Why does statute not say in clearer terms only Parl has power to impose tax on minerals: SC

New Delhi: The Supreme Court on Tuesday asked the Centre as to why the statute does not say in clearer terms that only Parliament has the power to impose tax on minerals and states are denuded of authority to levy such exaction.

A nine-judge bench headed by Chief Justice DY Chandrachud asked Solicitor General Tushar Mehta, appearing for the Centre, whether his contention that the Union fixes taxes on minerals to bring uniformity impinges upon the federal distribution of power enshrined in the Constitution. “Why does the statute not say that this is the tax that the Union will be charging and to that extent the power of state is denuded or something like that? Why do you have to say this by inference?” 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 asked.

Mehta said in his submissions that the entire architecture of the Mines and Minerals (Development and Regulation) Act (MMDRA) is the limitation on the states’ legislative power to impose tax on minerals.

“If such tax is imposed, it would be invalid or unconstitutional tax. There is an in-built statutory mechanism which says that this will be the amount and nothing more Pre India Cement verdict (1989 judgement), some states had levied 300 per cent royalty on mineral rights tax and some had levied 500 per cent tax on royalty. To bring uniformity, the Centre fixes the rate of tax,” he submitted.

CJI Chandrachud told Mehta this submission may have implications for the federal system.

“It is a desirable argument that for uniformity in taxes the Centre can fix the taxes and it is a matter of policy. But the question is whether this will impinge upon the federal distribution of power under the Constitution,” the CJI said.He said under Entry 53 of List 2 (state list), states can levy taxes on the sale and consumption of electricity and the same goes for natural gas under Entry 54 of List 2.