The Indian government has taken a stand against a request from mineral-rich states for refunds of royalty payments made since 1989. The Centre, in its arguments before the Supreme Court, asserted that granting such retroactive refunds would have a significant and multifaceted impact. This contention follows a crucial ruling delivered by a nine-judge constitution bench of the Supreme Court on July 25th. This bench, led by Chief Justice D.Y. Chandrachud, delivered a landmark 8:1 verdict, affirming that the power to levy taxes on mineral rights rests with the states. The court declared that royalty payments for minerals are not considered a tax. This verdict, a significant victory for mineral-rich states, has sparked a new controversy concerning its implementation. States governed by opposition parties have sought that the Supreme Court apply this ruling retroactively, enabling them to claim refunds of royalty payments from the Centre. The Centre, however, has firmly opposed this request, arguing that such a move would have far-reaching and complex consequences. Notably, numerous firms involved in mining operations have also expressed their support for the Centre’s stance regarding the refund of royalty to mineral-bearing states. Solicitor General Tushar Mehta, representing the Centre, highlighted that states like Madhya Pradesh and Rajasthan, both governed by the BJP, advocated for the judgement to be applied prospectively, meaning only to future transactions. The hearing on this matter is currently ongoing. Chief Justice Chandrachud penned the 200-page majority verdict, endorsed by justices Hrishikesh Roy, Abhay S Oka, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma, and Augustine George Masih. The verdict stated, “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.” Justice B V Nagarathna, however, dissented from the majority view, asserting that the Centre holds the power to levy royalty.
