New Delhi: The Centre on Wednesday opposed in the Supreme Court a demand by states for refund of royalty levied on mines and minerals since 1989, saying it will impact citizens and the PSUs will have to empty their coffers by Rs 70,000 crore according to initial estimates.
A nine-judge constitution bench headed by Chief Justice DY Chandrachud reserved its orders on the issue of whether its July 25 verdict upholding the power of states to levy tax on mineral rights and mineral-bearing land should be given retrospective or prospective effect.
In a majority 8:1 verdict on July 25, the bench had held that legislative power to tax mineral rights vests with states.
The verdict had overruled a 1989 judgement which held that only the Centre has power to impose royalty on minerals and mineral bearing land.
Some opposition-ruled mineral rich states are now seeking refund of royalty levied by the Centre and taxes from the mining companies since the 1989 verdict.
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 was told by Solicitor General Tushar Mehta, appearing for the Centre, that making the July 25 verdict retrospective will have cascading effects as companies will pass on the financial burden on citizens.
He said the 1989 verdict had held the field for 35 years and the financial impact of the July 25 judgement will be on companies undertaking mining operations, which will be different for each state.
“A preliminary estimate of the potential financial impact of the judgement due to past State levies which may become due (in the form of additional state levies of taxes, interest and penalties) on only the Public Sector Units (PSUs) engaged in mining, and in production activities dependent on minerals (like electricity production), is to the tune of Rs 70,000 crore,” he said.
The CJI asked Mehta what was the interim arrangement when the case was pending consideration before the court.
Mehta replied that some states like Odisha did not raise any demand after the 1989 verdict, while some raised.
Giving an example without taking the name of a stock market listed PSU, he said, if the July 25 verdict is to have a retrospective effect, then the potential demand of tax is three times the net worth of the company, which is a profit making ‘Maharatna’ firm. The solicitor general said the PSU will have a demand of principal amount of Rs 35,000 crore and with interest it will be Rs 55,000 crore while the company’s net worth is Rs 14,000 crore.