2011 (3) TMI 1554 - SC - VAT and Sales Tax

Whether royalty determined under Sections 9/15(3) of the Mines and Minerals (Regulation & Development) Act, 1957 (Act 67 of 1957, as amended) is in the nature of tax? Can the State Legislature while levying a tax on land under Entry 49 List II of the Seventh Schedule of the Constitution adopt a measure of tax based on the value of the produce of land? If yes, then would the Constitutional position be any different insofar as the tax on land is imposed on mining land on account of Entry 50 List II and its interrelation with Entry 54 List I? What is the meaning of the expression Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development within the meaning of Entry 50 of List II of the Seventh Schedule of the Constitution of India? Does the Mines and Minerals (Regulation & Development) Act, 1957 contain any provision which operates as a limitation on the field of legislation prescribed in Entry 50 of List II of the Seventh Schedule of the Constitution of India? In particular, whether Section 9 of the aforementioned Act denudes or limits the scope of Entry 50 of List II? What is the true nature of royalty / dead rent payable on minerals produced / mined / extracted from mines? Whether the majority decision in State of West Bengal v. Kesoram Industries Ltd. and Ors, (2004) 10 SCC 201, could be read as departing from the law laid down in the seven Judge Bench decision in India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors., (1990) 1 SCC 12? Whether taxes on lands and buildings in Entry 49, List II of the Seventh Schedule to the Constitution contemplate a tax levied directly on the land as a unit having definite relationship with the land? What is the scope of the expression taxes on mineral rights in Entry 50, List II of the Seventh Schedule to the Constitution? Whether the expression subject to any limitation imposed by Parliament by law relating to mineral development in Entry 50, List II refers to the subject matter in Entry 54, List I of the Seventh Schedule to the Constitution? Whether Entry 50, List II read with Entry 54, List I of the Seventh Schedule to the Constitution constitute an exception to the general scheme of Entries relating to taxation being distinct from other Entries in all the three Lists of the Seventh Schedule to the Constitution as enunciated in M.P.V. Sundararamier & Co. v. State of Andhra Pradesh & Anr., (1958) 1 SCR 1422 at 1481 (bottom)? Whether in view of the declaration under Section 2 of the Mines and Minerals (Development & Regulation) Act, 1957 made in terms of Entry 54 of List I of the Seventh Schedule to the Constitution and the provisions of the said Act, the State Legislature is denuded of its power under Entry 23 of List II and/or Entry 50 of List II?

Issues:
1. Whether 'royalty' determined under Sections 9/15(3) of the Mines and Minerals Act is in the nature of tax?
2. Can the State Legislature levy a tax on land based on the value of produce of land under Entry 49 List II of the Constitution?
3. Interpretation of "Taxes on mineral rights subject to any limitations imposed by Parliament" in Entry 50 List II of the Constitution.
4. Nature of royalty/dead rent payable on minerals produced from mines.
5. Consistency between decisions in State of West Bengal v. Kesoram Industries Ltd. and India Cement Ltd. cases.
6. Interpretation of "taxes on lands and buildings" in Entry 49, List II of the Constitution.
7. Scope of "taxes on mineral rights" in Entry 50, List II of the Constitution.
8. Interpretation of "subject to any limitation imposed by Parliament by law relating to mineral development" in Entry 50, List II.
9. Exception of Entry 50, List II read with Entry 54, List I to the general scheme of taxation.
10. Impact of Mines and Minerals Act on State Legislature's power under Entry 23 and Entry 50 of List II.
11. Effect of limitations imposed by Parliament on State Legislature's taxing power in Entry 50, List II.

Analysis:

1. The Supreme Court decided that the determination of 'royalty' under the Mines and Minerals Act is not in the nature of tax. The Court referred to specific sections of the Act to clarify this distinction.

2. The Court examined whether the State Legislature can levy a tax on land based on its produce value under specific constitutional entries. The judgment delved into the constitutional provisions and their interrelation to determine the legislative scope.

3. The interpretation of "Taxes on mineral rights subject to any limitations imposed by Parliament" in the Constitution was analyzed. The Court scrutinized the provisions of the Mines and Minerals Act to ascertain any limitations on the State's legislative power.

4. The Court elucidated on the true nature of royalty and dead rent payable on minerals extracted from mines. This analysis involved a detailed examination of legal principles and precedents.

5. The judgment discussed the consistency between the decisions in State of West Bengal v. Kesoram Industries Ltd. and India Cement Ltd. cases, focusing on any potential departure from established legal principles.

6. The interpretation of "taxes on lands and buildings" in the Constitution was examined to determine the tax implications directly related to the land as a unit.

7. The scope of "taxes on mineral rights" in the Constitution was analyzed to establish the extent of taxing authority concerning mineral rights.

8. The Court interpreted the phrase "subject to any limitation imposed by Parliament by law relating to mineral development" to understand its impact on the State's taxing power in the context of mineral resources.

9. The judgment explored the exception of specific constitutional entries related to taxation, emphasizing the distinct nature of Entry 50, List II read with Entry 54, List I.

10. The impact of the Mines and Minerals Act on the State Legislature's power under relevant constitutional entries was thoroughly examined to delineate the legislative boundaries.

11. The Court analyzed the effect of limitations imposed by Parliament on the State Legislature's taxing power under Entry 50, List II, highlighting the unique constraints in the realm of mineral development legislation.

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