In Mineral Area Development Authority v. Steel Authority of India, the nine-Judge Bench of this Court clarified the legal position by overruling India Cement Ltd. v. State of Tamil Nadu and related decisions. Following this, there was a request for prospective application of the judgment. Hearings were scheduled to determine whether the ruling should be applied prospectively.
B. Submissions
2. Counsel for the assesses, including Mr. R. Venkataramani, Attorney-General for India, Mr. Tushar Mehta, Solicitor-General of India, and other senior counsels, argued:
a. India Cement was the guiding precedent for thirty-five years. Tax demands based on this precedent have been stayed, and applying the new judgment retrospectively could unfairly burden consumers.
b. The States enacted legislation based on the protection provided by India Cement, and retrospective application of MADA could lead to significant financial repercussions.
c. Entities based their bids for mineral concessions on India Cement. Retrospective application would disrupt commercial agreements.
d. Prospective overruling is a recognized principle in Indian law, and MADA should follow this approach to avoid injustice.
e. States should not issue new tax demands for periods before the MADA judgment date.
3. Conversely, counsel for the States, including Mr. Rakesh Dwivedi and Mr. Vijay Hansaria, argued:
a. Prospective overruling typically applies when a court invalidates legislation, not when validating legislation.
b. Applying MADA prospectively could invalidate existing legislation and disrupt financial stability.
c. Retrospective application would create inequities among states with similar legislations.
4. Prospective overruling, a doctrine developed in U.S. law and adopted by this Court, is used to avoid disrupting settled legal and financial frameworks.
5. The Court’s decision in Golak Nath v. State of Punjab illustrates the application of this doctrine. Prospective overruling ensures stability and avoids past transactions’ disruption.
6. In Jindal Stainless Ltd. v. State of Haryana, the Court overruled past decisions but did not apply prospective overruling, highlighting the importance of maintaining commercial stability.
7. Therefore, to balance interests:
a. States may renew tax demands only from 1 April 2005 onwards.
b. Tax payments should be spread over twelve years starting from 1 April 2026.
c. Interest and penalties for demands before 25 July 2024 are waived.
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