively or prospectively. The nine-judge Constitution bench, which delivered an 8:1 verdict on July 25, had overruled a 1989 judgment that granted exclusive taxation rights over minerals to the Centre.
The judgment has significant financial implications, particularly for opposition-ruled mineral-rich states seeking refunds of royalties and taxes levied by the Centre since the 1989 ruling. The Centre had opposed these refund demands, warning of a potential ₹70,000 crore impact on public sector undertakings and citizens.
The bench included Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih. Notably, Justice Nagarathna dissented from the majority opinion in the July 25 decision.
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