From UPSC perspective, the following things are important :
Prelims level: Mines and Minerals (Development and Regulation) Act of 1957 (MMDR Act);
Mains level: Design of power between Union and state;
Why in the News?
The Supreme Court delivered a significant 8:1 judgment affirming that State Legislatures have the power to tax mining lands and quarries, independent of the Parliament’s Mines and Minerals (Development and Regulation) Act of 1957 (MMDR Act).
About the verdict given by SC
- Judgment Overview: The majority opinion, authored by Chief Justice D.Y. Chandrachud, stated that states derive their taxing authority from Article 246 and Entry 49 of the State List, which pertains to taxation on lands and buildings.
- Distinction Between Tax and Royalty: The Court clarified that royalty paid for mining leases is not considered a tax.
- Royalty is viewed as a contractual obligation between the mining lessee and the lessor, thus not subject to the same regulatory framework as taxes.
- Parliamentary Limitations: The judgment emphasised that the MMDR Act cannot impose limitations on state taxation powers regarding mines and quarries. The Court rejected the argument that Entry 50 of the State List allowed Parliament to impose restrictions on state taxes related to mineral rights.
- Dissenting Opinion: Justice B.V. Nagarathna provided a dissenting opinion, cautioning that allowing states to tax under Entry 49 could lead to double taxation and undermine the specific provisions of Entry 50.
About the Mines and Minerals (Development and Regulation) Act of 1957
- The MMDR Act was enacted to regulate the mining sector in India, ensuring the development and conservation of minerals while balancing the interests of the state and the public.
- The Act provides a comprehensive framework for the licensing and regulation of mines, including provisions for the fixation of royalties on mineral extraction.
- The Act has been a point of contention regarding the extent of state powers to impose taxes on mineral rights, with arguments that it limits state legislative competence in this area.
- The Supreme Court’s recent ruling clarifies that the MMDR Act does not restrict state powers to tax mineral rights, thus resolving conflicts arising from previous interpretations of the Act.
On the division of the power
- Constitutional Framework: The Constitution of India delineates the distribution of powers between the Centre and the States through the Seventh Schedule, which includes the State List and the Union List.
- Entry 49 and Entry 50: Entry 49 allows states to levy taxes on lands and buildings, while Entry 50 pertains specifically to taxes on mineral rights, subject to limitations imposed by Parliament.
- Judicial Clarity: The Supreme Court’s judgment clarifies that states can exercise their taxing powers under both Entries 49 and 50 without interference from the MMDR Act, reinforcing the states’ authority over local resources.
Conclusion: The Supreme Court’s ruling affirms that states can tax mining lands independently of the MMDR Act, highlighting their authority under Article 246 and Entry 49, despite dissenting concerns about double taxation.
Mains PYQ:
Q Though the federal principle is dominant in our Constitution and that priniciple is one of its basic features, but it is equally true that federalism under the Indian Constitution leans in favour of a strong Centre, a feature that militates against the concept of strong federalism. 15M
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