Are States' Powers To Tax Mineral Rights Limited By MMDR Act? Supreme Court 9-Judge Bench Discusses [Day 2]

The Supreme Court's 9-judge Constitution Bench continued its hearing on the intricate taxation matter related to mineral-bearing lands, exploring key questions about the constitutional distribution of powers. Chief Justice DY Chandrachud raised a pivotal query during the session, questioning whether a tax on mineral-bearing land, while technically a land tax, could impact mineral development. This query concerned whether Parliament could impose limitations under Entry 23 of List I even when a state exercises its power under Entry 49.“ If a tax is a land tax, obviously entry 23 of List I does not impose any fetters. But if the tax on land is albeit a tax on mineral-bearing land, can it not be postulated that the levy of the tax will have some impact on the development of minerals? If so, would it not be open to the Parliament to prescribe limitations even though you are really seeking to exercise your power under Entry 49…when you are choosing to levy tax on a mineral-bearing land, is it not open to the Parliament under Entry 23 of List I to impose restraints on limitations even when you are exercising power”.Entry 49 of List 2 relates to the State's power to levy taxes on lands and buildings. Entry 50 of List 2 relates to the State's power to levy taxes on mineral rights subject to limitations imposed by the Parliament's law.The post-lunch session saw the Chief Justice, referring to the above question, contemplate the nature of the levy, pondering whether it is a tax on mineral rights or a combination of land and mineral rights. “For us to put forth that proposition which I was trying to say earlier, we will then have to say that the levy itself is not under land but is a tax on mineral rights or that it is a tax on land and mineral rights. It's sort of a ragbag legislation.” The hearings today culminated the arguments of the different state governments which pondered on the purpose and scope of Entry 50 List II of the 7th Schedule and its interplay with Entry 49 List II. Senior Advocate Mr Rakesh Dwivedi representing the State of Jharkhand emphasized the crucial nature of Entry 50, highlighting that while Parliament can amend laws and introduce limitations, it must explicitly state that it intends to restrict Entry 50 List II. The importance of preserving the state's taxing power was underscored, cautioning against any attempt to silently strip away vital taxing authority. “As far as entry 50 is concerned, the Parliament can make an amendment in the existing law or any other law and provide limitations. But it will have to spell out that it is doing so in order to limit entry 50 list II. It is of very vital importance, the state's taxing power, so it cannot sub-silentio while prescribing some fees/royalty/surface rent etc take away a vital power of the taxing rent.” Justice Nagarathna agreeing to the same, stressed that any limitation imposed by Parliament should align with the overarching interest of mineral development. This sentiment was echoed by Justice Roy, who emphasized the need to give weight to the historical context, particularly the debates in the Constituent Assembly. He pointed out that although there was an attempt to shift Entry 50 to the Union List, it was explicitly rejected, reinforcing its position in the State List.“Some emphasis has to be given that this was specifically moved to bring in the ambit of the union list but then it was specifically rejected to say that it will remain in the state list. So the debate in the constituent assembly will have to be given some meaning and some emphasis.” The discussion further delved into the question of whether Entry 50 is a specific entry distinct from Entry 49. Senior Advocate Dwivedi, referring to the Kesoram case, argued that the Court in Kesoram recognized both Entry 49 and Entry 50 as viable powers for the states. Chief Justice Chandrachud expanded on this, invoking the Principle of Rag Bag Legislation. He elucidated that the powers under both Entry 49 and 50 can coexist, not only in the context of the Union List but also within the State List. The CJI opined, “ In such a scenario the Principle of Rag-Bag Legislation would be applicable. It is not only in relation to the Union list. The state has a power both under Entry 50 and 49 of List II, powers can be combined in both the Entries.” Mr Dwivedi offered a nuanced analysis, drawing parallels with parliamentary law principles. He highlighted that when analyzing entries in the State List, the court must assess whether any entry, taken in isolation or conjunction with others, finds support in the State List. If support is found, the court then examines if there is a clash with any actions Parliament may have taken concerning other entries. This process, he emphasized, follows the doctrine of harmonious construction, a last-resort approach to avoid rendering any Entry redundant. The Key arguments of Mr Dwivedi can be enlisted as follows : 1. Entry 49 in List II is the exclusive entry...

Are States' Powers To Tax Mineral Rights Limited By MMDR Act? Supreme Court 9-Judge Bench Discusses [Day 2]

Anmol Kaur Bawa

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