"Entire Universe" Of Mineral Development Not Under Parliament: Supreme Court

The Supreme Court said on Wednesday the Constitution does not give Parliament the "entire universe" of mineral development and states also have powers to regulate and develop mines and minerals.

A nine-judge Constitution bench headed by Chief Justice DY Chandrachud was responding to the contention of senior advocate Harish Salve, who represented a host of mining companies, that Parliament's power to impose tax on minerals can "wipe clean" the authority of the states.

"Entry 54 of List 1 of the Constitution does not give the Parliament the entire universe of that subject because it qualifies 'to the extent to which'. It means it recognises Entry 23 of List 2 which says that States also have power for regulation of mines and minerals development," the bench said.

Entry 54 of List 1 of the 7th Schedule (union list) talks about "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest." 

Entry 23 of List 2 of the 7th Schedule (state list) relates to, "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union." The nine-judge constitution bench is considering the vexed question whether the royalty collected by the Centre on mining leases can be considered as tax, as held by a seven-judge bench in 1989.

The bench, also comprising Justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih said, once Parliament has specifically made a declaration, only then is the power of the states under Entry 23 of List 2 ousted.

"When we are considering that states' taxing power is excluded, then we must bear in mind that the domain which has been entrusted to the Parliament is not the entire universe but something which is carved out of that universe of regulation and development," the bench told the senior lawyer.

Mr Salve contended that the power of Parliament under Entry 54 of List 1 is "untrammelled" to such an extent that it can "wipe Entry 23 clean".

"Entry 54 of List 1 has no limitations. It leaves to the wisdom of Parliament to decide how much they want to occupy the field. It is my submission and has been held by different constitutional benches that the Mines and Minerals (Development and Regulations) (MMDR) Act of 1957 occupies everything," he said.

Elaborating on his submissions, which continued for the whole day, Mr Salve said at the constitutional level there are no limitations on Parliament which has sweeping powers in this respect.

"Parliament may choose to slice or may take two or the whole slice of the cake. The language of various judgments clears the ambiguity after analysing the Act (MMDR) that it is pretty much the whole thing and nothing remains for the state to do," he added.

Supporting the reasoning in the 1989 verdict in India Cements case that ruled that royalty is a form of tax, he said the expression taxes on mineral rights has to be construed that under the Constitution it would mean tax which is an exaction of a share-like land revenue because in India mineral rights have been decoupled from land.

Mr Salve, while closing his arguments, said the court has always applied broad and massive tests to measure not pin-pointed or narrow tests while interpreting a law.

"This court will have to be sensitive to the compelling needs of the development of minerals in today's India. Today, the fiscal imposition on minerals is important...If Parliament imposes something, it is uniform. The revenues are distributed directly or indirectly," he said.

The hearing remained inconclusive and would continue on March 12 when Solicitor General Tushar Mehta, appearing for the Centre, will make his submissions. Mr Salve, at the fag end of the hearing, pointed out that several oil companies have also approached the Supreme Court with regard to taxes imposed on oil extraction but oil falls in a separate Entry under the Constitution.

"Oil companies should not be allowed to hijack this proceeding before the nine-judge constitution bench," Mr Salve said.

CJI Chandrachud told him the court wouldl not widen the ambit of reference order on the issue.

On February 27, the top court had commenced hearing the vexed issue of whether the royalty payable on minerals extracted, as provided for under the MMDR Act, 1957, is in the nature of tax.

The issue arose after the 1989 verdict in the case of India Cements Limited versus State of Tamil Nadu by a seven-judge bench of the Supreme Court which held that royalty was a tax.

However, a five-judge bench of the Supreme Court ruled in 2004 in the State of West Bengal versus Kesoram Industries Limited case that there was a typographical error in the 1989 verdict and that royalty was not a tax.

The dispute was then referred to a larger nine-judge bench.

The top court is hearing a batch of 86 appeals filed by mining companies, public sector undertakings (PSUs) and state governments arising from conflicting verdicts passed by different high courts on the issue. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)