SC allows states to collect past mineral royalties from Centre
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New Delhi: The Supreme Court has granted states the authority to collect past dues on royalties from mineral-bearing lands, dating back to April 1, 2005. This ruling comes as the court rejected the Centre's request to apply its July 25 verdict prospectively, allowing states to levy taxes on mineral rights and mineral-bearing land.
The nine-judge Constitution bench, led by Chief Justice DY Chandrachud, addressed the contentious issue of whether the July 25 ruling should have retrospective or prospective effect. The court ruled that states can retroactively collect royalties and taxes, with payments to be staggered over 12 years, starting from April 1, 2026. Importantly, the court also directed that no penalties be imposed by states on the payment of these past dues.
The bench, comprising Justices Hrishikesh Roy, Abhay S. Oka, B.V. Nagarathna, J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih, rejected a request from the mineral area development authority for the prospective realization of the levy by states.
CJI Chandrachud noted that the verdict will be signed by eight judges, with Justice Nagarathna dissenting in the July 25 decision.
The July 25 ruling was significant as it overturned a 1989 judgment that had previously granted the Centre exclusive power to impose royalties on minerals and mineral-bearing lands. The court's decision restored the legislative power to tax mineral rights to the states, leading some opposition-ruled, mineral-rich states to seek refunds of the royalties levied by the Centre and taxes collected from mining companies since 1989.
The Centre had argued against this refund, cautioning the court that doing so could have severe financial repercussions, potentially costing public sector undertakings (PSUs) and impacting citizens by an estimated ₹70,000 crore. Despite these concerns, the Supreme Court's decision paves the way for states to claim backdated royalties, altering the financial dynamics between the Centre, states, and the mining sector.
Input from PTI
