States can levy royalty on mineral rights: Supreme Court

New Delhi: A nine-judge constitutional bench of the Supreme Court on Thursday held by an 8:1 majority that States have the power to levy royalty on mineral rights and that the Union law - Mines and Minerals (Development and Regulation) Act 1957 - does not limit their power to do so.

The decision may benefit mineral-rich states like Jharkhand, Odisha, West Bengal, Chhattisgarh and Madhya Pradesh.

The Bench comprising Chief Justice of India DY Chandrachud, Justices Hrishikesh Roy, Abhay Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, SC Sharma and AG Masih pronounced the judgment on the main issue whether royalties on mining leases be considered as tax and whether the States have the power to levy royalty/tax on mineral rights after the enactment of the Parliamentary law, Mines and Minerals (Development and Regulation) Act 1957.

Chief Justice of India DY Chandrachud wrote the judgment on behalf of himself and seven other judges.

Justice BV Nagarathna delivered a dissenting judgment.

The conclusion of the Majority judgement pronounced by the CJI is that the royalty is not within the nature of tax as it is a contractual consideration paid by the lessee under the mining lease.

Both royalty and deed rent do not fulfil the characteristics of tax, said the court overruling the judgment in India Cements case that held royalty to be a tax.