35-years, a typo, Rs 2 lakh cr liabilities: How a string of court judgements hit India’s mining sector
Supreme Court ruling that sought to address an issue that has been lingering for 35-years is now threatening to cripple India’s mining sector. According to the judgement, states now have the right to tax mineral lands and tax mining companies retrospectively. Stakeholders say this will put a heavy financial burden on the industry, affecting investment plans and overall economic stability of the segment.
How the case started and progressed The issue has its roots in the Mines and Minerals (Development and Regulation) Act, 1957, which gave the Union government the power to regulate mines and minerals and the power to collect royalties from mining leaseholders.
In 1963, the Tamil Nadu government gave a mining lease to India Cements. Later, it imposed a cess on the royalty, which the company challenged in the high court later in the Supreme Court. In 1989, a seven-judge bench of the apex court ruled in favour of India Cements. “… we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature…,” said the verdict.
This is where the twist in the tale begins. Though subsequently there were other cases dealing with cess on mining, a five-judge bench of the Supreme Court said in the State of West Bengal vs Kesoram Industries Ltd case in 2004 that the India Cement verdict has a “typographical error”. It said the 1989 judgment had said “royalty is a tax” but it meant “cess on royalty is a tax”. “The words ‘cess on’ appear to have been
