# Mineral Area Development Authority & Anr v. M/s Steel Authority of India & Anr. Etc

- **Citation:** 2024 INSC 554
- **Court:** Supreme Court of India
- **Decided:** 2024-07-25
- **Case number:** Civil Appeal Nos. 4056-4064 of 1999
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mineral-area-development-authority-anr-v-m-s-steel-authority-of-india-anr-etc-38044
- **Pages:** 298

## Headnote

The questions which arose for determination are as to what is the
true nature of royalty determined u/s.9 r/w s.15(1) of the Mines
and Minerals (Development and Regulation) Act, 1957; whether
royalty is in the nature of tax; what is the scope of Entry 50 List II
Seventh Schedule; what is the ambit of the limitations imposable
by Parliament in exercise of its legislative powers under Entry 54
List I; does s.9, or any other provision of the MMDR Act, contain
any limitation with respect to the field in Entry 50 List II; whether
the expression "subject to any limitations imposed by Parliament
by law relating to mineral development" in Entry 50 List II pro
tanto subjects the entry to Entry 54 List I, which is a non-taxing
general entry; whether there is any departure from the general
scheme of distribution of legislative powers as enunciated in
M P V Sundararamier's case; what is the scope of Entry 49 List II
and whether it covers a tax which involves a measure based on
the value of the produce of land; would the constitutional position
be any different qua mining land on account of Entry 50 List II r/w
Entry 54 List I; and whether Entry 50 List II is a specific entry in
relation to Entry 49 List II, and would thus, subtract mining land
from the scope of Entry 49 List II.
Headnotes†
Mines and Minerals (Development and Regulation) Act,
1957 - s.9 read with s.15(1) - Royalties in respect of mining
leases - Nature of royalty determined u/s.9/15(1) - Royalty, if
in the nature of tax:
* Author
Ed. Note: Hon'ble Dr. Justice Dhananjaya Y. Chandrachud, Chief Justice of India pronounced the judgment on
behalf of himself, Hon'ble Mr. Justice Hrishikesh Roy, Hon'ble Mr. Justice Abhay S. Oka, Hon'ble Mr. Justice
J.B. Pardiwala, Hon'ble Mr. Justice Manoj Misra, Hon'ble Mr. Justice Ujjal Bhuyan, Hon'ble Mr. Justice Satish
Chandra Sharma and Hon'ble Mr. Justice Augustine George Masih. Hon'ble Mrs. Justice B.V. Nagarathna
pronounced a separate judgment.
1550
[2024] 7 S.C.R.
Digital Supreme Court Reports
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax - Royalty is a contractual
consideration paid by the mining lessee to the lessor for enjoyment
of mineral rights - Liability to pay royalty arises out of the
contractual conditions of the mining lease - Payments made to
the Government cannot be deemed to be a tax merely because
the statute provides for their recovery as arrears. [Para 342a] -
Held: (per B.V. Nagarathna, J.) (Dissenting) Royalty determined
u/s.9 r/w s.15(1) is in the nature of a tax or an exaction coming
within the scope and ambit of Art.366(28) which defines taxation to
include the imposition of any tax or impost, whether general or local
or special and the word "tax" is to be construed accordingly - It is
not merely a contractual payment but a statutory levy u/s.9 - Liability
to pay royalty does not arise purely out of the contractual conditions
of a binding lease - Payment of royalty to the Government is a tax
in view of Entry 50 List II being subject to any limitations imposed
by Parliament by law in the context of Entry 54 List I read with s.2
of the MMDR Act - Constitution of India - Art.366(28), Entry 54
List I, Entry 50 List II. [Paras 40a, 41a]
Mines and Minerals (Development and Regulation) Act, 1957 -
s.9 - Royalties in respect of mining leases - Constitution of
India - Entry 50 List II Seventh Schedule - Taxes on mineral
rights subject to any limitations imposed by Parliament by law
relating to mineral development - Scope of Entry 50 List II -
Ambit of the limitations imposable by Parliament in exercise
of its legislative powers under Entry 54 List I - s.9, or any
other provision of the MMDR Act, if contains any limitation
with respect to the field in Entry 50 List II:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S O

## Text

_Characters 0–39,548 of 714,839. This is a partial read: ask again with offset=39548 for what follows._

[2024] 7 S.C.R. 1549 : 2024 INSC 554
Mineral Area Development Authority & Anr.
v.
M/s Steel Authority of India & Anr. Etc.
(Civil Appeal Nos. 4056-4064 of 1999)
25 July 2024
[Dr. Dhananjaya Y. Chandrachud,* CJI, Hrishikesh Roy,
Abhay S Oka, B.V. Nagarathna,* J.B. Pardiwala,
Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma
and Augustine George Masih, JJ.]
Issue for Consideration
The questions which arose for determination are as to what is the
true nature of royalty determined u/s.9 r/w s.15(1) of the Mines
and Minerals (Development and Regulation) Act, 1957; whether
royalty is in the nature of tax; what is the scope of Entry 50 List II
Seventh Schedule; what is the ambit of the limitations imposable
by Parliament in exercise of its legislative powers under Entry 54
List I; does s.9, or any other provision of the MMDR Act, contain
any limitation with respect to the field in Entry 50 List II; whether
the expression "subject to any limitations imposed by Parliament
by law relating to mineral development" in Entry 50 List II pro
tanto subjects the entry to Entry 54 List I, which is a non-taxing
general entry; whether there is any departure from the general
scheme of distribution of legislative powers as enunciated in
M P V Sundararamier's case; what is the scope of Entry 49 List II
and whether it covers a tax which involves a measure based on
the value of the produce of land; would the constitutional position
be any different qua mining land on account of Entry 50 List II r/w
Entry 54 List I; and whether Entry 50 List II is a specific entry in
relation to Entry 49 List II, and would thus, subtract mining land
from the scope of Entry 49 List II.
Headnotes†
Mines and Minerals (Development and Regulation) Act,
1957 - s.9 read with s.15(1) - Royalties in respect of mining
leases - Nature of royalty determined u/s.9/15(1) - Royalty, if
in the nature of tax:
* Author
Ed. Note: Hon'ble Dr. Justice Dhananjaya Y. Chandrachud, Chief Justice of India pronounced the judgment on
behalf of himself, Hon'ble Mr. Justice Hrishikesh Roy, Hon'ble Mr. Justice Abhay S. Oka, Hon'ble Mr. Justice
J.B. Pardiwala, Hon'ble Mr. Justice Manoj Misra, Hon'ble Mr. Justice Ujjal Bhuyan, Hon'ble Mr. Justice Satish
Chandra Sharma and Hon'ble Mr. Justice Augustine George Masih. Hon'ble Mrs. Justice B.V. Nagarathna
pronounced a separate judgment.
1550
[2024] 7 S.C.R.
Digital Supreme Court Reports
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax - Royalty is a contractual
consideration paid by the mining lessee to the lessor for enjoyment
of mineral rights - Liability to pay royalty arises out of the
contractual conditions of the mining lease - Payments made to
the Government cannot be deemed to be a tax merely because
the statute provides for their recovery as arrears. [Para 342a] -
Held: (per B.V. Nagarathna, J.) (Dissenting) Royalty determined
u/s.9 r/w s.15(1) is in the nature of a tax or an exaction coming
within the scope and ambit of Art.366(28) which defines taxation to
include the imposition of any tax or impost, whether general or local
or special and the word "tax" is to be construed accordingly - It is
not merely a contractual payment but a statutory levy u/s.9 - Liability
to pay royalty does not arise purely out of the contractual conditions
of a binding lease - Payment of royalty to the Government is a tax
in view of Entry 50 List II being subject to any limitations imposed
by Parliament by law in the context of Entry 54 List I read with s.2
of the MMDR Act - Constitution of India - Art.366(28), Entry 54
List I, Entry 50 List II. [Paras 40a, 41a]
Mines and Minerals (Development and Regulation) Act, 1957 -
s.9 - Royalties in respect of mining leases - Constitution of
India - Entry 50 List II Seventh Schedule - Taxes on mineral
rights subject to any limitations imposed by Parliament by law
relating to mineral development - Scope of Entry 50 List II -
Ambit of the limitations imposable by Parliament in exercise
of its legislative powers under Entry 54 List I - s.9, or any
other provision of the MMDR Act, if contains any limitation
with respect to the field in Entry 50 List II:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Legislative power to tax mineral rights
vests with the State legislatures - Parliament does not have
legislative competence to tax mineral rights under Entry 54
List I, it being a general entry - Since the power to tax mineral
rights is enumerated in Entry 50 List II, Parliament cannot use its
residuary powers with respect to that subject-matter - Entry 50
List II envisages that Parliament can impose "any limitations" on
[2024] 7 S.C.R.
1551
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
the legislative field created by that entry under a law relating to
mineral development - MMDR Act as it stands has not imposed
any limitations as envisaged in Entry 50 List II - Entry 54 List I,
Entry 50 List II Seventh Schedule. [Para 342b, c] - Held: (per
B.V. Nagarathna, J.) (Dissenting) - Entry 50 List II dealing with
taxes on mineral rights, is subject to any limitations imposed by
Parliament by law relating to mineral development - Use of the
word "any" means the limitation could be in any form which can
be imposed only by the Parliament by law relating to mineral
development - Use of the expression 'any limitations' must be
given the widest possible meaning to include a limitation in the
form of ss.9 and 9A, 25 or any other provision of the MMDR Act
and Rules made thereunder which act as a limitation to Entry 50
List II - Scope of the expression "any limitations" under Entry
50 List II is wide enough to include the imposition of restriction,
conditions, principles as well as a prohibition by Parliament by law
relating to mineral development - Thus, in view of the declaration
u/s.2 of the MMDR Act made in terms of Entry 54 List I and to
the extent of the provisions of the said Act, the State legislature
is denuded of its powers under Enry 50 List. [Paras 40b, 41d, e]
Mines and Minerals (Development and Regulation) Act, 1957 -
s.9 - Royalties in respect of mining leases - Constitution of
India - Entry 50 List II Seventh Schedule - Expression "subject
to any limitations imposed by Parliament by law relating to
mineral development" in Entry 50 List II, if pro tanto subjects
the Entry to Entry 54 List I, which is a non-taxing general
Entry - If there is any departure from the general scheme
of distribution of legislative powers as enunciated in MPV
Sundararamier's case:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) - Legislative power to tax mineral rights
vests with the State legislatures - Parliament does not have
legislative competence to tax mineral rights under Entry 54 List I,
it being a general entry - Since the power to tax mineral rights is
enumerated in Entry 50 List II, Parliament cannot use its residuary
powers with respect to that subject-matter - Entry 50 List II does
not constitute an exception to the position of law laid down in
M P V Sundararamier's case. [Para 342b, c, d] - Held: (per B.V.
1552
[2024] 7 S.C.R.
Digital Supreme Court Reports
Nagarathna, J.) (Dissenting) Expression "subject to any limitations
imposed by Parliament by law relating to mineral development" in
Entry 50 List II pro tanto subjects the Entry to Entry 54 List I - Use
of the expression "any limitations" would mean that the taxing Entry
would be subject to a non-taxing or general Entry such as in Entry
54 List I which could also be termed as a regulatory Entry - Thus,
there is a departure from the general scheme of distribution of
legislative powers as enumerated in MPV Sundararamier's case
insofar as Entry 50 List II read with Entry 54 List I is concerned
which is unique to Entry 50 List II - This is having regard to the
significance of Entry 54 List I which also overrides Entry 23 List II -
Entry 50 List II is an exception to the position of law laid down in
MPV Sundararamier's case. [Paras 40c, 41b]
Mines and Minerals (Development and Regulation) Act, 1957 -
ss.9, 2 - Royalties in respect of mining leases - Constitution
of India - Entry 49 List II Seventh Schedule - Scope of Entry
49 List II - Entry 49 List II, if covers tax involving a measure
based on the value of the produce of land - Constitutional
position, if different qua mining land on account of Entry 50
List II read with Entry 54 List I:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) State legislatures have legislative competence
u/Art.246 read with Entry 49 List II to tax lands which comprise
of mines and quarries - Mineral-bearing land falls within the
description of "lands" under Entry 49 List II - 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 - Decision in Goodricke's case clarified to this extent [Para
342 e, f] - Held: (per B.V. Nagarathna, J.) (Dissenting) Entry 49
List II deals with taxation of lands and buildings - It does not cover
taxes on mineral bearing lands - Constitutional position is different
qua mineral bearing lands on account of Entry 50 List II read with
Entry 54 List I and s.2 of the MMDR Act - Thus, any imposition
on the basis of royalty by a State Legislature or involving royalty
as a measure of the value of the minerals extracted from the land
is impermissible - State legislatures have legislative competence
under Art.246 read with Entry 49 List II to tax lands and buildings
but not lands which comprise of mines and quarries or have mineral
[2024] 7 S.C.R.
1553
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
deposits as mineral bearing lands do not fall within the description
of lands (under Entry 49 List II) - Similarly, States can tax such
mineral bearing lands which are not covered within the scope of
MMDR Act-minor minerals, under Entry 50 List II and not under
Entry 49 List II as tax on exercise of mineral rights - Thus, mineral
bearing lands cannot be taxed under Entry 49 List II - Further,
the yield of mineral bearing lands, in terms of quantity of mineral
produced or royalty paid cannot also be used as a measure to
tax such lands under Entry 49 List II - Decision in Goodricke's
case does not require any clarification - Entry 50 List II read with
Entry 54 List I Seventh Schedule. [Paras 40d, 41f, g]
Mines and Minerals (Development and Regulation) Act, 1957 -
ss.9, 2 - Constitution of India - Entry 49 List II, Entry 50 List
II Seventh Schedule - Entry 50 List II, if a specific Entry in
relation to Entry 49 List II, and would consequently subtract
mining land from the scope of Entry 49 List II:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Entries 49 and 50 of List II deal with distinct
subject matters and operate in different fields - Mineral value
or mineral produce can be used as a measure to impose a
tax on lands under Entry 49 List II - "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 because there
is no specific stipulation under the Constitution to that effect.
[Para 342g, h] - Held: (per B.V. Nagarathna, J.) (Dissenting)
Entry 50 List II is a specific Entry in relation to Entry 49 List II and
would consequently subtract mining lands from the scope of Entry
49 List II, having regard to Entry 50 List II to be read with Entry
54 List I and s.2 of the MMDR Act. [Para 40e]
Mines and Minerals - Royalty, in the nature of tax or not -
Divergence between India Cement's case and Kesoram's
case - India Cement's case held 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 because s.9 of the Central
Act covers the field and the State legislature is denuded of its
competence under Entry 23 List II whereas Kesoram's case held
that royalty is not a tax, but a payment made to the owner of
land who may be a person and may not necessarily be the State:
1554
[2024] 7 S.C.R.
Digital Supreme Court Reports
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) - Kesoram held that India Cement's case
was caused by "an apparent typographical error or inadvertent
error" and should not be understood as a correct declaration
of law - Kesoram's case also expressed its disagreement with
Mahalaxmi Fabric Mills's case to the extent it had held that there
was no "typographical error" in India Cement's case - Kesoram's
case concurred with India Cement's case on the aspect that cess
on royalty is beyond the legislative competence of the State
legislatures - Divergence on the point of law between India
Cement's case and Kesoram's case is apparent and pertains to
whether or not royalty is a tax - Thus, the royalty does not meet
the characteristic requirements of a tax. [Paras 117, 121, 122] -
Held: (per B.V. Nagarathna, J.) Majority decision in Kesoram is
a serious departure from the law laid down by the seven-judge
Bench in India Cement which was wholly unwarranted and thus,
the said majority judgment is liable to be overruled and is overruled
to the extent of holding that royalty is not a tax - India Cement
was correctly decided wherein it was held that royalty is in the
nature of tax. [Paras 42 (ii), 1.1]
Constitution of India - Legislative entries - Interpretation -
Entries 49 and 50 List II in the context of mineral bearing
lands - Interplay of:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Entries 49 and 50 of List II deal with distinct subject
matters - Both the entries operate in different fields without any
overlap - Nature of taxes under the entries are distinct - Fact that
mineral value or mineral produced is used as a measure under
Entry 50 List II does not preclude the legislature from using the
same measure for taxing mineral bearing land under Entry 49
List II - Doctrine of generalia specialibus non derogant has no
application because Entries 49 and 50 List II operate in different
fields - Though Parliament can limit the taxing field entrusted to
the State under Entry 50 List II through a law relating to mineral
development, the limitation operates on the field of taxing mineral
rights - Such a limitation cannot operate on Entry 49 List II
because there is no specific stipulation under the Constitution to
[2024] 7 S.C.R.
1555
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
that effect - Constitution envisages the imposition of limitations
by Parliament on the legislative field of the state of taxes on
mineral rights, and not taxes on lands. [Para 339] - Held: (per
B.V. Nagarathna, J.) (Dissenting) Entry 49 List II is of the widest
amplitude - Mineral value or mineral produce cannot be used as
a measure to tax mineral bearing land under Entry 49 List II, also,
the word "lands" under Entry 49 List II cannot include mineral
bearing land as well - This would amount to "double taxation",
one, by the State Legislature on the mineral bearing land under
Entry 49 List II and again for conducting a mining operation which
is for exercise of a mineral right u/s.9 of MMDR Act, which is
Parliamentary law also paid to the State Government - This is
impermissible having regard to the constitutional intent and scheme
of Entries in the Lists - Thus, royalty cannot also be a measure
to impose tax on mineral bearing land - State Legislature using
royalty on mineral produce as a measure to impose a cess under
Entry 49 List II on mineral bearing land would overlap Entry 50
List II, because minerals are extracted by virtue of mining activity
which is in exercise of mineral right and taxes on mineral rights are
envisaged under Entry 50 List II subject to any limitation imposed
by Parliament - Thus, Entry 50 List II would have to be viewed
distinctly from Entry 49 List II - If so viewed, it becomes subject
to Parliamentary law in the form of MMDR Act and the rules made
thereunder which would be a limitation on the power of State to
tax under Entry 50 List II - Hence to get over the rigour of Entry
50 List II, States cannot resort to Entry 49 List II. [Paras 33, 34]
Mines and Minerals - Dead rent - Explanation:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Dead rent acts as a deterrent against a
leaseholder cornering a mining lease and keeping the mineral
resources idle - Similar to royalty, dead rent is also a statutory
imposition and an integral part of the mining lease, but it generally
does not serve as a consideration for the removal or consumption
of minerals - Dead rent is determined on the basis of the area
of land covered by the lease - Imposition of dead rent ensures
that the proprietor obtains a fixed rent from the lessee even if
the mine remains unworked - Thus, dead rent is not in addition
to royalty but an alternative - Principles applicable to royalty
apply to dead rent because dead rent is imposed in the exercise
1556
[2024] 7 S.C.R.
Digital Supreme Court Reports
of the proprietary right (and not a sovereign right) by the lessor
to ensure that the lessee works the mine, and does not keep it
idle, and in a situation where the lessee keeps the mine idle, it
ensures a constant flow of income to the proprietor; the liability
to pay dead rent flows from the terms of the mining lease; dead
rent is an alternate to royalty; if the rates of royalty are higher
than dead rent, the lessee is required to pay the former and not
the latter; and the Central Government prescribes the dead rent
not in the exercise of its sovereign right, but as a regulatory
measure to ensure uniformity of rates. [Paras 99, 129] -
Held: (per B.V. Nagarathna, J.) Entry 49 List II does not apply
to mineral bearing lands as such lands are taxed in the form of
royalty or dead rent in the context of exercise of mineral rights -
Exercise of mineral rights is the basis for payment of royalty or
dead rent - Insofar as extraction of minerals is concerned, being
an exercise of a mineral right, royalty is payable by a holder of
a mining lease and when no mining activity is carried on, dead
rent is payable by such a person. [Paras 33, 41]
Constitution of India - Federalism - Explanation - Distinctive
elements:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Federalism is one of the basic features of
the Constitution which embodies a division of powers between
the units of the federation-the Union and the States - Indian
federalism is defined as asymmetric because it tilts towards the
Centre, producing a strong Central Government - Yet, it has not
necessarily resulted in weak State governments - Indian States
are sovereigns within the legislative competence assigned to
them - Delicate balance of power is secured by constitutional
courts by interpreting the scheme of distribution of powers - In a
federal form of government, each federal unit should be able to
perform its core constitutional functions with a certain degree of
independence - Constitution has to be interpreted in a manner
which does not dilute the federal character of our constitutional
scheme - Effort of the constitutional court should be to ensure
that State legislatures are not subordinated to the Union in the
areas exclusively reserved for them. [Paras 48, 49] - Held: (per
B.V. Nagarathna, J.) India's postcolonial Constitution introduced
[2024] 7 S.C.R.
1557
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
a new approach to federalism which has departed from the
principle that federal and regional governments should each
have independence in their own sphere of authority - Distinctive
elements of Indian federalism were shaped at their foundations by
the desire to boost industrial development and lay the foundation
for a national welfare state in a post-colonial future by preventing
the consolidation of ''race to the bottom'' dynamics arising from
unregulated inter-provincial economic competition - Distinctive
element of Indian federalism is the combination of a strong Centre
and a substantial sphere of shared Centre-State jurisdiction -
Desirable balance between Central and the State Governments
has to be viewed in the context of the country continuing to
confront the need to promote economic growth while upholding
and expanding social rights. [Paras 36, 36.3, 36.4]
Mines and Minerals (Development and Regulation)
Act, 1957 - s.9 - Royalty - Royalty, in nature of tax or not:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax - It is a consideration paid
by a mining lessee to the lessor for enjoyment of mineral rights
and to compensate for the loss of value of minerals suffered by
the owner of the minerals - Liability to pay royalty arises out of the
contractual conditions of the mining lease - s.9 statutorily regulates
the right of a lessor to receive consideration in the form of royalty
from the lessee for removing or carrying away minerals from the
leased area - Rates of royalty prescribed u/s.9 does not make it a
"compulsory exaction by public authority for public purposes" - s.25
allows recovery of royalty due to the Government under the MMDR
Act or "under the terms of the contract" as arrears of land does not
make royalty "an impost enforceable by law" - Furthermore, there
is difference between royalty and a tax - Proprietor charges royalty
as a consideration for parting with the right to win minerals, while a
tax is an imposition of a sovereign, royalty is paid in consideration
of doing a particular action, that is, extracting minerals from the
soil, while tax is generally levied with respect to a taxable event
determined by law, and royalty generally flows from the lease deed
as compared to tax which is imposed by authority of law - Since
royalty is a consideration paid by the lessee to the lessor under
a mining lease, it cannot be termed as an impost - Furthermore,
1558
[2024] 7 S.C.R.
Digital Supreme Court Reports
both royalty and dead rent do not fulfil the characteristics of tax or
impost - Thus, observation in India Cement's case that royalty
is a tax is incorrect. [Paras 327, 123-130]
Mines and Minerals (Development and Regulation)
Act, 1957 - s.9 - Royalties in respect of mining leases -
Purpose of s.9:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) s.9 sought to remedy the disparity of royalty rates across
India - Rates of royalty were primarily governed by the terms of
lease prior to the enactment of the MMDR Act - Once a mining lease
was entered into between a lessor and lessee, the rates of royalty
would remain static during the subsistence of the lease - s.9 has
enabled the Central Government to examine the rates of royalty in
respect of all minerals and modulate them periodically after taking
into consideration various factors, including the uniformity of mineral
prices - Primary reason for empowering the Central Government
to fix the rate of royalty could be traced to the Industrial Policy
Resolution which underscored the active and predominant role
of the State in organizing and utilizing mineral resources - State
Governments were not empowered to determine royalty in order to
maintain a uniform regime of royalty across India - This was intended
to promote domestic industry and maintain competitive commodity
prices in the international market. [Paras 77, 78]
Mines and Minerals (Development and Regulation) Act, 1957 -
Meaning of "royalty" - Explanation - Essential characteristics:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Royalty is generally understood as compensation
paid for rights and privileges enjoyed by the grantee - It has
its genesis in the agreement entered into between the grantor
and grantee - Royalty is a payment made by the lessee to the
lessor or proprietor of the minerals for the removal of minerals -
Royalty also serves to compensate the lessor for the degradation
of the value of the mine because of the extraction of minerals -
Essential characteristics of royalty are that-it is a consideration or
payment made to the proprietor of minerals, either government or
[2024] 7 S.C.R.
1559
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
private person, it flows from a statutory agreement (mining lease)
between lessor and lessee, it represents a return for the grant of
privilege (to lessee) of removing or consuming the minerals, and
it is generally determined on basis of the quantity of the minerals
removed. [Paras 94, 96, 98]
Mines and Minerals (Development and Regulation)
Act, 1957 - s.9 - Royalty - Nature of - Calculation of royalty:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax but a statutory
consideration payable by the lessee to the lessor for the exercise
of mineral rights - Specification of rates of royalty with respect
to major minerals under the MMDR Act limits the powers of the
State Government in terms of Entry 54 List I read with Entry 23
List II - Royalty is payable u/s.9 on the removal or consumption
of minerals by the lessee in the leased area - Thus, essentially
royalty is payable on the dispatch of minerals from the leased
area - Rates of royalty are generally calculated on per tonnage
basis or ad valorem basis on the basis of the formula laid down -
Royalty is calculated on the basis of the quantity of minerals
extracted or removed - Yield from mineral bearing land is nothing
but the quantity of mineral produced - Royalty is per se not the
yield from a mineral bearing land, but the yield (mineral produced)
is the important factor in determination of the rate of royalty -
Moreover, royalty can be considered as an income if it is paid to
a private landowner - In case minerals are vested in the State,
royalty is paid to the State Government, and hence assumes the
form of non-tax revenues - Thus, royalty is relatable to the yield
of the mineral-bearing land as well as the income in case the
minerals vest in a private person. [Paras 87, 327-332]
Mines and Minerals (Development and Regulation)
Act, 1957 - s.9 - If serve as a limitation on the taxing powers
of State under Entry 50 List II - Expression 'any limitation'
under Entry 50 List II, if can be extended to prohibition:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Scheme of the MMDR Act does not in itself serve as a
1560
[2024] 7 S.C.R.
Digital Supreme Court Reports
limitation on the field of taxation under Entry 50 List II - MMDR Act
empowers the Central Government to specify the rates of royalty
u/s.9 r/w Second Schedule - Since royalty payable u/s.9 is not
a tax on mineral rights, any limitation on the enhancement of the
rates of royalty is not the imposition of a tax under Entry 50 List II -
ss.9, 9A, 9B, and 9C do not impose any limitations on the powers
of State to tax mineral rights under Entry 50 List II - Under Entry
50 List II, phrase "any limitations" is specifically used - Framers
of the Constitution intended to empower Parliament to impose
"all" and "every" possible limitation on the taxing powers of the
State in the interests of mineral development, which include even
"prohibition" - Thus, the expression 'any limitations' include the
power to prohibit the States from taxing mineral rights - Overall
scheme of Art. 246 r/w Entry 54 List I and Entry 50 List II makes it
clear that Parliament, in the interests of mineral development, can
impose "any limitations" - Purport of expression "any limitations"
is wide enough to include the imposition of restrictions, conditions,
principles, as well as prohibition - Constitution of India - Entry 50
List II. [Paras 229, 231, 244, 245]
Mines and Minerals (Development and Regulation) Act, 1957 -
Mineral-bearing land - Measure to tax - Minerals produced,
if a measure to tax mineral bearing land:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Tax on lands and buildings under Entry 49 List II is
often measured with respect to the income derived from the land
or building sought to be taxed - Measure for taxing land may bear
a reasonable relationship to the actual or potential productivity of
land - Measures such as annual value or market value provide
a proximate basis to measure the income derived from land - If
the State legislature utilizes the income derived from the land as
a measure to quantify a tax on land, it does not trench upon the
legislative domain of Union to tax income - Income merely serves
as the measure to calculate the levy of taxes on land - MMDR
Act does not serve as a limitation on the legislative competence
of the States to tax mineral rights under Entry 50 List II, including
the power to levy taxes on mineral-bearing lands under Entry
49 List II - Mineral value or mineral produce could be used as
a measure of the tax on land under Entry 49 List II - Entry 50
[2024] 7 S.C.R.
1561
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
List II pertains to taxes on mineral rights would not preclude the
State legislature to use the measure of mineral value or mineral
produce under Entry 49 List II - State legislature has legislative
discretion to determine the appropriate measure for the purposes
of quantifying taxes, so long as there is a reasonable nexus
between the measure and the nature of the tax - Measure does
not determine the nature of the tax - Lands under Entry 49 List II
includes mineral bearing land - Mineral produce is the yield from
a mineral bearing land - Since royalty is determined on the basis
of the mineral produce, royalty can also be used as a measure
to determine the tax on royalty - Fact that the State legislature
uses mineral produce or royalty as a measure does not overlap
with Entry 50 List II. [Paras 291, 294, 302, 341]
Mines and Minerals (Development and Regulation)
Act, 1957 - Mineral bearing land - Decoupling of minerals
from land - When:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Minerals are decoupled from land only upon
the exercise of mineral rights by the lessee - Although the title to
minerals vests in the State Government, the mining lease transfers
the interest in the mineral from the State Government to the mining
lessee - During the whole process, minerals continue to remain
embedded in the earth, either over or above - Thus, there is no
decoupling of minerals from land - When a mining lease is granted,
the lease holder necessarily has to occupy the surface rights of
the area specified in the lease - Leaseholder has rights to both
the minerals and surface during the subsistence of the mining
lease - It cannot be said that the mineral rights are transferred
from the State to the mining lessee only upon the extraction of
minerals - Once the lease deed is signed, the interest in the
minerals is transferred from the State Government (in case the
minerals vest in the State Government) to the lessee - Interest
of the lessee in the minerals continues until the determination of
the lease deed - It is only upon the exercise of mineral rights by
the lessee, that is removal or consumption of minerals, that the
lessee is required to pay royalty - Thus, the transfer of interest
in the minerals is distinct from the exercise of the mineral rights.
[Paras 323, 324]
1562
[2024] 7 S.C.R.
Digital Supreme Court Reports
Mines and Minerals (Development and Regulation) Act,
1957 - ss.2, 4, 9, 9A, 9B, 9C, 13, 15, 25 - Royalty under the
MMDR Act - Explained. (per Dr Dhananjaya Y Chandrachud,
CJI) (for himself and for Hrishikesh Roy, Abhay S Oka,
J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra
Sharma and Augustine George Masih, JJ.) [Paras 62-74]
Mines and Minerals (Development and Regulation) Act, 1957 -
Mines and Minerals - Contours of a mining lease - Explanation:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Expressions 'lease' and 'licence' have been used in the
context of mining operations in the Constitution and in the MMRD
Act - "Mining lease" is defined under the MMDR Act to mean a
lease granted for the purpose of undertaking mining operations and
includes a sub-lease granted for such purpose - Expression "mining
operations" has been defined to mean any operations undertaken for
the purpose of winning any mineral - Expression "winning" means
getting or extracting minerals from the mines - Under a lease deed
for mining operations, the owner transfers the interest in the minerals
to the lessee in lieu of the payment of rent, which usually takes the
form of royalty - Under the MMDR Act, a "prospecting licence" is
granted for the purpose of undertaking prospecting operations for
the purpose of exploring, locating, or proving a mineral deposit -
Under a prospecting licence, the licensee does not get an interest
in the land or in the minerals contained therein - Licensee is only
allowed to carry away a limited quantity of minerals after payment
of specified royalty. [Paras 86, 87]
Mines and Minerals (Development and Regulation) Act, 1957 -
Mineral Concession Rules, 1960 - Nature of a mining lease
under the MMDR Act and Mineral Concession Rules:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) MMDR Act and the Mineral Concession Rules detail the
procedure for the grant of mining leases in three situations-where
the minerals vest in the government, where the minerals vest in a
person other than the government, and where the minerals vest
partly in the government and partly in a private person - Right
of proprietors to grant leases and receive royalty stems from the
[2024] 7 S.C.R.
1563
Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.
proprietary interest in the immovable property including the minerals -
MMDR Act regulates the exercise of the proprietary rights in the
minerals in the larger public interest - Statute specifies the terms
of the lease, but the lease deed is ultimately entered between the
State Government (or the private person, as the case may be) and
the lessee - Similarly, the rates of royalty are fixed by the Central
Government u/s. 9, but royalty is received by the mining lessor, that
is the State Government or a private person. [Paras 89, 93]
Constitution of India - Federalism - Fiscal federalism, in the
context of mineral resources:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Basic features of fiscal federalism is that both the Union
government and the State governments ought to have adequate
fiscal resources to discharge their constitutional responsibilities -
List I and List II of the Seventh Schedule contain various subjectmatters under which Parliament and the State legislatures can
respectively levy taxes - Purpose of such a distribution is to entrust
adequate fiscal powers with the legislatures to raise revenues to
meet the growing fiscal expenditures and rein in the fiscal deficit -
Legislatures can formulate the principles underlying any taxing
legislation, define the taxing event or the charge of tax as well
the mode and manner of its implementation - As regards fiscal
federalism in the context of mineral resources, not all states are
equally endowed with mineral resources - Few States have greater
reserves of mineral resources, resultantly, the contribution of the
mining sector in the state domestic product is higher - Despite the
abundance of mineral wealth, many of these states lag economically
and suffer from, "resource curse" - Taxation is among the important
sources of revenue for these States, impacting on their ability
to deliver welfare schemes and services to the people - Fiscal
federalism entails that the power of the States to levy taxes within the
legislative domain carved out to them and subject to the limitations
laid down by the Constitution must be secured from unconstitutional
interference by Parliament. [Paras 51-54]
Constitution of India - Arts.366(28), 265 - Expression 'tax' -
Explanation - Essential characteristics of tax:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala,
1564
[2024] 7 S.C.R.
Digital Supreme Court Reports
Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and
Augustine George Masih, JJ.) Taxes are monetary burdens or
charges imposed by legislative power upon persons, or property
to raise revenues to fund public expenditure - Objects to be
taxed can be taxed by the legislature according to the exigencies
of its needs so long as they happen to be within the legislative
competence of the legislature - Although the power of taxation
is pervasive and an incidence of sovereignty, it is subject to welldefined constitutional limitations - Tax is a compulsory exaction
of money by a public authority, it is imposed under statutory
power without the consent of the tax payer, the demand is
enforceable by law, it is an imposition made for public purposes
to meet the general expenses of the state without reference to
any special benefit to be conferred on the payer of the tax, and
it is part of the common burden - Art.