Mineral Area Development Authority & Anr. Vs Steel Authority of India & Anr Etc. (Supreme Court of India)
In Mineral Area Development Authority & Anr. Vs Steel Authority of India & Anr, the Supreme Court’s 9-judge bench, with an 8:1 majority, clarified several critical issues regarding the taxation of mineral resources. The court determined that royalty paid for mineral rights is a contractual obligation, not a tax, and cannot be classified as a tax merely because it is recoverable as arrears. It upheld that the power to tax mineral rights lies with state legislatures under Entry 50 of List II, and Parliament cannot tax these rights under Entry 54 of List I. The judgment affirmed that states can levy taxes on mineral-bearing lands, considering the mineral yield as a measure. The court also clarified that limitations imposed by Parliament on mineral development laws do not affect state powers under Entry 49 of List II.
9 Bench Supreme court Bench by Majority of 8:1 held as follows:
a. Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears;
