1991 (8) TMI 350 - SC - Indian Laws

Rajasthan Land Tax Act Declared Unconstitutional; Tax Levies on Mineral Lands Lack Legislative Competence, No Refunds Ordered.

The Federation of Mining Associations of Rajasthan and Ors. Versus State of Rajasthan and Ors.

The Federation of Mining Associations of Rajasthan and Ors. Versus State of Rajasthan and Ors. - TMI Issues:Validity of provisions of Section 3 of the Rajasthan Land Tax Act, 1985 concerning taxation on land containing minerals.Severability of the legislation to uphold the validity of the tax based on dead rent.Prospective declaration of invalidity of the tax levies.Analysis:Issue 1: Validity of provisions of Section 3 of the Rajasthan Land Tax Act, 1985The Supreme Court considered the validity of the provisions of Section 3 of the Rajasthan Land Tax Act, 1985, which imposed a tax on landholders based on the annual value of land containing minerals. The Court referred to previous decisions in India Cement Ltd. v. State of Tamil Nadu and Orissa Cement Ltd. v. State of Orissa, where similar levies were challenged and deemed unconstitutional. The Court held that the State Legislature lacked the competence to levy a tax on mineral-bearing lands based on royalty derived from the land. The Court found no distinguishing features in the present case and upheld the earlier decisions, declaring the levy ultra vires.Issue 2: Severability of the legislationThe Court examined the argument for severing the valid and invalid portions of the legislation to uphold the tax based on dead rent. The counsel for the respondent contended that the legislation could be read to impose the tax based on dead rent instead of royalty. However, the Court found that dead rent was defined as a guaranteed amount of royalty payable to the government, making it equivalent to royalty under the Act. The Court concluded that the legislation's integrated scheme based on royalty and dead rent could not be mechanically severed, leading to the dismissal of the appeals and the declaration of the tax as unconstitutional.Issue 3: Prospective declaration of invalidityThe Court addressed the issue of the retrospective effect of the declaration of invalidity of the tax levies. Following precedents, the Court ruled that the declaration of unconstitutionality would only apply prospectively from the date of the judgment. Any tax collected under the statute before the judgment need not be refunded, and the impugned tax would not be enforceable from the date of the judgment. The Court directed that any remaining tax to be paid for earlier periods must be paid by the assessee, ensuring a prospective application of the declaration.In conclusion, the Supreme Court declared the tax levies under the Rajasthan Land Tax Act, 1985 as unconstitutional, upheld the previous decisions on similar levies, dismissed the appeals, and directed a prospective application of the declaration of invalidity.