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of <h1>Supreme Court rules royalty under Section 9 MMDR Act is contractual consideration, not tax, allowing states to tax mineral rights</h1> <h3>Mineral Area Development Authority & Anr. Versus M/s Steel Authority of India & Anr Etc.</h3> Mineral Area Development Authority & Anr. Versus M/s Steel Authority of India & Anr Etc. - 2024 INSC 554 Issues Involved:1. Nature of royalty under Section 9 of the MMDR Act.2. Scope of Entry 50 - List II and limitations imposed by Parliament.3. Relationship between Entry 50 - List II and Entry 54 - List I.4. Scope of Entry 49 - List II and its applicability to mineral-bearing lands.5. Specificity of Entry 50 - List II in relation to Entry 49 - List II.Detailed Analysis:1. Nature of Royalty under Section 9 of the MMDR Act:The judgment distinguishes between royalty and tax. It holds that royalty is a contractual consideration paid by the mining lessee to the lessor for the enjoyment of mineral rights. It is not a tax. The liability to pay royalty arises from the contractual conditions of the mining lease.2. Scope of Entry 50 - List II and Limitations Imposed by Parliament:Entry 50 - List II allows State legislatures to tax mineral rights but is subject to limitations imposed by Parliament by law relating to mineral development. The MMDR Act, 1957, particularly Sections 9, 9A, and 25, imposes such limitations. The expression 'any limitations' under Entry 50 - List II is broad enough to include restrictions, conditions, principles, and even prohibitions.3. Relationship Between Entry 50 - List II and Entry 54 - List I:The judgment clarifies that Entry 50 - List II is subject to Entry 54 - List I, which is a non-taxing general entry. This relationship indicates a departure from the general scheme of distribution of legislative powers as enunciated in MPV Sundararamier. The MMDR Act, 1957, enacted under Entry 54 - List I, limits the State's power to tax mineral rights under Entry 50 - List II.4. Scope of Entry 49 - List II and Its Applicability to Mineral-Bearing Lands:Entry 49 - List II pertains to taxes on lands and buildings. The judgment concludes that mineral-bearing land falls within the description of 'lands' under Entry 49 - List II. However, the yield of mineral-bearing land, in terms of the quantity of mineral produced or the royalty, can be used as a measure to tax the land under Entry 49 - List II. The decision in Goodricke is clarified to this extent.5. Specificity of Entry 50 - List II in Relation to Entry 49 - List II:Entry 50 - List II is specific to taxes on mineral rights and operates distinctly from Entry 49 - List II, which pertains to taxes on lands and buildings. The judgment concludes that mineral value or mineral produce can be used as a measure to impose a tax on lands under Entry 49 - List II. However, the limitations imposed by Parliament in a law relating to mineral development with respect to Entry 50 - List II do not operate on Entry 49 - List II.Conclusions:1. Royalty is not a tax but a contractual consideration for mineral rights.2. Entry 50 - List II allows State legislatures to tax mineral rights, subject to limitations imposed by Parliament.3. Entry 50 - List II is subject to Entry 54 - List I, indicating a unique relationship that departs from the general scheme of legislative power distribution.4. Entry 49 - List II includes mineral-bearing lands, and mineral yield can be used as a measure for taxation under this entry.5. Entry 50 - List II is specific to mineral rights and does not overlap with Entry 49 - List II.
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