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TMI Blog2024 (7) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... f Entry 49 of List II and whether it covers a tax which involves a measure based on the value of the produce of land - constitutional position be any different qua mining land on account of Entry 50 of List II read with Entry 54 of List I or not - Entry 50 of List II is a specific entry in relation to Entry 49 of List II, and would consequently subtract mining land from the scope of Entry 49 of List II. What is the true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act? Whether royalty is in the nature of tax? As per Dr Dhananjaya Y Chandrachud, CJI (majority view) - Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears. As per NAGARATHNA, J. (dissenting view) - The true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act, 1957 is that it is in the nature of a tax coming within the scope and ambit of Article 366(28) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the form of Sections 9 and 9A, 25 or any other provision of the MMDR Act, 1957 and Rules made thereunder which act as a limitation to Entry 50 - List II. 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. The use of the expression any limitations would mean that the taxing Entry would be subject to a nontaxing or general Entry such as in Entry 54 - List I which could also be termed as a regulatory Entry. Consequently, there is a departure from the general scheme of distribution of legislative powers as enumerated in MPV Sundararamier 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. What is the scope of Entry 49 of 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 of List II read with Entry 54 of List I? - Whether Entry 50 of List II is a specific entry i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I and Section 2 of the MMDR Act, 1957. - With Civil Appeal No. 7937 of 2019 With Writ Petition (Civil) No. 512 of 2018 With Civil Appeal No. 7938 of 2019 With Civil Appeal No. 7936 of 2019 With Civil Appeal No. 6221 of 2008 With Civil Appeal No. 5250 of 2019 With Writ Petition (C) No. 729 of 2019 With Writ Petition (C) No. 1029 of 2019 With Special Leave Petition (C) No. 16028 of 2021 With Civil Appeal No. 4286 of 2023 With Civil Appeal No. 5682 of 2007 With Civil Appeal No. 1295 of 2008 With Civil Appeal No. 874 of 2013 With Civil Appeal Nos. 8269-8271 of 2013 With Civil Appeal No. 8268 of 2013 With Civil Appeal No. 8267 of 2013 With Civil Appeal No. 6135 of 2013 With Civil Appeal No. 8272 of 2013 With Civil Appeal No. 9458 of 2013 With Special Leave Petition (Civil) No. 18600 of 2013 With Civil Appeal No. 4332 of 2013 With Civil Appeal No. 5329 of 2002 With Civil Appeal No. 4993 of 2006 With Civil Appeal No. 8273 of 2013 With Civil Appeal No. 8274 of 2013 With Civil Appeal No. 3869 of 2014 With Civil Appeal No. 2632 of 2013 With Civil Appeal No. 14685 of 2015 With Civil Appeal No. 6784 of 2014 With Writ Petition (Civil) No. 376 of 2015 With Civil Appeal No. 10082 of 2016 With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikram, Adv. Mr. Eklavya Dwivedi, Adv. Mr. Prashant Bharadwaj, Adv. Mr. Prashant Bhardwaj, Adv. Mr. Amarjeet Gupta, Adv. Ms. Aishwarya Bhati, A.S.G. Mr. Uddyam Mukherjee, AOR Mr. Swapnil Pattanayak, Adv. Ms. Manisha Chava, Adv. Mr. Agnibha Chatterjee, Adv. Ms. Shagun Thakur, Adv. Ms. Bln Shivani, Adv. Mr. Abhijeet Singh, Adv. Mr. Rustam Singh Chauhan, Adv. Ms. Sthavi Asthana, Adv. Mr. Ashwin Joseph, Adv. Ms. Poornima Singh, Adv. Mr. Annirudh Singh, Adv. Ms. Shreya Jain, Adv. Ms. Aishwarya Bhati, A.S.G. Mr. Gp. Capt. Karan Singh Bhati, AOR Mr. Hemendra Sharma, Adv. Ms. Chitrangda Rastravara, Adv. Mr. Abhijeet Singh, Adv. Mr. Anirudh Singh, Adv. Mr. Aishwary Mishra, Adv. Mr. Dhananjai Shekhwat, Adv. Mr. Shiv Autar Singh Sengar, Adv. Mr. Dashrath Singh, Adv. Mr. Yogeshwar Krishna, Adv. Ms. Anjali Sexena, Adv. Mr. S.K. Bagaria, Sr. Adv. Mr. Ashok Grover, Sr. Adv. Mr. Praveen Kumar, AOR Mr. Kumar Ajit Singh, Adv. Ms. Sunaina Kumar, Adv. Mr. Karuppaiah Meyyappan, Adv. Mr. Abhishek Kalaiyarsan, Adv. Mr. Ajit Kumar Sinha, Sr. Adv. Mr. Ashwarya Sinha, AOR Ms. Priyanka Sinha, Adv. Mr. Aditya Malhotra, Adv. Mr. Milind Kumar, AOR Mr. Syed Shahid Hussain Rizvi, AOR Mr. Guntur Prabhakar, AOR Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Solaman, Adv. Ms. Nivedita Sudheer, Adv. Ms. Sunaina Phul, Adv. Mr. Shailendra Swarup, AOR Ms. Bindu Saxena, Adv. Ms. Aparajita Swarup, Adv. Mr. Surender Kumar Gupta, AOR Ms. Muskan Gupta, Adv. Ms. Nandini Sen Mukherjee, AOR Mr. Sumit Teterrwal , AOR For the Respondent : Mr. R. Venkataramani, Attorney General for India Mr. Tushar Mehta, Solicitor General Mr. S.K. Bagaria, Sr. Adv. Mr. Rupesh Kumar, Sr. Adv. Mr. Sunil Kumar Jain, AOR Mr. Kaushik Choudhury, Adv. Mr. Shaantanu Jain, Adv. Ms. Anusha Agarwal, Adv. Mr. Deepanshu Jain, Adv. Mr. Achintya Kumar Sinha, Adv. Mr. Kumar Ajit Singh, Adv. Mr. Manish Jain, Adv. Ms. Rashika Swarup, Adv. Mr. Saksham Garg, Adv. Mr. Jyotirmoy Chatterjee, Adv. Mr. Sachin Sharma, Adv. Ms. Kanika Kalaiyarasan, Adv. Mr. Raman Chitwan Singh, Adv. Mr. Gurmeet Singh Makker, AOR Mr. Prashat Rawat, Adv. Mr. Rakesh Dwivedi, Sr. Adv. Mr. Tapesh Kumar Singh, Sr. Adv. Ms. Sansriti Pathak, AOR Mr. Eklavya Dwivedi, Adv. Mr. Sukant Vikram, Adv. Mr. Prashant Bhardwaj, Adv. Mr. Aditya Pratap Singh, Adv. Mr. Amarjeet Gupta, Adv. Mr. Vijay Hansaria, Sr. Adv. Mr. Gaurav Jain, Adv. Ms. Abha Jain, AOR Ms. Kavya Jhawar, Adv. Mr. Pawanshree Agarwal, Adv. Ms. Sneha Kalita, Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Nikhil Kohli, Adv. Mr. Kushank Garg, Adv. Ms. Kritika Khurana, Adv. Ms. Shrishti Jeswani, Adv. Mr. Arjun Garg, AOR M/S. Ars Associates, AOR Mr. V. K. Verma, AOR Mr. Praveen Kumar, AOR Mr. Ajit Kumar Sinha, Sr. Adv. Mr. Ambhoj Kumar Sinha, AOR Mrs. Manik Karanjawala, AOR Ms. Ankita Sharma, AOR Mr. Arjun D Singh, Adv. Mr. Apurv Kurup, A.A.G. Mr. S. S. Shroff, AOR Mr. Prafull N Bharat, Adv. Gen./Sr. Adv. Mr. Bishwajit Dubey, A.A.G. Mr. Atul Jha, A.A.G. Mr. Vikrant Singh Bais, D.A.G. Mr. Praneet Pranav, D.A.G. Mr. Vinayak Sharma, Standing Counsel, Adv. Mr. Apoorv Shukla, Adv. Mr. Ravinder Kumar Yadav, AOR Mr. Vinay Mohan Sharma, Adv. Mrs. Prabhleen Apoorv Shukla, Adv. Ms. Kritika Yadav, Adv. Ms. Devina Sehgal, AOR Mr. Gaurav Kejriwal, AOR Mr. K. Parameshwar, A.A.G. Mr. Rajeev Kumar Dubey, Adv. Mr. Kamlendra Mishra, AOR Mr. Santosh Krishnan, AOR Mr. Abhisth Kumar, AOR Mr. Ramendra Mohan Patnaik, AOR Mr. Syed Shahid Hussain Rizvi, AOR Ms. Punam Kumari, AOR Ms. Mrinal Gopal Elker, AOR Mr. Saurabh Singh, Adv. Mr. Rohit K. Singh, AOR Mr. Pritam Biswas, Adv. Mr. Prakhar Srivastava, Adv. Ms. Pratibha Malviya, Adv. Mr. Rakesh K. Sharma, AOR Ms. Manjula Gupta, AOR Mr. Harsh Parashar, AOR Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Raman, Adv. Mr. Shashank Menon, Adv. Mr. Amit Mital, Adv. Mr. John Thomas Arakal , Adv JUDGMENT Dr Dhananjaya Y Chandrachud, CJI Table of Contents A. Background .............................................................................................................. 9 B. Issues ...................................................................................................................... 13 C. Submissions ........................................................................................................... 14 i. Submissions of the petitioners ......................................................................... 14 ii. Submissions of the respondents ...................................................................... 18 D. Distribution of legislative fields relating to mines and minerals........................ 24 E. Underlying constitutional philosophy .................................................................. 29 i. Scheme of distribution of legislative powers and constitutional limitations 29 ii. Interpretation of legislative entries ................................................................... 35 iii. Fiscal Federalism ...................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................... 107 c. Taxes on mineral rights ................................................................................... 113 ii. The limitations on the taxing power of the State under Entry 50 of List II .. 116 a. Entry 50 of List II does not constitute an exception to the Sundararamier principle ........................................................................................................... 117 b. Nature of any limitation ................................................................................. 124 c. Scheme of the MMDR Act does not serve as any limitation ......................... 129 d. Section 9 does not serve as a limitation on the taxing powers of State ........... 134 e. Any limitation can extend to prohibition ........................................................ 135 f. Impact of taxes on mineral rights on mineral development ............................. 142 I. Scope of Entry 49 ................................................................................................. 146 i. Land System in India ........................................................................................ 146 ii. Tax on land and buildings ...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 [34] a seven-Judge Bench of this Court held that royalty is tax and the state legislatures lack competence to levy taxes on mineral rights because the subject-matter is covered by the MMDR Act. The Court also held that royalty cannot be used by the State legislature as a measure of tax on mineral-bearing lands under Entry 49 of List II. Later in time, in State of West Bengal v. Kesoram Industries Ltd. (2004) 10 SCC 201 [71] a Constitution Bench of this Court held that the decision in India Cement (supra) stemmed from an inadvertent error and clarified that royalty is not a tax. 3. In the aftermath of India Cement (supra) and Kesoram (supra), State legislatures exercised their legislative powers to impose taxes on mineralbearing land in pursuance of Entry 49 of List II by applying the mineral value or royalty as the measure of the tax. Mineral Area Development Authority v. Steel Authority of India, Civil Appeal No. 4056-64 of 1999; Sanghi Infrastructures MP Ltd. v. Union of India, Writ Petition (C) No. 512 of 2018 States such as Rajasthan Ambuja Cement v. State of Rajasthan, Diary No. 21291 of 2023; Wolkem Industries v. State of Rajasthan, Civil Appeal No. 8273 of 2013; Wonder C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MMDR Act is in the nature of tax; b. 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? c. 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 MMDR Act 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 MMDR Act denudes or limits the scope of Entry 50 of List II? d. What is the true nature of royalty/ dead rent payable on minerals produced/ mined/ extracted from mines? e. Whether the majority decision in Kesoram (supra) could be read as departing from the law laid down in India Cement (supra)? f. Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9, or any other provision of the MMDR Act, contain any limitation with respect to the field in Entry 50 of List II? c. Whether the expression subject to any limitations imposed by Parliament by law relating to mineral development in Entry 50 of List II pro tanto subjects the entry to Entry 54 of List I, which is a non-taxing general entry? Consequently, is there any departure from the general scheme of distribution of legislative powers as enunciated in M P V Sundararamier (supra)? d. What is the scope of Entry 49 of 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 of List II read with Entry 54 of List I? e. Whether Entry 50 of List II is a specific entry in relation to Entry 49 of List II, and would consequently subtract mining land from the scope of Entry 49 of List II? 6. The Union of India has filed an affidavit stating that the issues in this reference do not involve the interpretation of Entry 53 of List I of the Seventh Schedule which pertains to oilfields, mineral oil resources, petroleum and petroleum products. Counsel on both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot assume to itself the power to tax mineral rights, but can only impose limitations on the states when they exercise their powers in pursuance of Entry 50 of List II; e. The limitations contemplated under Entry 50 of List II have to be express because they deprive the State legislatures of their plenary power to impose tax. The MMDR Act does not expressly limit the legislative competence of the State legislatures to tax mineral rights. Royalty is neither tax, nor an exaction in the nature of tax. It cannot serve as a limitation envisaged by Entry 50 of List II; f. Under Entry 50 of List II, the limitations are required to be imposed by law made by Parliament. They cannot be imposed by a delegate acting under parliamentary legislation; and g. Entry 54 of List I read with Entry 50 of List II is not an exception to the principle laid down in M P V Sundararamier (supra). Entry 54 of List I is a regulatory entry, while Entry 50 of List II is a taxing entry. The power to impose any limitations under Entry 50 of List II cannot be interpreted so as to bestow upon Parliament legislative powers to tax mineral rights. There cannot be any overlap of the power of taxation because the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation on the legislative power of the states to tax mineral rights; and c. Parliament does not have the legislative powers to tax minerals rights using its residuary powers because the subject matter has been expressly enumerated in the State List. 10. Ms Sansriti Pathak, learned counsel, made the following submissions: a. The State, being the proprietor of minerals, can receive royalty for parting with its mineral rights and can also levy tax on the same minerals in the capacity of the sovereign; and b. The expression any limitations appearing in Entry 50 of List II cannot be construed to mean prohibition. Parliament can only limit the exclusive legislative powers of the State legislature to tax minerals, but cannot prohibit them. ii. Submissions of the respondents 11. Mr R Venkataramani, the learned Attorney General for India, made the following submissions: a. The grant of permission to undertake any activity in relation to a mineral is based on certain terms and conditions prescribed under the MMDR Act. The consideration for the grant of such permission is royalty, which in essence is the demand for parting with the privilege of working the mineral; b. It is immaterial wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sively to include sub-soil minerals because the subject matter of mines and minerals is covered by Entry 54 of List I and Entries 23 and 50 of List II. If mineral produce or mineral rights are used as a measure for taxation of lands under Entry 49 of List II, it will impact the Union s powers to legislate under Entry 54 of List I to limit the taxes on mineral rights in the manner contemplated in Entry 50 of List II; and d. Any levy imposed by the States with reference to the value of minerals produced is in pith and substance a tax on mineral rights under Entry 50 of List II. Since subject-matter of mineral rights covered by Entry 50 of List II is limited by a parliamentary law, giving an expansive reading to Entry 49 of List II by interpreting lands to include mineral deposits will lead to an overlap between the two entries. 13. Mr Harish Salve, learned senior counsel, made the following submissions: a. Entry 50 of List II is sui generis because it is the only legislative entry which limits the taxing power of the State legislatures by reference to a general law; b. The MMDR Act is a complete code on all aspects relating to regulation of mines and development of minerals. All mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve declaration under Section 2 of the MMDR Act denudes the States of any power to tax mineral rights under Entry 50 of List II. Even if the legislative declaration does not ipso facto exclude the legislative competence of the State legislatures under Entry 50 of List II, the MMDR Act contains specific provisions such as Sections 9, 9A, and 9B imposing taxes on mining lessees which occupy the field of taxation of mineral rights; c. The express language of Entry 50 of List II suggests that the taxing power of the State legislature is subordinated by a legislation made under Entry 54 of List I. This necessarily implies that Entry 54 of List I read with Entry 97 of List I empowers Parliament to tax mineral rights; and d. Entry 54 of List I read with Entry 97 of List I implies a sui generis and complete code on the legislative subject of regulation of mines and mineral development and taxation of minerals and mineral rights. Therefore, Entry 54 of List I and Entry 50 of List II constitute an exception to the principle laid down in M P V Sundararamier (supra). 15. Mr Darius Khambata, learned senior counsel, made the following submissions: a. The limitations imposed by Parliament under En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, submitted that the taxing powers of the State legislatures under Entry 50 of List II is not eclipsed by a taxing power of Parliament, but by a regulatory power. The learned ASG also emphasized that the concept of inter-generational equity has to be borne in mind by this Court to balance the legislative power of the State legislatures to tax mineral rights against the need for the development of minerals. D. Distribution of legislative fields relating to mines and minerals 21. A mineral is an inorganic substance found either on or under the surface of the earth. Ramanatha Aiyar Advanced Law Lexicon (Volume 3) 3543; In Banarsi Dass Chadha v. Lt Governor, Delhi Administration, (1978) 4 SCC 11 [4]. (Justice O Chinappa Reddy, on behalf of a three-Judge Bench observed: The word mineral is not a term of Article. It is a word of common parlance, capable of a multiplicity of meanings depending upon the context. For example, the word is occasionally used in a very wide sense to denote any substance that is neither animal nor vegetation. Sometimes it is used in a narrow sense to mean no more than precious metals than gold and silver. Again, the word minerals is often used to indicate subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the following manner: Part I Central Subjects 25. Control of mineral development in so far as such control is reserved to the Governor General in Council under rule made or sanctioned by the Secretary of State, and regulation of mines. Part II Provincial Subjects 24. Development of mineral resources which are Government property; - subject to rules made or sanctioned by the Secretary of State, but not including the regulation of mines. 24. The primary aim behind the introduction of the Devolution Rules was to transfer certain responsibilities to provincial legislative assemblies. See Debates in the House of Commons on the Government of India Act 1919 (3rd December 1919) However, the colonial state reserved to itself almost the entirety of the subject matter relating to mineral development and regulation of mines. The provincial legislatures were given limited power to the extent of development of mineral resources which were Government property. The Government of India Act 1935 GOI Act 1935 retained the distribution of legislative powers between the Centre and Provinces. Section 100 of the GOI Act 1935 demarcated the legislative powers of the Federal and Provincial Legislatures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes out of the purely restricted Provincial field and becomes a subject of control at the Centre. ] Thus, legislative power in relation to regulation of mines and mineral development was accorded to both the Federal and Provincial Legislatures. However, the subject matter in the Provincial Legislative List was made subject to the provisions of the Federal Legislative List. The Dominion Legislature enacted the Mines and Minerals (Regulation and Development) Act 1948 in pursuance of the subject contained in Entry 36 of the Federal Legislative List. 26. Entry 44 of the Provincial Legislative List enumerated the subject matter of taxes on mineral rights, but made the taxing power of the Provinces subject to any legislation relating to mineral development enacted by the Federal Legislature. This scheme of the distribution of legislative powers with respect to the subjectmatter of mines and mineral development as well as the taxation of mineral rights is reflected in the Constitution. 27. The Seventh Schedule to the Constitution enumerates the following entries pertaining to regulation of mines and mineral development and the taxation of mineral rights: List I Union List 54. Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 1 [617] While the sovereign legislative powers of Parliament and the State legislatures are plenary, they are subject to well-defined constitutional limitations. The language of Article 245 makes the exercise of legislative powers expressly subject to the provisions of the Constitution. Therefore, laws made by a legislature may be void not only for the lack of legislative power in respect of the subject-matter, but also for transgressing constitutional limitations. H M Seervai, Constitutional Law of India, Volume 3 (4th edn.) [22.6] 2306; State of Kerala v. Mar Appraem Kuri Company Ltd., (2012) 7 SCC 106, [41]. It is the duty of constitutional courts to resolve disputes regarding a breach of constitutional limits by the Union and State legislatures. State of West Bengal v. Committee for Protection of Democratic Rights, (2010) 3 SCC 571 30. The scheme of distribution of legislative powers between Parliament and the State legislatures is embodied in Article 246. Article 246 is similar to Section 100 of the GOI Act 1935. Article 246 deals with the subject matter of laws made by Parliament and the Legislatures of States and is set below: 246. Subject-matter of laws made by Parliamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t capable of reconciliation, the power of Parliament to legislate with respect to a matter enumerated in List I must supersede pro tanto the exercise of power of the State legislature; and g. Both Parliament and State legislatures have concurrent powers of legislation with respect to any of the matters enumerated in List III, the law enacted by Parliament prevailing in the event of any inconsistency or conflict. 32. Article 245 (read with Article 246) is the source of the legislative powers of Parliament and the State legislatures. The entries in the Seventh Schedule delineate the subject matter over which the appropriate legislature can enact laws. The entries are legislative heads and not the source of legislative powers. Calcutta Gas Company (Proprietary) Ltd v. State of West Bengal, 1962 Supp (3) SCR 1, [8] A legislation could be composite in nature, drawing upon several entries in a particular list. Ujagar Prints (II) v. Union of India, (1989) 3 SCC 488 [53]; State of West Bengal v. Committee for Protection of Democratic Rights, (2010) 3 SCC 571 [27]. Such a legislation is referred to as a ragbag legislation. 33. Article 254 clarifies that if the law made by a State legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to either of them; (ii) an attempt should be made to see whether the two entries can be reconciled so as to avoid a conflict of jurisdiction; and (iii) no question of conflict arises between two Lists if the impugned legislation in pith and substance appears to fall exclusively under one list and the encroachment upon the other list is incidental. 36. Articles 245 and 246 embody the essence of Indian federalism. The division of legislative powers between Union and States is an emanation of the federal project. Constituent Assembly Debates, Vol. 11 (25 November 1949). [Dr. B R Ambedkar As to the relation between the Centre and the States, it is necessary to bear in mind the fundamental principle on which it rests. The basic principle of Federalism is that the Legislative and Executive authority is partitioned between the Centre and the States not by any law to made by the Centre but by the Constitution itself. This is what the Constitution does. The States under our Constitution are in no way dependent upon the Centre for their legislative or executive authority. The Centre and the States are co-equal in this matter. It is difficult to see how such a Constitution can be called centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general entries and entries 46 to 63 provide for taxing entries. The legislature does not derive the power to tax from the general entries - taxation is considered to be a distinct matter for purposes of legislative competence. The distinction between the general and taxing entries was explained by this Court in M P V Sundararamier (supra) in the following manner: In List I, Entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law by Parliament. An examination of these two groups of Entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, entry 22 in List I is Railways , and Entry 89 is Terminal taxes on goods or passengers, carried by railway, sea, or air; taxes on railway fares and freights . If Entry 22 is to be construed as involving taxes to be imposed, then Entry 89 would be superfluous. Entry 41 mentions Trade and commerce with foreign countries; import and export across customs frontiers . If these expressions are to be interpreted as including duties to be levied in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive powers of Parliament and State legislatures. The rule that words should receive their ordinary, natural, and grammatical meaning applicable to statutes also applies to the entries contained in the Seventh Schedule. Navinchandra Mafatlal v. Commissioner of Income Tax, Bombay City, (1954) 3 SCC 623 It is also a well-accepted principle that the entries should not be read in a narrow or pedantic sense but must be given their broadest meaning and the widest amplitude because they are intrinsic to a machinery of government. Hans Muller of Nurenburg v. Superintendent, Presidency Jail (1955) 1 SCR 1284; Elel Hotels Investments Ltd v. Union of India, (1989) 3 SCC 698; State of Rajasthan v. G Chawla, 1958 SCC OnLine SC 33 [8] The ambit of the entries extends to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them. United Provinces v Atiqa Begum, (1940) 2 FCR 110; Express Hotels (P) Ltd. v. State of Gujarat, (1989) 3 SCC 677; Sardar Baldev Singh v. CIT, 1960 SCC OnLine SC 147 [20] Since the Seventh Schedule uses general terms, there is always a possibility of an overlap and conflict between two or more entries. 41. Many entries in the Sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n List III 26, 27, 57 Subject to the provisions of List I and List III 13 Subject to any limitations imposed by Parliament by law 50 Other than 7, 12, 32, 63 Not including 1, 51, 54, 66 43. The above table is an indication of the extent to which the legislative powers of the States have been restricted, limited, or altogether precluded. The use of the expression other than or not including serves the purpose of redacting from the ambit of the legislative power of the States to the extent suggested. Where the Constitution intends to limit or preclude the legislative powers of the State to a particular extent, it has used specific terminologies such as other than and not including . 44. Where the entries have used the phrase subject to , the legislative power of the State is made subordinate to Parliament with respect to either the Union List or the Concurrent List. The expression subject to conveys the idea of a provision yielding place to another provision or other provisions to which it is made subject. South India Corporation (P) Ltd. v. Secretary, Board of Revenue, (1964) 4 SCR 280 [19] Therefore, where the Constitution intends to displace or override State of Bihar v. Kameshwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Seventh Schedule, Constitution of India. [It reads Ancient and historical monuments and records, and archaeological sites and remains, declared by or under law made by Parliament to be of national importance. ] of the Union List. The object of the amendment was to enable the delegate under the statute to make the required declaration. Constitution (Seventh Amendment) Act, 1956, State of Objects and Reasons Clause 24 Entry 67 of the Union List refers to ancient and historical monuments and records, and archaeological sites and remains, declared by Parliament by law to be of national importance. A large number of ancient monuments, archaeological sites, etc. have been declared to be of national importance by an Act of Parliament. It requires another Act of Parliament to make the slightest alteration in, or addition to, the lists in that Act, which seems to be and unduly cumbrous procedure. It is, therefore, proposed to amend the entry substituting for the words declared by Parliament by law , the words declared by or under law made by Parliament . The same amendment is also proposed to be made in connected provisions, entry 12 of the State List, entry 40 of the Concurrent List and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach or interpretation which may have an effect of whittling down the powers reserved to the States: 276. The fact that under the scheme of our Constitution, greater power is conferred upon the Centre vis- -vis the States does not mean that States are mere appendages on the Centre. Within the sphere allotted to them, States are supreme. The Centre cannot tamper with their powers. More particularly, the courts should not adopt an approach, an interpretation, which has the effect of or tends to have the effect of whittling down the powers reserved to the States. [ ] 49. In a federal form of government, each federal unit should be able to perform its core constitutional functions with a certain degree of independence. The Constitution has to be interpreted in a manner which does not dilute the federal character of our constitutional scheme. Jindal Stainless Steel (supra) [85] The 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. Jindal Stainless Steel (supra) [615] 50. In Union of India v. Mohit Minerals Private Limited, (2022) 10 SCC 700 [56] this Court recognized fiscal fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by taking into consideration the particular needs of the State. By laying down a heterogenous distribution of legislative powers, the Constitution underscores that the asymmetry of our federation is an integral aspect of our federal form of governance. 53. Dr B R Ambedkar in his treatise on the evolution of provincial finances in colonial India observed that the cornerstone of the financial relationship between the Federal and State governments was characterized by separation of sources and contributions from the yield. Dr. B R Ambedkar, The Evolution of Provincial Finance in British India: A Study in the Provincial Decentralization of Imperial Finance (1923) 152-171. Any dilution in the taxing powers of the State legislatures will necessarily impact their ability to raise revenues, which in turn will impede their ability to deliver welfare schemes and services to the people. The ability of the State Governments to invest in physical infrastructure, health, education, human capacity, and research and development is directly co-related to the raising of government revenues. State Finances: A Study of Budgets of 2023-2024, Revenue Dynamics and Fiscal Capacity of Indian States Reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resources which are by nature meant for public use and enjoyment. The learned Judge further observed that the State has a legal duty to protect natural resources which cannot be converted into private ownership. ibid The environment and natural resources are national assets and subject to intergenerational equity. M C Mehta v. Union of India, (2009) 6 SCC 142 [45] The public trust doctrine looks beyond the needs of the present generation and obligates the State to protect natural resources for future generations as well. T N Godavarman Thirumulpad v. Union of India, (2006) 1 SCC 1 [89]. 56. While dealing with the allocation of spectrum in Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1 this Court held the State should distribute natural resources in consonance with the principles of equality and public trust to ensure against action detrimental to public interest. The public trust doctrine imposes restrictions and obligations on the government to protect long-established public rights over short-term private rights and private gain. Fomento Resorts Hotels Ltd. v. Minguel Martins, (2009) 3 SCC 571 [55] However, the obligation extends to every person who exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eant to protect the environment and communities who depend on the environment. 59. The principle that the Union and State Governments act as public trustees of mineral resources has been incorporated in the MMDR Act. Section 4-A empowers the Central Government to prematurely terminate a prospecting license, exploration license, or mining lease, after consultation with the State Government in the interests of (i) the regulation of mines and mineral development; (ii) preservation of the natural environment; (iii) control of floods; (iv) prevention of pollution; (v) avoiding danger to public health or communications; (vi) ensuring the safety of buildings, monuments or other structures; (vii) conservation of mineral resources; and (viii) maintaining safety in the mines or for such other purposes. See State of Haryana v. Ram Kishan, (1988) 3 SCC 416 [7]. [This Court observed that Section 4-A was enacted with a view to improve the efficiency in this regard and with this view directs consultation between the Central Government and the State Government. The two governments have to consider whether premature termination of a particular mining lease shall advance the object or not, and must, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining operations in any area except under and in accordance with the terms and conditions of a reconnaissance permit; prospecting licence; exploration licence; or mining lease granted under the Act. It also provides that no mineral concession shall be granted otherwise than in accordance with the provisions of the Act and the rules made under it. 64. Section 9 deals with royalties in respect of mining leases. Section 9(1) provides that the holder of a mining lease granted before the commencement of the Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at the commencement of the statute, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area after such commencement, at the rates of royalties prescribed under the Second Schedule. The non-obstante clause is only applicable to mining leases granted before the commencement of the MMDR Act. 65. Section 9(2) provides that the holder of a mining lease granted after the commencement of the MMDR Act is also liable to pay royalty in respect of any mineral removed or consumed by him or by his agent, manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mineral Concession Rules 1960 provides for charging of royalty in case of minerals subjected to processing. It provides that if the processing of run-of-mine mineral is carried out within the leased area, royalty shall be chargeable on the processed mineral removed from the leased area. In case run-of-mine mineral is removed from the leased area to a processing plant located outside the leased area, the royalty shall be chargeable on the unprocessed run-of-mine mineral and not the processed product. Thus, royalty is payable on removal of the mineral from the boundaries of the leased area. Tata Steel Ltd. v. Union of India, (2015) 6 SCC 193 [71] Rule 64D of the Mineral Concession Rules 1960 deals with the manner of payment of royalty on minerals on ad valorem basis. 68. Section 9A deals with payment of dead rent by the lessee. It provides that the holder of a mining lease shall pay to the State Government dead rent at such rate as may be prescribed in the Third Schedule. However, where the holder of the mining lease also becomes liable to pay royalty under Section 9, such person shall be liable to pay either royalty or dead rent, whichever is higher. The dead rent is calculated on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of the Form K. According to the recitals of Form K, the State Government executes the lease deed in favor of the lessor in consideration of the rents and royalties, covenants and agreement by and in these presents and the Schedule hereunder written reserved and contained and on the part of the lessee/lessees to be paid observed and performed. Further, all the mine beds/ veins/ seams with respect to specified minerals lying and being in or under lands are demised by the State Government to the lessee together with the liberties, powers, and privileges to be exercised or enjoyed in connection with the demise. The recitals indicate that the lease deed serves as a statutory agreement between the State Government, being the lessor, and the lessee. 73. Part V of Form K deals with rents and royalties reserved by the lease and specifies the rate and mode of payment of dead rent, royalty, surface rent, and the water rate. This part mandates the lessee to pay royalty to the State Government at the rates prescribed by the Central Government in the Second Schedule to the Act. Mineral Concession Rules 1960, Form K, Part V. It reads : [ Rate and mode of payment of royalty 3. Subject to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval from the State Government concerned or is covered by Rule 12. ] ) were approved and issued by the State Government. The Industrial Policy Resolution of 1956 proposed an active role for the State in setting up new industrial undertakings to achieve planned and rapid development. Cabinet Secretariat, Industrial Policy Resolution (30 April 1956) Minerals such as coal, lignite, mineral oils, iron ore, copper, zinc, and atomic minerals were exclusively reserved for the State, while the private sector was allowed to participate along with the public sector in case of minor minerals. The MMDR Act was enacted in pursuance of the above goals stated in the Industrial Policy Resolution. Another important consideration behind the enactment of the MMDR Act was to revise old and outmoded mining lease agreements and allow the private sector reasonable encouragement to develop mines and minerals. Mr J R Mehta, Lok Sabha Debates, Volume X (9th December to 21st December 1957) 7111. Through the MMDR Act, both the Central Government, and in case of minor minerals, the State Government, have been assigned a greater responsibility of development of minerals in India. This classification between m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remain static during the subsistence of the lease. Section 9 of the MMDR Act 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. The 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. The 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. Lok Sabha Debates, Volume VIII (11th November to 22nd November, 1957, Third Session) 463. iii. Contours of a mining lease a. Lease and license 79. Article 31A of the Constitution was inserted by the Constitution (First Amendment) Act 1951 to deal with the saving of laws providing for acquisition of estates: 31A. Saving of law providing for acquisition of estates, etc Notwithstanding anything contained in article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. Section 3(26), General Clauses Act 1897. Section 2(6) of the Registration Act defines immoveable property to include land, buildings, hereditary allowance, rights of way, lights, ferries, fisheries, or any other benefit to arise out of land, and things attached to earth, or permanently fastened to anything which is attached to the earth, except for standing timber, growing crops, and grass. Section 2(6), Registration Act 1908 A mineral is also a benefit arising out of land. The right to carry out mining operations to extract minerals under a mining lease has been held by this Court to be a right to enjoy immoveable property within the meaning of Section 105. State of Karnataka v. Subhash Rukmayya Guttedar, 1993 Supp (3) SCC 290 [6]; Sri Tarkeshwar Sio Thakur jiu v. Dar Dass Dey, (1979) 3 SCC 106 [37]. 84. The expression licence is defined in the Indian Easements Act 1882 as follows: 52. License defined. - Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immoveable property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied royalty. Under a prospecting licence, the licensee does not get an interest in the land or in the minerals contained therein. The licensee is only allowed to carry away a limited quantity of minerals after payment of specified royalty. Mineral Concession Rules 1960, Schedule III Even a prospecting licensee has to pay royalty to the State Government for carrying away the minerals won during prospecting operations. 87. A 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. Section 3(c), MMDR Act The expression mining operations has been defined to mean any operations undertaken for the purpose of winning any mineral. The expression winning has been explained by this Court to mean getting or extracting minerals from the mines. Gujarat Pottery Works v. B P Sood, (1967) 1 SCR 695 [18]; Bhagwan Dass v. State of Uttar Pradesh, (1976) 3 SCC 784 [13]. [Justice Y V Chandrachud (as the learned Chief Justice then was) observed: In any case, the definition of mining operations and minor minerals in Section 3(d) and (e) of the Act of 1957 and Rule 2(5) and (7) of the Rules of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 53, Mineral Concession Rules 1960 Chapter IV of the Mineral Concession Rules 1960 (containing Rules 22 to 40) deals with the grant of mining leases in respect of land in which the minerals vest in the government. Rule 22(1) provides that an application for the grant of a mining lease in respect of land in which the minerals vest in the government shall be made to the State Government. Rule 27 provides the conditions which are applicable to mining leases under Chapter IV. Rule 27(1)(c) provides that the lessee shall pay either dead rent or royalty (whichever is higher) to the State Government. Rule 27(c), Mineral Concession Rules 1960 Rule 27(1)(d) deals with payment of surface rents, water rents, etc. by the lessee to the State Government. 128 Rule 27(d), Mineral Concession Rules 1960 Rule 27(2) allows the State Government to include such other conditions as it may deem necessary in regard to matters enumerated therein. Rule 27(3) allows the State Government, either with the previous approval of the Central Government or at the instance of Central Government, to impose such further conditions as may be necessary in the interests of mineral development. 90. Chapter V (containing R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g lease if the lessee defaults in payment of royalty or commits a breach of any of the conditions of the lease. These differences indicates that in case of a mining lease under Chapter V of Mineral Concession Rules: (i) the State Government is not the lessor (that is the proprietor of the minerals who is a private person); and (ii) royalty, dead rent, and other rents are to be payable to the lessor and not the State Government. 92. In State of Meghalaya v. All Dimasa Students Union, (2019) 8 SCC 177 [129]-[130] this Court held that: (i) Chapter V of the Mineral Concession Rules has to be treated to be dealing with minerals owned by private persons; (ii) a mining lease granted according to Chapter V of the Mining Concession Rules 1960 is a mining lease granted by the owner of the minerals and not the State Government; and (iii) no authority can grant a mining lease in respect of minerals which vest with private owners without the authority of such owners. 93. The right of proprietors to grant leases and receive royalty stems from the proprietary interest in the immovable property including the minerals. The MMDR Act regulates the exercise of the proprietary rights in the minerals in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t merely to enjoy the property as under an ordinary lease but also to extract minerals from the land and to appropriate them for his own use or benefit, in addition to the usual rent for the area demised, the lessee is required to pay a certain amount in respect of the minerals extracted proportionate to the quantity so extracted. Such payment is called royalty . It may, however, be that the mine is not worked properly or as not to yield enough return to the lessor in the shape of royalty. In order to ensure for the lessor a regular income, whether the mine is worked or not, a fixed amount is provided to be paid to his by the lessee. This is called dead rent . Dead rent is calculated on the basis of the area leased while royalty is calculated on the quantity of minerals extracted or removed. Thus, while dead rent is a fixed return to the lessor, royalty is a return which varies with the quantity of minerals extracted or removed. [ ] ( emphasis added ) 96. Minerals are exhaustible and finite resources. Each quantity of mineral removed leads to the depletion of the mineral stock of the mine.137 Under a mining lease, a lessee acquires a right or interest in minerals. This right or int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worked. Therefore, dead rent is not in addition to royalty but an alternative. 100. If royalty is a consideration paid by the lessee to the lessor as part of the terms of a mining lease, can this payment be considered in the nature of tax? This is the next issue for our consideration. v. Characteristics of Tax 101. Taxation is a mode of raising revenue to fund public expenditure. The power of taxation is an essential and inherent attribute of sovereignty.141 In the decision of the US Supreme Court in McCulloch v. Maryland,142 Chief Justice John Marshall described the sovereign right of taxation thus: It is admitted that the power of taxing the people and their property is essential to the very existence of Government, and may be legitimately exercised on the objects to which it is applicable, to the utmost extent to which the Government may choose to carry it. The only security against the abuse of this power is found in the structure of the Government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 102. Taxes are monetary burdens or charges imposed by legislative power upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral or local or special. This Court has interpreted the word tax in its widest amplitude to include all money raised by taxation.150 In Jindal Stainless Steel (supra), one of us (Justice D Y Chandrachud) held that the expression any tax means any levy which the State is constitutionally competent to legislate. 151 106. One of the issues debated in the reference pertains to the meaning of the word impost. Thomas Cooley in the Law of Taxation defines imposts to mean any tax, tribute, or duty. 152 This Court has generally construed the expression imposts to include taxes153 and fees154 realizable by the authority of law.155 In CIT v. McDowell and Co. Ltd.,156 this Court held that the term impost means compulsory levy and that tax in its wider sense includes all imposts.157 In McDowell (supra), the assesse sought to claim a deduction under Section 43- B(a) of the Income Tax Act 1961 on the payment of bottling fees made to the State Government under the Rajasthan Excise Act 1950. Section 43-B(a) allowed a deduction in respect of any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force. The issue before the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xaction. An impost is a compulsory exaction. The power to levy an impost is an incident of sovereignty. A liability arising out of contract cannot be termed as an impost or tax. A consideration paid under a contract to the State Government for acquiring exclusive privileges and rights with respect to a particular activity cannot be termed as an impost or tax under Article 366(28). 109. The government may demand payments in the nature of a price or consideration for parting with its exclusive privilege to carry on activities of a particular description. Well-known examples involving the parting of the exclusive privilege by the government include telecommunication activities and the manufacture and sale of intoxicants. The price paid for parting with an exclusive privilege vesting in government is neither a tax nor a fee.159 In State of Punjab v. Devans Modern Breweries,160 the issue before a Constitution Bench was whether the levy of an import fee by the state on potable liquor manufactured in other states was beyond the legislative competence of the state legislature. Justice R C Lahoti (as the learned Chief Justice then was) speaking for the majority, observed that the State Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature had no legislative power to impose the levy since its subject matter was covered by the MMDR Act. The High Court also held that the levy was in substance a tax on mineral rights.164 In the context of Entry 50 of List II, the High Court observed that: (i) tax on mineral rights includes royalty payable on extracted minerals; (ii) mineral rights and mining activities which are carried out in exercise of mineral rights are indistinguishable; (iii) Parliament has occupied the entire subject matter of the regulation of mines and mineral development as well as tax on mineral rights by virtue of the legislative declaration under the MMDR Act; and (iv) the provisions of the MMDR Act pertaining to the levy, fixation and collection of royalty (Section 9) as well as its recovery as arrears of land revenue (Section 25) suggest that the expression royalty under Section 9 connotes the levy of a tax. The essence of the High Court s decision was that since royalty is in the nature of a tax on mineral rights and is covered by Parliamentary legislation, the legislative power of the State legislature to levy taxes on mineral rights stands excluded. 114. The contrary view of other High Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting for the majority, observed that the cess was levied essentially on royalty and not on land revenue, both of which are distinct concepts. The State s recourse to Entry 45 of List II was negatived. With respect to Entry 49 of List II, Justice Mukharji observed that royalty is directly relatable to the minerals extracted and therefore would only be relatable to Entries 23 and 50 of List II, and not Entry 49 of List II.167 Therefore, the statutory provision was in pith and substance held to be a tax on royalty and not on land. The decision in H R S Murthy (supra), according to which cess paid on royalty has a direct relationship with land and only a remote relationship with minerals, was overruled. A detailed analysis pertaining to Entry 49 of List II has been undertaken in a later segment of this judgment. 117. On Entries 23 and 66 of List II, Justice Mukharji observed that the legislative power of the State legislature to levy fees is denuded by the enactment of the MMDR Act by Parliament. Finally, on Entry 50 of List II, Justice Mukharji observed that the bar provided in Section 9(3) on the enhancement of royalty specified under the Second Schedule also applies to the state leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Constitution Bench had to decide on the validity of a cess levied by the State on coal-bearing land. The measure of the cess was relatable to the quantity of minerals produced from land. Whether royalty is a tax was not directly in issue. In fact, Justice Lahoti, speaking for the majority, held that India Cement (supra) was distinguishable because in that case cess was levied on royalty and not on mineral rights or lands. However, the learned Judge felt constrained and dutybound to point out a typographical error in the majority opinion in India Cement (supra) to prevent any adverse impact on subsequent judicial pronouncements . Paragraph 34 of India Cement (supra) was held to contain a typographical error, which Justice Lahoti explained thus: 57. In the first sentence the word royalty occurring in the expression royalty is a tax , is clearly an error. What the majority wished to say, and has in fact said, is cess on royalty is a tax . The correct words to be printed in the judgment should have been cess on royalty in place of royalty only. The words cess on appear to have been inadvertently or erroneously omitted while typing the text of the judgment. This is clear from reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kesoram (supra) is apparent and pertains to whether or not royalty is a tax. For the reasons to follow, we are of the opinion that royalty does not meet the characteristic requirements of a tax. c. Royalty is not a tax 123. On first principles, royalty 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. The marginal note to Section 9 states that royalties are in respect of mining leases. The liability to pay royalty arises out of the contractual conditions of the mining lease.177 A failure of the lessee to pay royalty is considered to be a breach of the terms of the contract, allowing the lessor to determine the lease and initiate proceedings for recovery against the lessee. 124. Section 9 of the MMDR Act 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. Prior to the enactment of the MMDR Act, such a condition was treated as part of a mining lease. The object of empowering the Central Government to specify rates of royalty for major miner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has held that royalty is not a tax, in several decisions. In State of H P v. Gujarat Ambuja Cement Ltd,179 a three judge Bench of this Court held royalty not to be a tax. The subsequent decision in Indsil Hydro Power Manganese Ltd. v. State of Kerala180 brought out the distinction between tax and royalty in the following terms: 56. Thus, the expression royalty has consistently been construed to be compensation paid for rights and privileges enjoyed by the grantee and normally has its genesis in the agreement entered into between the grantor and the grantee. As against tax which is imposed under a statutory power without reference to any special benefit to the conferred on the payer of the tax, the royalty would be in terms of the agreement between the parties and normally has direct relationship with the benefit or privilege conferred upon the grantee. 129. The principles applicable to royalty apply to dead rent because: (i) dead rent is imposed in the exercise 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter-relationship between the two entries, we deem it necessary to define the subject matter of the entries. The subject-matter of the entries has to be understood from both the text and the context in which the words have been used. 134. The expression regulation generally means to manage the governance of an enterprise by means of rules or laws.182 In K Ramanathan v. State of Tamil Nadu,183 this Court explained the meaning of the power to regulate in the following terms: 19. It has often been said that the power to regulate does not necessarily include the power to prohibit, and ordinarily the word regulate is not synonymous with the word prohibit . This is true in a general sense and in the sense that mere regulation is not the same as absolute prohibition. At the same time, the power to regulate carries with it full power over the thing subject to regulation and in absence of restrictive words, the power must be regarded as plenary over the entire subject. It implies the power to rule, direct and control, and involves the adoption of a rule or guiding principle to be followed, or the making of a rule with respect to the subject to be regulated. The power to regulate implies t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR Act gives shape and meaning to the expression regulation of mines and mineral development through its provisions and the subordinate rules. To that effect, we find provisions under the MMDR Act pertaining to prospecting or mining operations under lease or licence,193 restrictions on the grant of mineral concessions,194 periods for which prospecting licences195 or mining leases196 may be granted or renewed, and royalties in respect of mining leases.197 Chapter III deals with the procedure for obtaining mineral concessions in respect of land in which the minerals vest in the government. Chapter IV empowers the government to frame rules for regulating the grant of mineral concessions. Chapter V deals with the special powers of Central Government to undertake prospecting or mining operations in respect of lands in which the minerals vest in the Government of a State or any other person.198 Thus, Chapters II to V of the MMDR Act invariably deal with aspects regulating the place of extraction of minerals and the process by which mines are worked. These provisions govern aspects such as conceding land to a person for carrying out mining operations (mining concession) or granting licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or controlling any pollution which may be caused by prospecting or mining operations. Section 18(2) indicates that the Central Government may make rules on matters pertaining inter alia to regulation of mining operations in any area; regulation of the excavation or collection of minerals from any mine; development of mineral resources in any area; regulation of arrangement of storage of minerals; and regulation of prospecting operations, disposal or discharge of waste slime or tailing arising from mining operations. In terms of Section 18, Parliament has framed the Mineral Conservation and Development Rules 2017 to provide a framework for conservation of minerals, systematic and scientific mining, development of minerals and protection of the environment.201 141. The expression mineral development has also been understood under the MMDR Act in a comprehensive manner, to include all activities and transactions relating to the working of mines, extracting of minerals, their storage and disposal, as well as the conservation of the environment. Having established the meaning and scope of the subject-matter in Entry 54 of List I and Entry 23 of List II, we now analyze the inter-relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetence to impose the levy in view of Entry 54 of List I read with the MMRD Act 1948. Justice P B Gajendragadkar (as the learned Chief Justice then was) writing for the majority, explained the inter-relationship between Entry 54 of List I and Entry 23 of List II in the following terms: 24. [ ] The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said Entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act the impugned Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter part of Entry 23 is a limitation on the legislative competence of the State Legislature itself. This position is not in dispute. 145. This Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be competent to the State Legislature to pass an Act in respect of the subject-matter covered by the said declaration. In order that the declaration should be effective it is not necessary that rules should be made or enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the regulation and development of mines under the control of the Union. In such a case the test must be whether the legislative declaration covers the field or not. Judged by this test there can be no doubt that the field covered by the impugned Act is covered by the Central Act 53 of 1948. (emphasis added) 146. The test laid down by this Court in Hingir-Rampur (supra) is whether the legislative declaration under a Parliamentary law enacted in pursuance of Entry 54 of List I covers the subject-matter. If the subject matter is covered by the legislative declaration, the legislative competence of the States with respect to that subject-matter is pro tanto denuded. Applying this test, it was held that the subject-matter of the levy of fees for conservation and development of minerals was covered by the MMRD Act 1948. 147. The next issue before this Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of mines and mineral development under Entry 23 of List II is plenary and subject to the provisions of Entry 54 of List I; (ii) Section 2 of the MMDR Act contains the requisite legislative declaration in terms of Entry 54 of List I. To the extent to which the Union Government has taken the regulation of mines and development of minerals under its control, so much was withdrawn from the ambit of the power of the State legislature under Entry 23 of List II. The legislation of the State enacted under Entry 23 of List II would, to the extent of that control , be superseded or be rendered ineffective;211 (iii) The legislative power of the state remains intact beyond the extent of the MMDR Act. Therefore, the crucial enquiry has to be directed to ascertain the extent of the Parliamentary legislation; (iv) Where a competent legislature with superior legislative powers expressly or impliedly evinces by its legislation an intention to cover the whole field, the enactments of the other legislature whether passed before or after would be superseded on the ground of repugnance.212 Section 18(1) evinces the Parliamentary intention to cover the entire field relating to conservation and develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slatures possess only such powers as are expressly conferred on them by Parliament. The propositions put forth by the Solicitor General can be encapsulated as follows: a. Hingir-Rampur (supra) shows that the subject-matter of statutory levies pertaining to minerals is covered by the legislative declaration. Although the MMDR Act does not contain a provision similar to Section 6 of the MMRD Act 1948, it provides for statutory levies such as royalty and dead-rent. Thus, Parliament has covered the subject-matter of statutory levies relating to mineral rights and the state legislature has no power to impose a levy in the form of taxes on mineral rights under Entry 50 of List II; b. M A Tulloch (supra) held that a Parliamentary legislation enacted under Entry 54 of List I also impacts the independent legislative powers of States with respect to Entry 66 of List II. This reasoning will be applicable to Entry 50 of List II with greater force, more so, because this entry is expressly subject to any law made by Parliament relating to mineral development; and c. In Baijnath Kedia (supra) there were no express provisions under the MMDR Act limiting the state legislature from enacting legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MMDR Act was held to cover the field of the disposal of waste of a mine (including coal slurry), thereby denuding the legislative power of the state legislature with respect to that subject matter. It was further held that once the state legislature s power under Entry 23 of List II is denuded, the State Government ceases to have any executive authority in the matter relating to the regulation of mines and mineral development in view of Article 162 of the Constitution.219 Thus, both the legislative and the executive powers of the State were held to be taken away to the extent to which the MMDR Act covered the subject matter dealing with regulation of mines and mineral development.220 157. This Court has to give credence to the public interest considerations underpinning the MMDR Act while interpreting its scope and ambit. The expression public interest occurring in both Entry 54 of List I and Section 2 of the MMDR Act indicates that the provisions of the legislation do not merely cover the interests of private individuals (such as owners of private property or holders of mining leases) relating to the regulation of mines and mineral development. The public interest underpinnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter under the control of Parliament and determines the extent of such control; and second, it enshrines the precept of the rule of law where the basis for trenching upon the legislative powers of the State has to be found in a law made by Parliament. The Parliamentary enactment through which legislative control is being assumed by the Union, to the exclusion of state legislatures, cannot be abstract, vague, and general. While Parliament has the power to denude the field given to the states under Entry 23 of List II by making a declaration in the law which it enacts pursuant to the field reserved by Entry 54 of List I, the law enacted by Parliament must specify the field of regulation and development which it has taken over, and the extent to which the control of the Union is deemed to be in the public interest. 161. The use of the expression to the extent under Entry 54 of List I carries the consequence that the Parliamentary legislation has to specify the subject matter or field over which it seeks to legislate. In M A Tulloch (supra), this Court held that the intention of the legislation to occupy a particular subject matter has to be gathered from the words of the provisions.22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in the public interest has to be ascertained from the language of the statute. Keeping these principles in mind, we now move on to analyzing the interrelationship between Entry 54 of List I and Entry 50 of List II. H. Inter-relationship between Entry 50 of List II and Entry 54 of List I 164. The respondents contend that the legislative declaration contained under Section 2 along with the other provisions of the MMDR Act serves as a limitation on the legislative powers of state legislatures to tax minerals under Entry 50 of List II. The main thrust of the argument of the respondents is that anything encompassed in a law relating to mineral development serves as a limitation on the field of taxation under Entry 50 of List II. Moreover, it was submitted that the MMDR Act leaves no legislative room for the state legislature in respect of the subject matter of mines and mineral development, including taxes on mineral rights. On the contrary, the petitioners submit that the MMDR Act can only have the effect of abstracting the State s legislative field with respect to Entry 23 of List II. It was further contended that the MMDR Act does not contain any provision limiting the field of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed times, when coal falls greatly in price, the royalty owner continues to receive his full royalty, whilst the miner suffers from a reduction in wages, or a closing of mines; their efforts to avert any reduction sometimes taking the form of a strike. 231 To counter the appropriation of royalties by landowners, the lawmakers decided to levy tax on royalties received by them232 with a view to increase revenue generation and enhance the welfare measures for miners.233 169. The Parliament in England imposed a mineral rights duty by Finance Act 1910. Section 20 imposed a duty on the rental value of all rights to work minerals and of all mineral way leaves at the rate of one shilling for every twenty shillings of that rental value. The rental value was calculated in the following manner: (i) where the right to work the minerals was the subject of a mining lease, the amount of rent paid in the last working year; (ii) where minerals were being worked by the proprietor, an amount fixed by the Commissioners of Inland Revenue as equivalent to rent; and (iii) in case of mineral wayleave, the amount of rent paid by the working lessee in the last working year. Lloyd George, the Chancellor of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m or selling them to third parties. The right to minerals emanates from the concept of the ownership of property. 173. Counsel have drawn attention to dictionary meanings attributed to mineral rights . Black s Law Dictionary defines mineral right as an interest in minerals in land, with or without ownership of the surface of the land; a right to take minerals or a right to receive royalty. 241 174. Corpus Juris Secundum defines the term mineral right as follows: It is the right or title to all, or to certain specified, minerals in a given tract. It is a broader term and is more inclusive than the term oil and gas , and it has been held that, in the light of the surrounding facts and circumstances under which it is used, it may not be necessarily include the right to oil and gas. 242 175. In Pennsylvania Coal Co. v. Mahon,243 the US Supreme Court observed that the right to coal consists of the right to mine it. Entry 50 of List II uses the expression mineral rights in the plural. It hence envisages a bundle of rights associated with the ownership of minerals. The owner of minerals may transfer the rights to the minerals to another person. Once transferred, the lessee stands in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nerals from the leased area. 177. In his dissenting opinion in Kesoram (supra), Justice S B Sinha sought to draw a distinction between minerals and mineral rights by observing that mineral rights cannot be construed as mineral already extracted as contradistinguished from being capable of extraction or otherwise in a state or form when embedded in the earth. 247 The learned Judge observed that when a mineral is extracted, it may be a culmination of the right to deal in the mineral but the mineral rights would not include a right to dispatch extracted minerals. Justice Sinha observed that the right to receive royalty is also a mineral right. According to him mineral rights extend till the extraction of minerals from the earth and do not include the right to dispatch the extracted minerals. There is a fallacy in Justice Sinha s observations. Statutorily, royalty is a consideration by the lessee to the lessor for winning the minerals and removing them from the leased area. Section 9 of MMDR Act imposes royalty on removal or consumption of minerals by lessee. Royalty, is paid on dispatch of minerals. Thus, mineral rights do not culminate with the extraction of minerals, but include the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or timber standing or found on the demised lands. 180. Having explained the scope of the expression mineral rights , the next issue pertains to the scope and ambit of taxes on mineral rights. c. Taxes on mineral rights 181. The respondents have contended that the meaning of the term taxes on mineral rights must be derived from the related entries in List II, namely Entries 45 and 49. It was contended that since the incidence of the tax imposed in light of Entries 45 and 49 is on the owner of land, the incidence of tax on mineral rights is also on the owner of land, that is the private lessor. On the contrary, the petitioners have refuted the respondent s submission on the ground that the tax under Entry 50 of List II can also be applied with respect to lessees who hold the land or building on lease from the Government. 182. Conceptually, a tax has four elements (i) the nature of the tax which prescribes the taxable event attracting the levy; (ii) the person who is liable to pay tax; (iii) the rate at which the tax is paid; and (iv) the measure or value to which the rate will be applied for computing the liability.254 183. The subject matter of taxation has been exhaustively enunci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the minerals from the leased area. The right to receive royalty is an integral part of the mineral rights of the lessor. However, as discussed in the segments above, royalty is not a tax. Therefore, royalty would not be comprehended within the meaning of the expression taxes on mineral rights. The scope of taxes on mineral rights includes taxes on the right to extract minerals. Taxes on mineral rights also take within their fold other aspects relating to the exercise of mineral rights such as working the mines and dispatching minerals from the leased area. However, the legislature has to ensure that the exercise of the taxing powers relatable to the field under Entry 50 of List II does not foray into a duty of excise or a tax on the sale of minerals. 188. The taxable event with respect to taxes on mineral rights will be the exercise of mineral rights. The incidence of the tax on mineral rights depends upon who is exercising the right. We do not agree with the respondents that the incidence of a tax on mineral rights would necessarily have to be on the owner of the land. A tax under Entry 49 of List II is not only levied on the owner of the land, but also an occupier.260 Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icted by a regulatory entry. A related issue is whether Parliament has the legislative competence to tax mineral rights under its residuary powers. 193. The decision in Hoechst Pharmaceuticals (supra) interpreted the relationship between Entry 54 of List II and Entry 92A of List I. Entry 54 of List II, before amendment, was subject to the provisions of Entry 92A of List I.261 The entry was substituted by the Constitution (One Hundred and First Amendment) Act 2016. The Bihar Finance Act 1981 levied a surcharge on dealers. The law was made pursuant to the field of legislation in Entry 54 of List II. The Act prohibited dealers from collecting surcharge. It was contended that the prohibition on dealers recovering the surcharge was inconsistent with the Drug (Price Control) Order 1979 issued under the Essential Commodities Act, which allowed the manufacturer or producer of drugs to pass on the liability to pay sales tax. The Essential Commodities Act was enacted for the regulation, production, supply, distribution and pricing of essential commodities and is relatable to Entry 33 of List III.262 One of the issues before this Court was whether the State power to tax the sale of goods unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the taxing entry in Entry 50 of List II is confined to mineral rights. Entry 23 of List II also encompasses the regulation of mines and mineral development as a legislative field for the states. Since Entry 54 of List I also deals with the regulation of mines and mineral development , the states domain under Entry 23 of List II is subject to the limitations created by Entry 54 of List I. Despite the positioning of Entry 23 in List II, the Constitution has specifically enumerated the taxing field with respect to mineral rights in Entry 50 of List II. Taxation of mineral rights is hence, traceable to Entry 50 of List II. If the framers had intended that the field of taxing mineral rights would be subsumed in the general entry covering the regulation of mines and mineral development, namely, Entry 23 of List II, there would have been no reason to provide for a specific taxing entry on mineral rights in Entry 50 of List II. Therefore, just as the field of taxing mineral rights does not fall under Entry 23 of List II, it does not fall under Entry 54 of List I which uses similar language and is not a taxing entry. While the imposition of taxes on mineral rights is a field entrusted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking for the Federal Court observed that [i]t is natural enough, when considering the ambit of an express power in relation to an unspecified residuary power, to give a broad interpretation to the former at the expense of the latter. The enumeration of taxes on mineral rights in List II is a constitutional entrustment to the states. This Court is bound to abide by the constitutional distribution of legislative powers. The distribution also subserves the principles of fiscal federalism. 201. In Mahalaxmi Fabric Mills (supra),267 the constitutional validity of Section 9(3) of the MMDR Act and a notification fixing new rates of royalty was in question. The Central Government sought to increase the rate of royalty to compensate the state, which had suffered financial losses as a result of the invalidation of the cess imposed by it by the decision in India Cement (supra). The notification was challenged before the High Court of Madhya Pradesh for excessively increasing the rates of royalty by 400 per cent to 2000 per cent as compared to the royalty fixed in 1981 on various varieties of coal. The High Court held that the notification was outside the purview of Section 9(3) of the MMDR A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idiary powers with respect to a legislative entry. However, the power to tax is neither incidental nor subsidiary to the power to legislate on a particular matter in the nature of a regulatory entry.272 206. Entry 50 of List II is subordinated only to the extent of any limitations that may be imposed by Parliament by law relating to mineral development. Unless Parliament imposes a limitation, the plenary power of the state legislature to levy taxes on mineral rights is unaffected. 207. The question of an overlap between the taxing entry and general entry does not arise because Parliament cannot impose taxes on minerals under Entry 54 of List I. There is no direct conflict between the taxing powers of the States under Entry 50 of List II and the regulatory powers of the Union. Resultantly, the principle of federal supremacy has no application in the instant case. Hence, while Entry 50 of List II is sui generis, it does not constitute an exception to the position of law laid down in M P V Sundararamier (supra). b. Nature of any limitation 208. Having established that the state legislature has exclusive power to enact laws relating to taxes on mineral rights under Entry 50 of List II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l by the Union. Once these three conditions are fulfilled, the field for the states is abstracted away to the extent that is envisaged in the Parliamentary law. The relationship between Entry 23 of List II and Entry 54 of List I is that the latter results in a denudation of the legislative field of the states to the extent envisaged by Parliament by law. The expression extent leaves it entirely to Parliament to determine whether the extent of the control by the Union is to be total or partial. The denudation of the legislative field of the states follows such a declaration by Parliament and the extent would be determined by the provisions of the law (the MMDR Act) enacted by Parliament. 211. We may now contrast this with Entry 50 of List II. Entry 50 of List II gives the legislative field of taxing mineral rights to the states. But while doing so, it makes it subject to limitations imposed by Parliament by law relating to mineral development. The words subject to appear in both Entry 23 and in Entry 50 of List II. They are words which indicate primacy of Parliament. But in Entry 50 of List II, the Constitution envisages that the field of taxing mineral rights which is given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive power of the state legislature must be express: 13. [ ] The legislative competence of the State can only be circumscribed by express prohibition contained in the Constitution itself and unless and until there is any provision in the Constitution expressly prohibiting legislation on the subject either absolutely or conditionally, there is no fetter or limitation on the plenary powers which the State Legislature enjoys to legislate on the topics enumerated in the Lists 2 and 3 of the Seventh Schedule to the Constitution. [ ] 14. The fetter or limitation upon the legislative power of the State Legislature which had plenary powers of legislation within the ambit of the legislative heads specified in the Lists 2 and 3 of the Seventh Schedule to the Constitution could only be imposed by the Constitution itself and not by any obligation which had been undertaken by either the Dominion Government or the Province of Bombay or even the State of Bombay. Under Article 246 the State Legislature was invested with the power to legislate on the topics enumerated in Lists 2 and 3 of the Seventh Schedule to the Constitution and this power was by virtue of Article 245(1) subject to the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int that the states have been deprived of legislative control in respect of mineral development: a. Although the State Government is the owner of minerals, the MMDR Act defines the rights which can be created in those minerals. Section 4 provides that no person can undertake prospecting or mining operations except in accordance with the terms and conditions of the license or lease, as the case may be. The form of license and lease agreements is stipulated under the Mineral Concession Rules. The grant of mineral rights is governed by the terms and conditions laid down under Form K of the rules. The State Government cannot change or modify the terms of the prospecting license or mining lease. The proviso to Section 5(1) states that the State Government shall not grant any mineral concession except with the previous approval of the Central Government. Any mineral concession granted in contravention of the provisions of the MMDR Act is void.277 Moreover, Section 21 entails penal sanctions for contravention of Section 4; b. The Central Government prescribes the fiscal exactions (such as royalty, dead rent, and surface rent) for the grant or creation of mineral rights. Section 9 empowers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resource, their exploitation has to be scientific and judicious. The MMDR Act enumerates rules and regulations to ensure that the exploration, extraction, and exploitation of minerals follow standards of conservation and sustainability. The Indian State is the trustee of all natural resources, including minerals.279 Therefore, it is a constitutional duty of the State to protect minerals and ensure their exploitation in public interest. 221. By authorizing the Central Government to lay down the terms of mining leases and grant approval to concessions, the MMDR Act seeks to ensure that there is uniformity in the terms for working of mines and extraction of minerals. Uniformity in the terms and conditions of mining leases, rates of royalty, and in the policy approach towards conservation of minerals reduces indiscriminate exploitation of mineral resources and promotes mineral development. The fact that the State Government cannot alter the clauses in the mining lease cannot be understood to mean that all the powers of the State with respect to regulation of mines and mineral development as well as the power to tax mineral rights have been extinguished. 222. Entry 50 of List II provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Entry 50 of List II contemplates an implicit denudation of legislative powers of States once a law relating to mineral development was enacted by Parliament under Entry 54 of List I. 226. The theory of implied limitations was adopted in Kesavananda Bharati (supra) to iterate that the basic structure doctrine serves as an implied limitation on the power of Parliament to amend the Constitution.282 The power of Parliament to amend the Constitution was subjected to the basic structure doctrine. The doctrine of implied limitations is not applicable in the present case in view of the fact that Entry 50 of List II specifies the nature of the limitation and the manner in which it can be imposed. The implication that any law enacted by Parliament under Entry 54 of List I will impliedly denude the powers of the state legislature under Entry 50 of List II will usurp the taxing powers of the States. 227. The principle of constitutional silences has generally been used to step in where the Constitution is silent or where there is a legislative vacuum.283 Entry 50 of List II is clear in its terms a limitation can be imposed by Parliament by law relating to mineral development. In the face ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mineral Foundation constituted by the State Government. Similarly, payment under Section 9C is made to the trust created by the Central Government for funding the agencies specified in Section 4(1). The payments under Sections 9B and 9C do not amount to a tax on mineral rights. Sections 9, 9A, 9B, and 9C do not impose any limitations on the taxation powers of the state legislatures under Entry 50 of List II. e. Any limitation can extend to prohibition 232. In Jindal Stainless Steel (supra), one of us (Justice D Y Chandrachud) observed that curtailment of legislative powers vested in the State may take place through: (i) abstraction; (ii) eclipse; and (iii) limitations or restrictions.285 The expression any limitations finds mention in Entry 50 of List II in the context of taxes on mineral rights. In its ordinary sense, the expression limitation means a restriction or containment.286 The Constitution uses the word limitations in two provisions Article 134(2) and Entry 50 of List II of the Seventh Schedule. Article 134 deals with the appellate jurisdiction of Supreme Court in criminal matters. Article 134(2) provides that Parliament may by law confer on the Supreme Court any further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislative competence of the State Legislature. In this view, there is no scope for the application of Article 254 of the Constitution. 236. In Sharma Transport v. Government of AP,291 a three judge Bench held that the exercise of authority by Parliament under Entry 35 of List III will not deprive the State legislature of its exclusive legislative powers referable to Entry 57 of List II: 11. Power to levy taxes on vehicles, whether mechanically propelled or not vests solely in the State Legislature, though it may be open to Parliament to lay down the principles on which the taxes may be levied on mechanically propelled vehicles in the background of Entry 35 of List III. To put it differently, Parliament may lay down the guidelines for the levy of taxes on such vehicles, but the right to levy such taxes vests solely in the State Legislature. No principles admittedly have been formulated by Parliament. In that sense, the Government of India s communication dated 30-08- 1993 does not in any sense violate the power of the State Legislature or its delegate to levy or exempt taxes from time to time. 237. Both Entries 50 and 57 of List II are subject to other legislative entries, but with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons imposed by Parliament upon the legislative power of the States must be specified by the law.294 240. In its textual sense, the verb to limit means to restrict or constrain. The respondents submit that the word any limitation can be interpreted in a manner bestowing absolute authority on Parliament to limit the field of taxation of the state legislature under Entry 50 of List II. However, we need to understand the purport of the expression limitations not only in its literal sense, but also IN the constitutional sense. 241. The common thread running between Entry 54 of List I and Entries 23 and 50 of List II is mineral development. The concept of mineral development is closely associated with proper and sustainable exploitation and utilization of mineral resources. Mineral resources are important for the economic development of the nation, considering the fact that they are used as raw materials in many industries. The Constitution had this aspect in mind when it empowered Parliament to bring under its control regulation of mines and mineral development. The rationale was that the Central Government will ensure uniform regulatory standards for mineral operations, especially with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 244. As held in Jindal Stainless Steel (supra),297 the Constitution understands the expression limitations as restrictions, conditions,298 or principles.299 However, does the expression any limitations include the power to prohibit States from taxing mineral rights? We are of the opinion that the answer must be in the affirmative. Under Entry 50 of List II, the Constitution specifically uses the phrase any limitations . The 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 may include even a prohibition. It had become clear during the course of the hearings, that counsel on both sides largely agreed that Parliament can impose any limitations including prohibiting the State legislatures from taxing minerals.300 The crux of the issue pertained to the manner in which Parliament can impose the limitations, which we have already considered in the above segments. 245. The overall scheme of Article 246 read with Entry 54 of List I and Entry 50 of List II makes it clear that Parliament, in the interests of mineral development, can impose any limitations. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. The State provides infrastructure both tangible and intangible. Tax revenues form an essential part of the requirements necessary for the States to govern. Taxes are required by Article 265 to be imposed by a law enacted by Parliament or the State Legislatures. Without the power to raise revenues, the ability of the State to create conditions requisite for trade and commerce to exist would be denuded. Hence, as a matter of first principle it cannot be postulated that taxation in whatever form is a burden on trade, commerce and intercourse and that every tax necessarily hinders trade. Such a wide construction cannot be accepted simply because by raising revenues through means of taxation, the State provides a political and legal order based on the rule of law where contractual transactions can be executed effectively. The extreme position that every law which imposes a tax is to be regarded as a hindrance to trade, commerce and intercourse is unsustainable. 248. It cannot be assumed that any tax levied by the State legislature under Entry 50 of List II will be ipso facto against mineral development. It is now a wellestablished principle that an increase in the rate of tax on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution has with foresight visualized this and empowered Parliament to impose any limitations on the subject of taxing mineral rights under Entry 50 of List II. 249. It was contended by the respondents that States already have multiple revenue streams arising from the mining and minerals sector. They are: (i) royalty and dead rent payable under Section 9 and 9A of the MMDR Act respectively; (ii) contributions to the District Mineral Foundation under Section 9B; and (iii) auction premium received from successful bidders for mineral blocks for mines allocated under the Mineral (Auction) Rules 2015. The above levies are statutorily collected and the revenue flows to the State as part of the regime for mineral development in place under the MMDR Act. All of these levies, which are statutory in nature, cannot impliedly limit the legislative power of the state legislature to levy a tax on mineral rights. The States have a constitutional and sovereign authority to exercise their taxing powers, within the bounds of the Constitution, to raise adequate revenues for the welfare of the people. I. Scope of Entry 49 i. Land System in India 250. The issue is whether the State legislatures are com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proprietary rights of the soil in the zamindars and in their heirs and successors.307 The regulations also allowed the zamindars to alienate or dispose of their proprietary rights in their zamindaris.308 Colonial courts recognized that the zamindars were presumed to be the owners of mineral rights in the absence of evidence that they had parted with them.309 Similarly, in the case of inam lands, it was held that the right of the inamdars to the sub-soil minerals was to be inferred from the express words of the grants.310 253. In 1813, the Court of Directors of the East India Company prohibited the government from introducing permanent settlements any further and ordered introduction of the ryotwari system in all unsettled lands in the provinces.311 Thereafter, the colonial state introduced the ryotwari system of land settlement in India. Under it the ryots were treated as proprietors of land with attendant rights and liabilities such as payment of assessment directly to government.312 The ryots were granted pattas which essentially served as evidence of the possession of the land. Thus, the pattadars used to hold lands on lease from the Government. 254. S Sundararaja Iyengar in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rights with respect to lands held under permanent settlements, and only a limited right in lands held under ryotwari pattas. This system of law continued until Independence and even thereafter. 256. The regulation of mines and mineral development before Independence was governed by executive rules. In 1913, Rules for the grant by local governments of licences to prospect for minerals and of mining leases in British India were made by Resolution No. 7552-7581-121 dated 15 September 1913.316 Under these Regulations, prospecting licenses317 could only be granted with respect to minerals which were owned by the Government.318 The rules also required the licencee to pay royalty at a rate specified in Schedule A of the Regulations. The Madras Mining Manual of 1929 contained rules regarding mining and quarrying applicable to the Madras Presidency. Chapter V of the Madras Mining Manual stated that the State s right to minerals varied according to the tenure on which the land was held. The Madras Mining Manual classified the land into three groups: Group A Lands in which the State claimed no right to minerals. These included: (a) estates held on sanads of permanent settlement; (b) land he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of the right to the surface conveys the right to the minerals underneath unless there is an express or implied reservation in the grant of land. In Thressiamma Jacob v. Geologist, Department of Mining and Geology,320 a three-Judge Bench of this Court had to determine whether the holder of jenmon rights owned the mineral wealth lying beneath the soil. The Court traced the history of land tenures in India to hold that the ownership of minerals normally follows the ownership of land, unless the owner is deprived of it by a valid legal process. 260. The legislative power of States to enact land legislation can be traced to Entry 18 of List II which empowers the State legislatures to legislate with respect to matters dealing with land, that is to say, rights in or over land, land-tenures including the relation of landlord and tenant, and the collection of rents. Similarly, Entry 42 of List III deals with acquisition and requisitioning of property. 261. After Independence, the State legislatures enacted land reform legislation divesting land owners of their sub-soil rights, including rights in the minerals. For instance, Section 48 of the Maharashtra Land Revenue Code 1966 declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exploited them for their personal gain without paying royalty to the State Government. This also indicates that the rights to mines and minerals continued to remain vested in private landowners long after India gained Independence and the divesting of their mineral rights happened in this case by the operation of legislation enacted by the State. 263. The decision in Thressiamma Jacob (supra) held that the MMDR Act does not declare the proprietary rights of the state in mineral wealth, nor does it contain a provision for divesting the owner of a mine of proprietary rights.324 Rights in minerals generally follow ownership of the land. The right of an owner of land extends to the sub-soil, including the minerals found underneath the soil, which continues until the State deprives the owner by a valid legal process. Importantly, Section 16(1)(b) of the MMDR Act also recognizes that the rights to minerals does not automatically vest in the State Government.325 264. Article 297 vests the proprietary rights in minerals within the territorial waters and the continental shelf in the Union Government. The provision reads: 297. Things of value within territorial waters or continental shelf a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of three years. 266. As held in the above segments, royalty is paid to the proprietor of the minerals for the exercise of mineral rights. Minerals found in offshore areas are constitutionally vested in the Central Government. Therefore, the Central Government can statutorily and contractually demand royalty from lessees for removal or consumption of such minerals. In comparison, subsoil minerals can either be legally vested in the States or continue to remain vested with private landowners. Resultantly, the payment of royalty under Section 9 of the MMDR Act is paid either to the State Government or private landowner, as the case may be. 267. Section 3 of the Haryana Minerals (Vesting of Rights) Act 1973 allowed the State Government to acquire the rights to minerals in any land. In State of Haryana v. Chanan Mal,329 where the validity of Section 3 was assailed, it was argued that the State legislative power to enact the legislation was curtailed by the operation of the MMDR Act. This Court noted that in Section 16(1)(b) of the MMDR Act Parliament has contemplated legislation by the States for vesting of lands containing mineral deposits in the State Government. The Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the face of the earth, but everything under or over it, and has in its legal signification an indefinite extent upward and downward. The above decisions are authority for the proposition that the ambit of the word lands under Entry 49 of List II comprises: (i) all types of lands; and (ii) covers everything under or over land. 271. In Ajoy Kumar Mukherjee v. Local Board of Barpeta,336 the constitutionality of an annual tax levied by local boards for the use of land for the purpose of holding markets was challenged before a Constitution Bench. Speaking for the Bench, Justice K N Wanchoo held that the tax was on land used for a market, and not on the market held on land. The Court held that the use to which the land is put can be taken into account while imposing a tax on the land within the meaning of Entry 49 of List II.337 Further, it was observed that the incidence of tax was on the owner or occupier of the land, and not any other person who may come to the market to transact. In conclusion, it was held that the tax was a tax on land, though its incidence depended upon the use of the land as a market. In Government of A P v. Hindustan Machine Tools Ltd.,338 it was held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of title by gift. The value of lands and buildings was held to be a measure of the value of gifts. Therefore, it was held that Parliament was competent to enact the levy. 274. In D G Gose and Co (Agents) Pvt Ltd v. State of Kerala,343 the validity of the Kerala Building Tax Act 1975 was challenged on the ground of being a tax on the capital value of the assets of an individual under Entry 86 of List I. The Constitution Bench held that a tax on buildings was a direct tax on the assessee s buildings as such, and was not a personal tax without reference to any particular property. It was further held that a State legislature while imposing a tax under Entry 49 of List II may decide how best to levy it. 275. In view of the above discussion, we can summarize344 the following principles for a tax under Entry 49 of List II: (i) The expression lands means all kinds of lands irrespective of the use to which the land is put; (ii) The expression lands includes not only the surface but everything under and over the surface; (iii) A tax on lands and buildings is a tax on lands and buildings as units; (iv) The expression tax on lands and buildings as a unit is used to distinguish composit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er provisions of the Constitution, including Article 14.351 Consequently, the legislature is competent to classify properties into categories and tax them differently. In adjudicating the validity of the taxing statutes, this Court has held that the power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.352 278. The expression lands includes lands of every description. A land may be put to use for growing tea leaves or extracting minerals. But what Entry 49 of List II contemplates is the levy of tax on land as a unit, irrespective of the use to which it is put. Therefore, the State legislature is competent while designing the levy under Entry 49 of List II to tax lands which comprise of mines and quarries. In other words, mineral-bearing land also falls within the description of lands under Entry 49 of List II. 279. The State legislature has wide discretion to classify lands and levy taxes on them under Entry 49 of List II. This is also evident from the decision of this Court in Spencer Co. v. State of Mysore,353 where excess land appurtenant to a building was treated as a separate class. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Chief Justice Y V Chandrachud, speaking for the majority, rejected the contention on the ground that the tax on lands and buildings had nothing to do with the development of mines and, therefore, did not conflict with the power of the Central Government to regulate and develop mines under the Coal Mines Act.356 In the context of the legislative declaration contained in Section 2 of the MMDR Act, the learned Chief Justice observed that though on account of that declaration, the legislative field covered by Entry 23 List II may pass on to Parliament by virtue of Entry 54 List I, the competence of the State Government to enact laws for municipal administration will remain unaffected by that declaration. Significantly, the Court observed that the declaration in Section 2 of the MMDR Act does no result in the invalidation of every State legislation relating to mines and minerals. 282. The principle which emanates from Western Coalfield Ltd (supra) is that the legislative declaration under the MMDR Act will only affect the legislative power of the State with respect to Entry 23 of List II to the extent the Parliamentary legislation covers the subject-matter. The legislative powers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging section provided that the tax was in respect of all passengers carried and goods transported by motor vehicles at such rate not exceeding one-eight of the value of the fare or freight. This Court held that the tax was on passengers and goods which could be traced to Entry 56 of List II of the Seventh Schedule. As regards the measure of the levy, it was held that that the measure was furnished by the amount of the fare and freight charged. 286. It is a settled position that the measure of tax is not a true test of the nature of tax.364 The standard adopted as a measure of tax may be a relevant consideration in determining the nature of tax, but is not conclusive. In Sir Byramjee Jeejeebhoy v. The Province of Bombay,365 the Bombay Provincial Legislature levied urban immovable property tax at ten percent of the annual letting value of lands and buildings. The Bombay High Court upheld the validity of the levy. Justice Broomfield observed that the power to impose taxes on lands and buildings meant the power to impose taxes on persons, owners, or occupiers as the case may be in respect of these properties. Justice Harilal Kania (as the learned Chief Justice then was) observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es contended that only the measure of manufacturing cost and profit create a direct and immediate nexus between the levy and the manufacturing activity. It was further urged that the postmanufacturing expenses and profits ought to be necessarily excluded to preserve the nexus between the nature of tax and the assessment of tax. This Court traced the line of precedent on the measure of tax to observe that a broad standard of reference may be adopted for the purpose of determining the measure of the levy. It was held that any standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for the measure of the levy. In CCE v. Grasim Industries Ltd.,369 a Constitution Bench reiterated that there must be a reasonable nexus between the nature of tax and the measure of the levy. It was further observed that the measure cannot be controlled by the rigors of the nature of tax. 290. The discussion above indicates that the nexus between the measure and levy of tax need not be direct and immediate . The nexus has to be reasonable and must have some relationship with the nature of levy. The reasonability of the nexus will largely depend upon the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property tax on vacant lands was unconstitutional because it was levied without any relation to the actual or potential income of the land. The Constitution Bench rejected the contention on the grounds that the market value of the land always bears a definite relationship to the actual or potential income being derived or derivable from the land. 294. The 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. The income merely serves as the measure to calculate the levy of taxes on land.376 Having looked at the general principles relating to the measure of tax on land, we now look at specific decisions pertaining to taxation of mineral-bearing land. 295. In H R S Murthy (supra), the validity of a land cess under the Madras District Boards Act 1920 was in issue. The cess was levied on the annual rent value of all occupied lands and the tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the cess was not on land but on royalty. The conclusion rested on the following reasons: (i) since royalty is income arising from land, it is not directly connected to the land; (ii) if royalty is the basis of taxation, no tax can be levied if no mining activities are carried on; and (iii) royalty cannot be used as a measure under Entry 49 of List II because it is exclusively relatable to Entry 50 of List II. Justice Mukharji held that H R S Murthy (supra) was not a correct approach to the issue. The decision in India Cement (supra) was followed by a three-Judge Bench in Orissa Cement (supra). 298. In Orissa Cement (supra), Section 5(1) of the Orissa Cess Act 1962 provided that the cess shall be assessed on the annual value of all lands calculated in the manner as provided. Section 5(2) provided for the levy of cess in case of mineral bearing land thus: 5. (2) The rate per year at which such cess shall be levied shall be In case of lands held for carrying on mining operations in relation to any minerals, such per centum of the annual value as the State Government may, by notification, specify from time to time in relation to such mineral; The annual value was defined in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance to be on mineral rights under Entry 50 of List II. It was observed that since the MMDR Act provides for all kinds of taxation on minerals and mineral rights, the State legislature was not competent to levy the tax under Entry 50 of List II. 302. The decisions rendered in above judgments, ranging from India Cement (supra) to Mahanadi Coalfields (supra), proceed on two premises: first, the MMDR Act, by providing for all levies with respect to taxation of minerals and mineral rights, completely excludes the legislative competence of the States to tax mineral- bearing land; and second, royalty is not directly connected to land and cannot be used as a measure to tax mineral-bearing land. The first premise has been answered in the earlier segments of this judgment. The MMDR Act does not serve as a limitation on the legislative competence of the States to tax mineral rights under Entry 50 of List II. Moreover, as held in Special Areas Development Authority (supra), the MMDR Act does not impede the legislative competence of the States with respect to legislative entries under List II, including the power to levy taxes on mineral-bearing lands under Entry 49 of List II. The second assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the tea estate. It cannot be characterised as a tax on production for that reason. [ ] 306. In Goodricke (supra), the petitioners relied on India Cement (supra) and Orissa Cement (supra) to urge that there has to be a direct connection between the land and the levy. The two decisions were distinguished on the following rationale: 21. [ ] The basis of the judgment and the ratio of the decision in our respectful opinion is that it was case where the tax was measured not with reference to or on the basis of the income or yield of the land but with reference to the amount of royalty payable by the lessee to his lessor. It was for this reason that the tax was held to be not upon the land. Royalty is a matter of agreement between the lessor and the lessee; it may also be determined by a statutory provision. But royalty is not a produce of the land; royalty is not the income of the land nor is the royalty the yield of the land and that is the distinction. 307. It is important to note the above observation to the effect that royalty is not the produce, income, or yield of the land. Royalty is paid by a lessee to the lessor as consideration for the exercise of mineral rights. However, do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive the State legislature of its power to levy a tax on lands comprised in a tea estate. The declaration in Section 2 of the Tea Act was held not to affect the legislative competence of the State legislature to levy land cess since it did not seek to control the cultivation of tea but sought to tax tea estates. The land cess was construed not to be on the tea industry, but a cess on land comprised in tea estates. 311. The decision indicates that the field reserved to the States under Entry 49 of List II is to impose a tax on land as a unit, without seeking to control the activity or use taking place on the land which is taxed. Similarly, a tax on mineral-bearing land is a tax on the land as a unit; it does not seek to control the mining activity which takes place on the land. Therefore, there is no conflict between the taxing field of the States under Entry 49 of List II to levy a on tax mineral-bearing land and the power of Union to regulate mines and mineral development under the legislative head of Entry 54 of List I. iv. Measure of tax on mineral-bearing land a. Decoupling of minerals from land 312. The respondents contend that the value of minerals cannot be used as a measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the areas included in the instrument of lease. Thus, dead rent is relatable to the area specified in the mining lease. Section 11(10) requires the holder of a composite licence to submit a report to the State Government specifying the area required for mining lease and the State Government shall grant mining lease for such area. The above provisions indicate that the leased area forms an integral part of a mining lease. However, the position becomes clearer when we look at the provisions of the Mineral Concession Rules. 315. Rule 31 of the Mineral Concession Rules requires a mining lease to be executed in terms of Form K or in a form as near thereto as circumstances of each case may require. The preamble to Form K grants and demises unto the lessee all those the mines beds/veins seams with respect to the specified mineral situated lying and being in or under the lands referred to in Part I. Part I details the area of the lease and its description. The mining lease makes it evident that the demise is for the minerals and not the area of land in which the minerals are found. There may arise situations where the lands may be owned by private individuals, but the minerals are vested in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia387 in the context of the Coal Bearing Areas (Acquisition and Development) Act 1957.388 The Coal Bearing Areas Act was enacted by Parliament to establish public control over the coal mining industry and its development by providing for the acquisition by the State of unworked land containing or likely to contain coal deposits or of rights in or over such land. Section 4 allows the Central Government to issue a preliminary notification giving notice of its intention to prospect for coal with respect to a particular land in any locality. Once the notification is issued under Section 4, any prospecting licence or mining lease with respect to that land ceases to have effect. Sections 7 and 9 empower the Central Government to acquire whole or part of any lands in which coal is obtainable. On the publication of the declaration of acquisition under Section 9, the land or the rights in or over the land vest absolutely in the Central Government free from all encumbrances.389 Section 13 pertains to the grant of compensation for cessation of prospecting licenses and acquisition of mining leases by the Central Government under Section 4. Thus, under the Coal Bearing Areas Act, the Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was any severance of the mineral rights and surface rights in either of these two cases. ( emphasis added ) 320. A mining lease contemplated under the MMDR Act relates to the mining rights and mineral rights. It does not grant surface rights to the mining lessee. However, surface rights are essential to begin any mining operations. In fact, obtaining of the surface rights by a mining lessee over the area where mining operations will be conducted is a prerequisite condition for grant of both a prospecting licence as well as a mining lease. The lessee requires access to the surface rights to effectively exercise their mining rights and privileges enumerated under Part II of Form K. Moreover, as held in Burrakur Coal (supra), the mining lessee requires enjoyment of surface rights to effectively carry out the mining operations. There cannot be any severance between the two during the continuance of the mining operations. 321. The more important question is when do the mineral rights transfer to the lessee? Since Independence, State legislatures have enacted a spate of land reform laws vesting the right to mines and minerals in the State Government.390 Through the instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rights of the area specified in the lease. Resultantly, the leaseholder has rights to both the minerals and surface during the subsistence of the mining lease. 324. We do not agree with the respondent s submission 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. The 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. In view of the above discussion, it is clear that minerals are decoupled from land only upon the exercise of mineral rights by the lessee. b. Minerals as measure of tax on land 325. Entry 49 of List II enumerates taxes on lands and buildings in the legislative field of the State legislatures. As mentioned in the above segments, the word lands is a compre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax mineral bearing land under Entry 49 of List II will be against the grain of the Constitution. 328. After the decision in Goodricke (supra) in particular, it is now well established that the income or yield of land can be adopted as a measure of tax. The assessment of tax on land depends upon the actual or potential productivity of the land sought to be taxed. In case of tea estates, the productivity is measured on the basis of the quantity of tea leaves produced. As a corollary, the productivity of mineral bearing land can be measured on the basis of the minerals produced.397 In Goodricke (supra), this Court observed that royalty is a matter of agreement between the lessor and the lessee or determined by a statutory provision. Further, it was observed that royalty is not the produce of the land; royalty is not the income of the land nor is the royalty yield of the land. In this segment, we analyze whether royalty could be used as a measure to tax mineralbearing land. 329. The rates of royalty are generally calculated on per tonnage basis or ad valorem basis on the basis of the laid down formula. In case of the former, royalty is determined on the basis of the following formu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of the minerals produced or mineral value is covered by Entry 50 of List II and not under Entry 49 of List II. It is a settled principle of law that Entry 49 of List II contemplates a levy of tax on lands and buildings as units. Once the legislature classifies a particular category of land as a separate unit for the purposes of the levy of tax on land, the yield comprised in such unit can validly constitute the basis for the levy and assessment.402 Resultantly, if the State legislature has classified mineral bearing land as a separate unit for the purposes of levy of tax on land, the minerals produced or any other measure directly connected to the minerals produced can be used as a measure to quantify the tax. 333. In Assistant Commissioner of Urban Land Tax v. Buckingham and Carnatic Co. Ltd,403 the Madras Urban Land Tax Act 1966 levied a tax on urban land on the basis of the market value of the land. One of the contentions of the assesses was that the legislation was in substance a tax on the capital value of the assets under Entry 86 of List I and hence beyond the legislative competence of the State legislature. The Court held that Entry 86 of List I does not prohibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onality. 335. It was further contended that since Entry 50 of List II is a special entry, the use of minerals produced or mineral value as a measure of tax under Entry 49 of List II will lead to overlap between the two entries. The issue for consideration is whether the limitations imposed by Parliament in a law relating to mineral development, which bears on the legislative field under Entry 50 of List II would also impact the field reserved to the State legislature under Entry 49 of List II. 336. The respondents have relied on a three-Judge Bench decision in State of Bihar v. Indian Aluminium Company,405 to strongly contend that a tax on lands cannot include tax on removal or excavation of land. In that case, the State Government levied a tax called the Bihar Restoration and Improvement of Degraded Forest Land Tax on excavational activities. The amount of tax was relatable to the extent to which the land was voided . The impugned legislation defined void to mean any area of leftover forest land from where soil, mineral or rock or anything being fastened with the earth has been removed for nonforest purpose, transported or dumped at a place other than the place from where the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in any developmental activities including mining shall be liable to pay the tax. The charging section clearly indicates that the object of the levy was to tax the activity by the occupier of creating void/voids . The measure of the tax, therefore, was based on the area of the land voided. It was not a tax on lands as a unit. Thus, this Court held that the levy was not a tax on land under Entry 49 of List II, but rather on the activity of extraction. However, this decision is not relevant for our purposes because the true nature of the levy in that case did not pertain to taxes on lands. 339. Both the entries 49 and 50 of List II deal with distinct subject matters. Both the entries operate in different fields without any overlap. The fact that mineral value or mineral produced is used as a measure under Entry 50 of List II does not preclude the legislature from using the same measure for taxing mineral bearing land under Entry 49 of List II. As Justice Ayyangar observed in H R S Murthy (supra), using royalty as a measure of tax on lands does not stamp it as a tax on either the extraction of the mineral or on the mineral right. The doctrine of generalia specialibus non derogant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears; b. Entry 50 of List II does not constitute an exception to the position of law laid down in M P V Sundararamier (supra). The legislative power to tax mineral rights vests with the State legislatures. Parliament does not have legislative competence to tax mineral rights under Entry 54 of List I, it being a general entry. Since the power to tax mineral rights is enumerated in Entry 50 of List II, Parliament cannot use its residuary powers with respect to that subject-matter; c. Entry 50 of List II envisages that Parliament can impose any limitations on the legislative field created by that entry under a law relating to mineral development. The MMDR Act as it stands has not imposed any limitations as envisaged in Entry 50 of List II; d. The scope of the expression any limitations under Entry 50 of List II is wide enough to include the imposition of restrictions, conditions, principles, as well as a prohibition; e. The State legislatures have legislative competence under Article 246 read with Entry 49 of List II to tax lands which comprise of mines and quarries. Mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills .................................................. 97 13. Mahanadi Coalfields ..................................................... 100 14. Saurashtra Cement. ..................................................... 101 15. Goodricke ..................................................................... 101 16. Kesoram ....................................................................... 107 17. Kannadasan ................................................................. 124 18. Entries 49 And 50 List II ............................................ 151 19. Effect of Overruling India Cement ................................. 165 20. Federalism in India ....................................................... 170 21. Sarkaria Commission Report on Centre-State Relations 173 22. Conclusions ................................................................. 181 I have perused the comprehensive opinion authored by Hon ble the Chief Justice of India Dr Dhananjaya Y Chandrachud on the questions referred to this nine-judge Bench. I respectfully dissent with the said opinion and express my reasons therefor. 1.1 The sum and substance of all the questions referred to this Bench could be cryst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arger Bench. 3. A similar view was expressed by a three-judge Bench in Mineral Area Development Authority vs. Steel Authority of India, (2011) 4 SCC 450, ( Mineral Area Development Authority ) wherein this Court was of the view that the matter has to be considered by a Bench of nine Judges and hence, the following questions of law were raised: 1. Whether royalty determined under Sections 9/15(3) of the Mines and Minerals (Development and Regulation) Act, 1957 (67 of 1957, as amended) is in the nature of tax? 2. Can the State Legislature while levying a tax on land under List II Entry 49 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 List II Entry 50 and its interrelation with List I Entry 54? 3. 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 Schedule VII List II Entry 50 of the Constitution of India? Does the Mines and Minerals (Development and Regulation) Act, 1957 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is how the questions have been placed for consideration of this nine-judge Bench. 4. His Lordship, the Chief Justice of India, while holding that royalty is not a tax, has overruled the following dicta of this Court: (i) India Cement; (ii) Orissa Cement Limited vs. State of Orissa, 1991 Supp (1) SCC 430 ( Orissa Cement ); (iii) Mahalaxmi Fabric Mills; (iv) Saurashtra Cement Chemicals Industries Ltd. vs. Union of India, (2001) 1 SCC 91, ( Saurashtra Cement ), and (v) State of Orissa vs. Mahanadi Coalfields Ltd., 1995 Supp. (2) SCC 686 ( Mahanadi Coalfields ). While coming to the aforesaid conclusion, three significant judgments of this Court in Hingir- Rampur Coal Co. Ltd. vs. State of Orissa, (1961) 2 SCR 537 ( Hingir-Rampur ); State of Orissa vs. M.A. Tulloch, (1964) 4 SCR 461 ( M.A. Tulloch ) and Baijnath Kedia vs. State of Bihar, (1969) 3 SCC 838 ( Baijnath Kedia ) have been discussed. 5. Since the Entries under discussion are in their respective Lists of the Seventh Schedule of the Constitution, it would be unnecessary to refer to them as being part of the Seventh Schedule of the Constitution in the following discussion. 6. On enumerating the questions for opinion of this nine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied or collected except by authority of law. Article 366 is a definition clause and it states that in the Constitution, unless the context otherwise requires, the expressions mentioned therein have the meanings thereby respectively assigned to them. For the purpose of this case, Article 366(28) is relevant and the same reads as under: (28) taxation includes the imposition of any tax or impost, whether general or local or special and tax shall be construed accordingly. The aforesaid definition of taxation is not exhaustive but inclusive in nature to include not only any tax in the usual understanding of the said expression or tax stricto senso but also any levy akin to a tax. There can be no cavil to the proposition that before any tax or impost could be levied or collected, it must have the authority of law vide Article 265. 8.1 Article 246 of the Constitution deals with distribution of legislative powers between the Parliament and State Legislatures. It reads as under: 246. Subject-matter of laws made by Parliament and by the Legislatures of States. (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Entry. Entry 47 - List III states that fees in respect of any of the matters in that List but not including fees taken in any Court could be levied and collected by an authority of law either by the Union or the State Legislature. Similarly, Entry 66 - List II states that fees in respect of any of the matters in List II but not including fees taken in any Court could be collected by the State Legislature. In a similar vein, Entry 96 - List I gives power to levy fee in respect of subjects enumerated in List I but not including fees taken in any Court. It is nobody s case that royalty is a fee and therefore no further discussion on that aspect is necessary. However, the conundrum to be unravelled by this nine-judge Bench is, whether royalty is a tax or a levy akin to a tax or an exaction in the context of exercise of mineral rights. 8.3 In order to understand the foundation of this controversy, it is necessary to consider Article 246 of the Constitution and the relevant Entries of the two Lists vis- -vis regulation of mines and mineral development, as the controversy has arisen in this particular context, which can be usefully extracted as under: List I Union List Entry 54 : Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and not by degree. 8.4.2 In case of any conflict between Entries in List I and List II, the power of Parliament to legislate under List I will supersede when, on an interpretation, the two powers cannot be reconciled. But if a legislation in pith and substance falls within any of the Entries of List II, the State Legislature's competence cannot be questioned on the ground that the field is covered by Union list or the Concurrent list vide Prafulla Kumar Mukherjee vs. Bank of Commerce, Khulna, AIR 1947 P.C. 60 ( Prafulla Kumar Mukherjee ). According to the pith and substance rule, if a law is in its pith and substance within the competence of the Legislature which has made it, it will not be invalid because it incidentally touches upon the subject lying within the competence of another Legislature vide State of Bombay vs. FN Balsara, AIR 1951 SC 318 ( FN Balsara ). 8.4.3 Once the legislation is found to be with respect to the legislative Entry in question, unless there are other constitutional prohibitions, the power would be unfettered. It would also extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in that topic or ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legislation. If, however, they cannot be fairly reconciled, the power enumerated in List II must give way to List I. 8.4.7 On a close perusal of the Entries in the three Lists, it is discerned that the Constitution has divided the topics of legislation into the following three broad categories: (i) Entries enabling laws to be made; (ii) Entries enabling taxes to be imposed; and (iii) Entries enabling fees and stamp duties to be collected. Thus, the Entries on levy of taxes are specifically mentioned. Therefore, as such, there cannot be a conflict of taxation power of the Union and the State. Thus, in substance the taxing power can be derived only from a specific taxing Entry in an appropriate List. Such a power has to be determined by the nature of the tax and not the measure or machinery set up by the statute. 8.5 Entry 54 - List I read with Entry 23 - List II deals with regulation of mines and mineral development. Since both the Entries deal with regulation of mines and mineral development and they are in List I and List II, Entry 23 - List II expressly states that any regulation of mines and mineral development is subject to the provisions of List I with respect to regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment in the country, which would embrace, inter alia, uniformity in mineral development throughout the country having regard to several factors which would otherwise come in the way of such development. Hence, the framers of the Constitution introduced Entry 50 - List I enabling a limitation being imposed on Entry 50 - List II although that is a taxation Entry giving powers to the States to impose taxes on mineral rights. It is subject to any limitation imposed by Parliament under Entry 54 - List I. 8.8 The golden thread which runs through Entry 54 - List I and Entry 23 - List II is that the Entries deal with regulation of mines and mineral development. Thus, any aspect of regulation of mines and mineral development taken under the control of the Union by a declaration made by the Parliament by a law, denudes the State Legislature of its legislative competence to pass any law to that extent. If a Parliamentary law such as MMDR Act, 1957 is enacted and deals with certain aspects of mineral development, to that extent the State Legislature would be denuded of its competence to pass any law on the said aspect. The legislative competence vested with the State Legislature is, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression minerals in Section 3(a)(d) includes all minerals except mineral oils. Section 3(e) defines minor minerals to mean building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the official gazette, declare to be a minor mineral. Notified minerals is defined under Section 3(ea) to mean any mineral specified in the Fourth Schedule, such as, bauxite, iron ore, limestone, manganese ore. Further, mineral concession is defined in Section 3(ae) of the said Act to mean either a reconnaissance permit, prospecting licence, mining lease, composite licence or a combination of any of these and the expression concession shall be construed accordingly. Section 3(c) defines mining lease to mean a lease granted for the purpose of undertaking mining operations and includes a sub-lease granted for such purpose. Section 3(d) defines mining operations to mean any operation undertaken for the purpose of winning any mineral. Section 3(h) defines prospecting operations to mean any operations undertaken for the purpose of exploring, locating or proving mineral deposits. Section 3(ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder and that they are to be recovered in the same manner as arrears of land revenue. 10.5 Section 9 of the MMDR Act, 1957 with which we are concerned deals with royalty while Section 9A deals with dead rent. The said provisions can be usefully extracted as under: 9. Royalties in respect of mining leases.―(1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral. (2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral. (2A) The holder of a mining lease, whether granted before or after the commencement of the Mines and Mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mining operation is an exercise of a mineral right and therefore, is covered under the provisions of the MMDR Act, 1957 and particularly having regard to Section 2 thereof, as a declaration has been made by the Union to take under its control the regulation of the mines and minerals development, which is expedient in public interest. Reconnaissance, prospecting operations or mining operations are all aspects which are taken under the control of the Union, in view of the declaration under Section 2 of the MMDR Act, 1957. 10.5.1 For the exercise of mineral rights, royalty has to be paid by the holder of the mining lease in terms of Section 9 or dead rent in terms of Section 9A of the said Act, as per the conditions mentioned therein. Royalty is paid in exercise of a mineral right as a consideration for conducting a mining operation, which is undertaken for the purpose of winning any mineral. A mining lease is granted only for the purpose of undertaking a mining operation. Therefore, royalty has to be paid by the holder of a mining lease to the lessor who executes the lease deed i.e. the State Government. For this reason, Section 25 states that any rent, royalty, tax, fee or other s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of a mining lease shall pay dead rent to the State Government, annually, at such rate specified in the third schedule to the Act. Dead rent is to be paid for such area included in the instrument of lease. However, since the holder of a mining lease is also liable to pay royalty under Section 9 of the Act, it is clarified under Section 9A that the liability shall be limited to either dead rent or royalty, whichever is greater. Since royalty is payable on ad valorem basis, the holder of a mining lease would be liable to pay the same only depending on the value of the mineral won/removed/consumed. That is, when mining activity is not conducted, liability of royalty would be nil. However, dead rent is payable for such area covered under the instrument of lease, on an annual basis, regardless of whether any mining activity is undertaken on such land. The Third Schedule to the Act prescribes the dead rent payable per hectare, per annum. The amount of dead rent payable also depends upon the nature of the minerals available on the land in question - medium value minerals, high value minerals or precious metals and stones. The Act also prescribes the manner in which rent and royalty pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereafter, the applicant shall submit the mining plan, duly approved by the Central Government or by an officer duly authorised by the Central Government, to the State Government to grant mining lease over that area. The procedure for approval of mining plans, by the Central or State Government, as the case may be, has been detailed under Rule 22BB. 10.8.4 Rule 31 provides that where, on an application for the grant of a mining lease, an order has been made for the grant of such lease, a lease deed in Form K is required to be executed by the State Government within six months of the order granting lease. The State Government may, after giving an opportunity of being heard and for reasons to be recorded in writing and communicated to the applicant, also refuse, in the manner specified under Rule 26, to grant a mining lease over whole or part of the area applied for. 10.8.5 Rule 27 prescribes the general conditions to which mining leases, in respect of land in which minerals vest in the Government, shall be subject to. The relevant portion of said Rule is extracted hereinunder for easy reference: 27. Conditions :- (1) Every mining lease shall be subject to the following conditions :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice and duly make the payment of royalty within sixty days from the date of receipt of notice, the lessor shall be bound to determine the lease. 10.8.7 Chapter VI pertains to grant of mining leases in respect of land in which the minerals vest partly in the Government and partly in private persons. Rule 53 provides that the provisions of Chapter IV shall apply to mining leases in respect of minerals which vest partly in the Government and partly in a private person as they apply in relation to the grant of prospecting licences and mining leases in respect of minerals which vest exclusively in the Government. The proviso to Rule 53 clarifies that the dead rent and royalty payable in respect of mineral which partly vest in the Government and partly in a private person shall be shared by the Government and by that person in proportion to the shares they have in the minerals. 10.8.8 The pertinent provisions prescribing the liability of a lessee to pay royalty and dead rent in respect of mining leases over different categories of lands as described under Chapters IV, V and VI of the Rules, have been summarised and presented in the following tabular statement: Sl. No. Category of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol of the Union by a declaration (vide Section 2 of the said Act) vis- -vis regulation of the mines and mineral development which is declared to be expedient in the public interest. When the imposition of royalty on a mining lease in terms of lease-deed as envisaged in Form-K of the MMDR Act, 1957 is considered in light of Entry 54 - List I read with Section 2 of the MMDR Act, 1957, it is clear that royalty is a matter coming under the control of the Union. If payment of royalty, which is a consideration for exercise of mineral rights is expressly covered under Section 9 of the MMDR Act, 1957, can the same be a basis for any other exaction by a State either by imposing another tax/cess based on royalty or by imposing any other tax on mineral bearing land? This is the question which has fallen for consideration in several cases before this Court as well as before several High Courts. As noted above, royalty is a consideration imposed by a lessor on a lessee of a mining lease for the grant of the mining lease, which in sum and substance is a requisite consideration for exercise of a mineral right. Royalty and dead rent as envisaged under the scheme of Sections 9 and 9A of the MMDR Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied for computing the taxing liability. If the aforesaid components are applied to the present case, it is clear that (i) Section 9 of the MMDR Act, 1957 deals with payment of royalty in respect of any mineral removed or consumed; (ii) by a holder of mining lease who is obliged to pay the royalty; (iii) at the rate specified in the Second Schedule to MMDR Act, 1957; and (iv) a percentage of the average sale price on ad valorem basis. For instance, in respect of Iron Ore : (CLO, lumps, fines and concentrates all grades) fifteen per cent of average sale price on ad valorem basis. Although, Section 9 of the MMDR Act, 1957 is not worded in the manner a charging section in a taxation statute is normally worded, nevertheless, its import must be understood in the sense of it being a taxation provision. For the aforesaid reasons, I hold that royalty is the nature of a tax or an exaction. I now move on to the judgments of this Court as well as High Courts on the nature of exaction in the form of royalty under the provisions of the MMDR Act, 1957 as the controversy centres around various decisions of this Court and certain High Courts. Hingir-Rampur: 11. In Hingir-Rampur, a Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposed by the impugned Act had adopted the method of determining the rate of the levy with reference to the minerals produced by the mines would not by itself make the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances; where an impugned statute passed by a State legislature is relatable to an Entry in List II, it is not permissible to challenge its vires only on the ground that the method adopted by it for the recovery of the impost can be and is generally adopted in levying a duty of excise. Therefore, it was held that cess in question was neither a tax nor a duty of excise but a fee. 11.2 If the cess was held to be a fee relatable to Entries 23 and 66 - List II, its validity was still open to challenge because the legislative competence of the State Legislature under Entry 23 is subject to the provisions of List I with respect to regulation and development under the control of the Union. 11.3 According to this Court, on a combined reading of two Entries, namely, Entry 23 - List II and Entry 54 - List I, what emerged was that the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed minerals from any mine in any mining area at a rate not exceeding five per centum of the value of the minerals at the pit s mouth by the Orissa State legislature under Section 4 of the Act of 1952 (Act 27 of 1952) was a fee properly so called and not a duty of excise. 11.5 The next contention considered by Wanchoo, J. was that if the cess is not justified as a fee, it is a tax under Item 50 of List II. Item 50 List II provides for taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. The question was as to what are taxes on mineral rights. It was held by Wanchoo, J. that taxes on mineral rights would be confined to taxes on leases of mineral rights and on premium or royalty. Taxes on such premium and royalty would be taxes on mineral rights while taxes on the minerals actually extracted would be duties of excise. Consequently, the writ petition was dismissed. M. A. Tulloch : 12. In M.A. Tulloch, also before a Constitution Bench, the question was with regard to the validity of the imposition of the Orissa Mining Areas Development Fund Act, 1952 (Orissa Act 27 of 1952) and cancellation of the notices of demand issued. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(1) of the Central Government had made rules providing for the amenities for which provision was made by the Orissa Act and if the Central Government had imposed a fee to defray the expenses of the provision of these amenities, would such rules be held to be ultra vires the Central Act, particularly, when taken in conjunction with the matters for which rules could be made under Section 13 to which reference has been made. 12.3 The Court observed that in Hingir-Rampur case, the Orissa Act was a post-Constitution enactment (1952 Act), whereas the Central Act of 1948 was a pre-Constitution law and under Entry 54 - List I Parliament had not made the requisite declaration. The previously existing Central law was held not to be within the terms of Entry 54 - List I and therefore, the State enactment was held to continue to be operative. But later when the Central law i.e. MMDR Act, 1957 contains the requisite declaration by the Union Parliament under Entry 54 - List I and that Act covers the same field as the Act of 1948 (Central Act) in regard to mines and mineral development, it was observed that unless there were any material differences between the scope and ambit of the Central Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f leases. By the declaration and the enactment of Section 15 of the MMDR Act, 1957, the whole of the field relating to minor minerals came within the jurisdiction of Parliament and no scope was left for the enactment of the second proviso to Section 10(2) in the Bihar Land Reforms Act. The enactment of the proviso was, therefore, without jurisdiction. Consequently, the appeals were allowed and the State of Bihar was restrained from enforcing the second proviso to Section 10(2) added to the Bihar Land Reforms (Amendment) Act, 1964. HRS Murthy : 14. HRS Murthy vs. Collector of Chittoor, AIR 1965 SC 177 ( HRS Murthy ) is also a decision of the Constitution Bench. In this case, the validity of notices of demand for the payment of land cess under the Madras District Boards Act, 1920 ( Madras Act , for short) and the legality of the procedure for the recovery of the amount of the said cess was questioned. The impugned notices made a demand also for education cess which was merely a proportion of the land-cess. 14.1 In the year 1953, the appellant's father therein had obtained a mining lease from the Government of Madras under which he was permitted to work and win iron ore in a tract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne the question, as to what exactly is a tax on mineral rights seeing that such a tax is not leviable by Parliament but only by the State and the sole limitation on the State's power to levy the tax is that it must not interfere with a law made by Parliament as regards mineral development. It was observed that there was no law enacted by Parliament which was contrary to the State power to levy the tax and in effect the cess under Sections 78 and 79 of the Madras Act was a tax on lands within Entry 49 - List II. In the circumstances, it was observed that the cess was lawfully imposed upon land and hence, the appeals and writ petitions were dismissed. 14.3 This Court, in India Cement held at para 34 that royalty is a tax and did not approve the dictum in HRS Murthy. It is the above conclusion which was doubted by a five-judge Bench in Kesoram and other cases which has led to the constitution of this nine-judge Bench in order to consider the correctness of the aforesaid verdicts. Therefore, it is necessary to consider the facts and the reasoning in India Cement. India Cement: 15. In India Cement, Section 115 of Madras Panchayats Act, 1958 as amended by the Madras Act, 1964 came up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery rupee of land revenue payable in respect of such land. ( emphasis by me ) 15.2 A writ petition was filed in the Madras High Court by the appellant therein, which was dismissed by a learned Single Judge holding that cess levied under Section 115 of the amended Act was a tax on land and as such, fell under Entry 49 - List II-State List and was within the competence of the State legislature. Reliance was placed on a decision of this Court in HRS Murthy. Against the order of the learned Single Judge, a writ appeal was filed before the Division Bench of the High Court, which was also dismissed by holding that local cess authorised by Section 115 of the amended Act was not land revenue but is a charge on the land itself and Section 115 merely qualified the basis of quantum of the land revenue. The Division Bench of the Madras High Court held that the meaning of the Explanation added to Section 115 was that the cess was levied as a tax on land and was measured with reference to land revenue which also meant, royalty, lease amount etc., as mentioned in the Explanation. The Division Bench of the High Court also relied on the decision of this Court in HRS Murthy and held that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature, under the provision of the State Legislation referred to above, could be justified or sustained either under Entries 49, 50 or 45 - List II was considered. In paragraph 19 of India Cement, this Court considered Guruswamy Co., vs. State of Mysore, AIR 1967 SC 1512, ( Guruswamy ) to indicate what a cess is. On analysing Sections 115 and 116 of the Madras legislation referred to above, this Court observed that the expression royalty in the Explanation could not be included in the definition of land revenue properly called or conventionally known, which is separate and distinct from royalty. 15.6 Reference was also made to the Judgments of the Mysore High Court in M/s Laxminarayana Mining Co., Bangalore vs. Taluk Development Board, AIR 1972 Mys 299 ( Laxminarayana Mining Co. ) and Patna High Court in Laddu Mal vs. The State of Bihar, AIR 1965 Pat 491, ( Laddu Mal ) and the Judgment of this Court in HRS Murthy. It was observed that in the latter case attention of this Court was not invited to the provisions of MMDR Act, 1957 and Section 9 thereof and the Second Schedule to the said Act. Under the above provisions, there was a clear bar on the State legislature taxing royalty pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Judgment of this Court, it is observed as under: 34. In the aforesaid view of the matter, we are of the opinion 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 Section 9 of the Central Act covers the field and the State legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land. A reading of paragraph 34 would indicate as follows: (i) Cess on royalty being a tax on royalty, is beyond the competence of the State legislature because Section 9 of the Central Act ie., MMDR Act, 1957, covers the field. (ii) As a result, the State Legislature is denuded of its competence under Entry 50 - List II to impose any cess on royalty which is collected under Section 9 of the MMDR Act, 1957. (iii) Cess on royalty cannot be sustained under Entry 49 - List II as being a tax on land. (iv) Royalty on mineral rights is not a tax on land but a payment for the user of land. (v) However, under the Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the MMDR Act, 1957 which is a structured levy in the form of a tax to be determined only by the Central Government in order to maintain uniformity in the price of a mineral extracted throughout the country. But if over and above payment of royalty by a holder of a mining lease, local cesses and surcharges are also imposed based on the royalty paid, it would be contrary to Entry 54 - List I and the declaration made under Section 2 of the MMDR Act, 1957 and the scheme of the said Act which envisages only payment of royalty on the minerals extracted. 15.10 Further, royalty could not be the basis for levy of cess construed as land revenue by the Tamil Nadu Act as this would make royalty a tax on land and cess on royalty would make it a tax which a State is not permitted to levy on mineral bearing land in view of Section 9 of the MMDR Act, 1957. Having regard to the provisions of MMDR Act, 1957, it was held that royalty is a tax. The same cannot be included within the definition of land revenue which itself is a tax which a State cannot make as the basis for imposing a cess or a surcharge on cess. Therefore, in paragraph 34 of the Judgment in India Cement, the seven-judge Bench of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-payment, as if it was arrears of land revenue. That royalty on mines and minerals is not a fee but a levy which is in the nature of a tax. Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law and the State Government had no authority to impose and demand royalty for mines and minerals. 16.1 With reference to Entry 54 - List I and Entry 23 - List II, it was observed that the area of operation of the two Entries has been kept separate and distinct. Anything beyond what is declared by Parliament to be expedient in the public interest to be kept under the control of the Union, will be under the legislative ambit of the State in regard to mines and mineral development in the State. The MMDR Act, 1957 is an enactment of the Parliament for the regulation of mines and the development of minerals under the control of the Union. Referring to various provisions of the MMDR Act, 1957 such as Section 3(a) which defines minerals to include all minerals except mineral oils; mining lease in Section 3(c) and mining operations in Section 3(d) and the definition of minor minerals in Section 3(e) of the said Act, it was observed that Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, widest possible meaning should be given to the said expression considering the question in the context of the Bihar Minor Minerals Concession Rules, 1954 and the impugned notices demanding royalty. Consequently, the notices issued by the Assistant Mining Officer calling upon the petitioners to pay royalty on account of brick-earth were quashed. Laxminarayana Mining Co. : 17. Reference was made to the judgment of the Mysore High Court in Laxminarayana Mining Co. authored by Venkataramiah, J. (as His Lordship then was), in India Cement. In the said case it was observed that on a combined reading of Entries 23 and 50 - List II and Entry 54 - List I it established that as long as the Parliament did not make any law in exercise of its power under Entry 54 - List I the powers of the State Legislature in Entries 23 and 50 - List II would be exercisable by the State Legislature. But once the Parliament makes a declaration by law that it is expedient in the public interest to make regulation of mines and development of minerals under the control of the Union, to the extent to which such declaration is made, such regulation and development is undertaken by law made by Parliament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Taluk Development Board had the competence to levy the same as the State Legislature was authorised by Entry 23 - List II to make law with respect to regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. It was further contended that Entry 50 List II of the same list authorised the State Legislature to levy tax on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. 17.4 After referring to the scheme of the MMDR Act, 1957 as well as the Mineral Concession Rules, 1960, the High Court reasoned that the State enactment was passed in the year 1959 whereas the MMDR Act, 1957 was passed in the year 1957. Section 143 of the State Act dealt with regulation of certain trades. The notification issued under Sections 143 and 144 of the aforesaid State Act had mandated that the owner or occupier of a place for the purpose of mining of manganese ore or iron ore etc. with the help of machinery or without the help of machinery had to pay a licence fee for the use of such place. Relying upon Hingir-Rampur and M.A. Tulloch, and distinguishing HRS M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for levy of excise duty by Parliament but within the scope of the expression tax on mineral rights within the meaning of that expression in Entry 50 of List II. To us it appears the expression tax on mineral rights includes within its scope the royalty payable on minerals extracted. Mineral rights and mining activity carried on in exercise of those mineral rights appear to us to be indistinguishable in the above context. That appears to be the true intendment of the declaration contained in Section 2 of the Central Act and that it is so enacted in order to see that throughout the Indian Union, the rents, royalties and other taxes payable in respect of mining and minerals are uniform. It may be recalled here that in Hingir Rampur Coal Company's case, AIR 1961 SC 459 the Supreme Court has stated that the scope of the Central Act is wider than the scope of the Central Act LIII of 1948 which by Section 6(2) provided for making rules regarding levy and collection of royalties fees or taxes on minerals mined, quarried or excavated (vide paragraph 24 of the judgment). 18. We are, therefore, of the opinion that by the enactment of the Central Act, the State Legislature lost its legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rliament having enacted the MMRD Act, 1957? After a detailed discussion, in paragraph 37 of Orissa Cement, it was observed by this Court that if royalty were to be regarded as a tax, it can perhaps be described properly as a tax on mineral rights and has to conform to the requirements of Entry 50 - List II. If the cess is taken as a tax, then, unless it can be described as land revenue or a tax on land or a tax on mining rights, it cannot be upheld under Entry 45, 49 or 50 - List II. It was further observed that the question whether royalty is a tax or not does not assist much in furnishing an answer to the two questions posed in the case. 18.1 Considering the Scheme of the MMDR Act, 1957 and the Rules made thereunder, it was opined that levy of tax had to be struck down insofar as the Bihar Act was concerned. As far as the Madhya Pradesh Act was concerned, the levy of cess was not on land in general but only on land held in connection with mineral rights, which, in the State of Madhya Pradesh is principally in regard to coal and limestone. Reiterating that cess is not referrable either under Entry 49 or 50 - List II, the State s petition was dismissed. It was held that the State l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes and development of minerals are interconnected concepts. This was because minerals hidden in the earth by themselves cannot yield profit to anyone and they become minerals only when they are brought out on the surface of the earth by mining operations. Therefore, imposition of royalty is in the context of development of minerals on a uniform pattern throughout the country. It was further observed that the original writ petitioners had failed to show how the enhanced rate of royalty as per the impugned notification had become unreasonable or confiscatory in nature. Consequently, the appeals were dismissed. Mahanadi Coalfields: 20. The main controversy in this case was with regard to levy of tax under the Orissa Rural Employment, Education and Production Act, 1992, on coal-bearing lands. The Division Bench of the High Court of Orissa held that the State Legislature did not have the competence to levy the tax on coalbearing lands and had struck down Section 3(2)(c) of the said Act as well as the Schedule appended to the said Act. The High Court took the view that the levy was hit by Section 9-A of the MMDR Act, 1957 and was also discriminatory and hit by Article 14 of the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the cess was held to be not upon the land. Royalty is a matter of agreement between the lessor and the lessee. It may also be determined by a statutory provision. But royalty is not the produce of the land; royalty is not the income of the land nor is royalty the yield of the land and that is the distinction. In India Cement, the petitioners contention was that the impugned measure being a tax not on the share of the produce of the land but on royalty payable, the levy of cess was bad. This contention was upheld. It was held that cess on royalty cannot be sustained under Entry 49 - List II as being a tax on land. It was observed that the cess impugned in India Cement was an additional charge on royalty which was impermissible as it was not a tax on land but an impost on royalty paid for exercising mineral rights. 22.1 The aforesaid reasoning in India Cement was therefore distinguished in Goodricke. Similarly, Orissa Cement was also distinguished. It was observed that the levy should not be an indirect levy on land like the one in India Cement wherein it was on the royalty but not on land itself. However, levy on land quantified on the basis of its yield could be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculty in drawing any further analogy between Goodricke and the instant case. Every facet concerning minerals, whether it be taxation, regulation, or development, is without an iota of doubt an important question of national concern for, it has ramifications on the stability of national economy, environmental degradation, labour laws, rights of tribal communities, etc. That the aforesaid sentiment was shared and acted upon by our Constitutional framers is explicit vide insertion of a unique and special apparatus in the Constitution through Entry 54 - List I, Entry 23 List II and Entry 50 List II. In my opinion, it would be incongruous with the constitutional intent to hold that the conscious provision for Union supremacy through the insertion of aforesaid apparatus, specifically through insertion of Entry 50 List II, denudes the States power to use mineral rights or royalty levied upon them as a measure to tax land. To do so would simply render Entry 50 List II nugatory. 22.6 The contention that land cannot be decoupled from mineral rights is attractive at first blush. But, on closer examination, this proposition goes against the cardinal rule of interpreting Entries in the Lists. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation was struck down as unconstitutional as ultra vires the competence of the State Legislature in Mahanadi Coalfields. 23.3 Insofar as the cases arising from the Allahabad High Court concerning constitutional validity of a cess on mineral rights levied under Section 35 of the Uttar Pradesh Special Area Development Authorities Act, 1986 read with Rule 3 of Shakti Nagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997 ( the SADA Act and the SADA Cess Rules , respectively), the challenge was to the imposition of cess on mineral rights at such rates as may be prescribed, subject to any limitations imposed by Parliament by law relating to mineral development. The SADA Cess Rules as well as Section 35 of the SADA Act were challenged on the ground that MMDR Act, 1957 having been enacted, containing a declaration under Section 2 thereof as contemplated by Entry 54 - List I and the Act being applicable to the State of Uttar Pradesh as well, the State legislature was denuded of its power to enact the impugned law and levy impugned cess. It was contended that the impugned cess would have the impact of adding to the royalty already being paid and thereby increase the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court in Kesoram observed as under: ( A diversion from the main issue) Royalty, if tax? 56. We would like to avail this opportunity for pointing out an error, attributable either to the stenographer's devil or to sheer inadvertence, having crept into the majority judgment in India Cement Ltd. case [(1990) 1 SCC 12 : 1989 Supp (1) SCR 692 : AIR 1990 SC 85] . The error is apparent and only needs a careful reading to detect. We feel constrained rather duty-bound to say so, lest a reading of the judgment containing such an error just an error of one word should continue to cause the likely embarrassment and have adverse effect on the subsequent judicial pronouncements which would follow India Cement Ltd. case [(1990) 1 SCC 12 : 1989 Supp (1) SCR 692 : AIR 1990 SC 85] , feeling bound and rightly, by the said judgment having the force of pronouncement by a seven-Judge Bench. Para 34 of the Report reads as under: (SCC p. 30) 34. In the aforesaid view of the matter, we are of the opinion 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 Section 9 of the Central Act covers the field and the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional charge on royalty and not a tax on land, cannot apparently be justified as falling under Entry 49 in List II. ( underlining by me ) 23.8 Thereafter, this Court discussed the meaning and content of the expression royalty from various dictionaries and other authorities and referred to the judgments of the High Courts of Orissa, Punjab and Haryana, and Gujarat High Court and in paragraph 64 observed as under: 64. We need not further multiply the authorities. Suffice it to say that until the pronouncement in India Cement [(1990) 1 SCC 12 : 1989 Supp (1) SCR 692 : AIR 1990 SC 85] nobody doubted the correctness of royalty not being a tax. ( underlining by me ) And ultimately in paragraph 69, it was inferred as under: 69. In India Cement [(1990) 1 SCC 12 : 1989 Supp (1) SCR 692 : AIR 1990 SC 85] (vide para 31, SCC) decisions of four High Courts holding royalty is not tax have been noted without any adverse comment. Rather, the view seems to have been noted with tacit approval. Earlier (vide para 21, SCC) the connotative meaning of royalty being share in the produce of land has been noted. But for the first sentence (in para 34, SCC) which we find to be an apparent error, nowhere el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a tax. On a non-appreciation of what exactly the import of the judgment in the India Cement was, this doubt expressed by the majority in Kesoram has ultimately led to the constitution of this ninejudge Bench to answer eleven points for reference which, in my view, was wholly unnecessary. This aspect would become more clear if the judgment of this Court in P. Kannadasan vs. State of Tamil Nadu, (1996) 5 SCC 670 ( Kannadasan ) is perused which is discussed later. 23.13 By contrast, Sinha J., in his dissenting opinion in Kesoram at paragraph 309, has appreciated the controversy in the following words: 309. The decisions of the Privy Council in Governor General in Council v. Province of Madras [1945 FCR 179 : AIR 1945 PC 98] on the question of interpretation as regards conflicting legislative entries in general and tax entries in particular may not be apposite in the instant case inasmuch as herein we are concerned with only one question, namely, whether the field of taxation of mines and minerals which are extracted and cease to be a part of the surface, is wholly covered or not. One of the principles for reconciling conflicting tax entries is to ascertain as to whether a person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... underlining by me ) The aforesaid observations are significant in light of the history of legislation as regards regulation of mines and development of minerals and the logical corollary would be that in the field of levy of tax, fee or other charges, the Parliament by virtue of Section 9 read with Section 25 of the MMDR Act, 1957 has covered the field of legislation which act as a limitation on the State's power under Entry 23 - List II of the Constitution. Therefore, Sinha, J. rightly observed that once it is held that the entire field of mines and minerals is covered by the MMDR Act, 1957 the impugned levy by way of cess on coal-bearing land is nothing but an imposition of tax on exercise of mineral rights which is barred having regard to the field being covered by the provisions of the MMDR Act, 1957. 24. What is of significance is that in India Cement, the seven-judge Bench of this Court considered the judgments of the Patna High Court in Laddu Mal and that of the Mysore High Court in Laxminarayana Mining Co. and approved the same. However, there was a reference made to four other judgments of the High Courts of Punjab and Haryana, Gujarat, Orissa and Rajasthan. The criti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 was given a complete go-by while arriving at such a conclusion. Consequently, the said judgments and also the majority in Kesoram concluded that the States have the legislative competence to tax mineral rights or make royalty a basis for any other exaction such as cess etc. This was contrary to the view expressed in India Cement by this Court. Therefore, it was unnecessary for the seven-judge Bench in India Cement to have discussed the judgments of the High Courts of Punjab and Haryana, Gujarat, Orissa and Rajasthan referred to above. In fact, in my view, the judgments of the aforesaid High Courts were impliedly overruled in India Cement, which aspect has not been noticed by the majority in Kesoram. 25. Insofar as the judgment of this Court in the case of Mahalaxmi Fabric Mills is concerned, the said judgment followed India Cement. However, it was overruled in Kesoram. So also, the judgments in Saurashtra Cement and other cases. Reference was made to Mahanadi Coalfields wherein the levy by the State Legislature was a tax of Rs.32/- per thousand acre on coal-bearing lands. The attack on the legislation was that the provision was one on mineral lands and mineral rights and the Parl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes and mineral development takes within its purview the levy of tax on minerals. This Court held that Sections 9 and 9A of the MMDR Act, 1957 provides for levy of royalty/dead rent on minerals. The State Legislatures cannot, therefore, impose any tax on minerals or exercise of mineral rights and HRS Murthy was wrongly decided. Having so declared, this Court in India Cement, however, directed that the said decision shall only have a prospective effect. This was for the reason that the States had been levying and collecting the cesses on the basis of the decision of this Court in HRS Murthy. The decision in India Cement was rendered on 25.10.1989. 26.2 Thereafter, a three-judge Bench in Orissa Cement declared identical levies imposed by the States of Orissa, Bihar and Madhya Pradesh as being lacking in legislative competence. The Bench again directed that the said decision shall be operative prospectively with effect from the date of the said judgment i.e., 04.04.1991 in the case of State of Bihar, with effect from 22.12.1989 in the case of State of Orissa and with effect from 28.03.1989 in the case of State of Madhya Pradesh. In view of the States not having the competence to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch provisions shall be deemed to have remained in force up to 04.04.1991. The Act was deemed to have come into force on 15.02.1992, which was the date on which the Ordinance was promulgated by the President. According to this Court, the Parliament adopted the device of legislation by incorporation as a result of which all the relevant provisions of the Scheduled Acts (State Acts) were deemed to have been enacted by Parliament and read into Section 2(1) of the Validation Act. As a corollary, all the taxes which were set aside by this Court and the High Courts were deemed to be the taxes/levies of the Parliament itself. This was on the clear understanding that the power of Parliament to levy such taxes was not in dispute and States had no power to levy such cesses or taxes. This was also on the acceptance of the judgment in India Cement. The provisions of the Act were declared to be in force up to 04.04.1991 though the law was enforced from 04.04.1992, which was unique by itself. 26.3 The validity of the Validation Act was questioned before this Court on several counts by the private parties and defended by the Union of India. This Court observed that the object and purpose of enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re two different things which are not necessarily coextensive. The Validation Act would remain in force till Parliament chooses to repeal it. Therefore, the argument that the Validation Act being a temporary statute was not effective from 04.04.1991, was rejected by this Court. It was observed that levies were validated by the Validation Act notwithstanding the cessation of levy after 04.04.1991 and the machinery created to recover and refund the said cesses/taxes was kept alive. 26.6 The judgment of this Court in Kannadasan is a clear indication of the fact that it was the Parliament, by enacting a legislation in the year 1992 in the form of a Validation Act which had to step in to support the States for validation of the States incompetent levies, namely, cesses or taxes on royalty which had been set aside over decades by this Court. This legislation was also in the interest of mineral development and in exercise of powers and relatable to Entry 54 - List I. But for the Validation Act enacted by the Parliament, the levies being declared invalid by this Court as well as the High Courts, it was the bounden duty of the States to have refunded the levies collected in the form of cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government as per Section 9 of the MMDR Act, 1957 and as notified in the Second Schedule to the aforesaid Act. Thus, royalty being a tax could be collected as arrears of land revenue in the event of non-payment. Such being the construction and interpretation of the provisions of MMDR Act, 1957 in light of the Entries in the Lists, royalty as a compulsory exaction has met all the parameters of a tax and hence the provisions regarding collection of royalty under the MMDR Act, 1957 and the Rules made thereunder acted as a limitation under Entry 50 List II. Hence, the States are denuded of their power to impose a cess or any other levy on royalty or define it as a land revenue which could be imposed by the States under Entry 49 List II. Such State levies on royalty is against the interest of mineral development in the country and therefore the State levies on the basis of royalty was struck down by this Court and certain High Courts. The validation Act also established the fact that the Parliament by passing such an Act did so in the interest of mineral development in the country and to save the States from losing the revenue collection made though under incompetent levies prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already collected. This was to allay the apprehension of the State Government that the incompetent levies already collected would have to be refunded. Therefore, Parliament, being also of the same opinion, through a legislative device of providing legislative competence in respect of the certain provisions of the States laws and by validating the levies which could be collected up to 04.04.1991 i.e. the date on which this Court delivered the judgment in Orissa Cement case, had enacted the Validation Act. 26.11 The controversy, however, revolved on the expression imposition and collection under Section 2(1) of the Validation Act. Whether it related to only imposition and collection already made under certain State laws or conferred further right of imposition and collection of cesses on the minerals extracted upto 04.04.1991. In Kannadasan this Court had interpreted the provisions to the effect that the Validation Act would confer a right on the State Government to make fresh levy and collection of dues which were collectable upto 04.04.1991. This interpretation was, however, not accepted by three-judge Bench. It was observed that the Validation Act could not be construed to confer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of arrears and dues, to that extent, disapproved Kannadasan. 26.14 I do not find any inconsistency between the judgments in Kannadasan and Tata Iron and Steel on the questions of whether royalty is a tax and whether the States had no competency to levy any tax on exercise of mineral rights. On the other hand, what is common to both Kannadasan and Tata Iron and Steel is the fact that they proceeded on the basis that this Court, having set aside the incompetent levies imposed by the States and the Parliament, coming forward to support the States vis- -vis their apprehension regarding refund to be made on the basis of the principle of unjust enrichment, enacted the Validation Act. The challenge to the said Act otherwise failed in Kannadasan. The contention of the assessee was only with regard to levies to be collected up to 04.04.1991 under the Validation Act and not after that date. This aspect was answered by the three-judge Bench in Tata Iron and Steel by holding that the Validation Act was in fact a temporary statute which neither gave the State the right to levy any taxes or cesses etc. which were struck-down by this Court as being incompetent nor could the States collect arrears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in different senses according to its context and a dictionary gives all the meanings of a word in several contexts. The Court has therefore to select the particular meaning which would be relevant to the context in which it has to interpret that word. Thirdly, the judgment in the India Cement was doubted even in the absence of their being a conflict of the judgment with any other seven-judge Bench decision. No doubt, at the Highest Court, one cannot really be bogged down by the Bench strength nor does the doctrine of stare decisis would apply strictly to this Court when a judgment of a larger Bench is questioned by a Bench of similar or smaller strength. But for that, there must be present a flagrant violation of law, a patent error or a blatantly erroneous approach in the matter so as to enable a Bench of a similar or smaller strength to doubt the correctness or otherwise of the decision of a larger Bench. There could also be a situation where a judgment is per incuriam or the doctrine of sub silentio would apply. For instance, a two-judge Bench of this Court doubted the correctness of a five-judge Bench decision in A.R. Antulay vs. R.S. Naik, 1986 Supp SCC 510 ( A.R. Antulay ) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nct and different. It was held that the taxation Entry i.e. Entry 50 List II could not be controlled by Entry 54 List I which is a regulatory Entry which is meant for regulation for mines and mineral development under the control of the Union. That may be so in the case of many other Entries, however, Entry 50 List II is unique inasmuch as the taxation Entry namely, the power to impose taxes on mineral rights is itself subject to any limitations imposed by Parliament by law relating to mineral development. In the context of mineral development, limitations could be imposed by Parliament by law vis - vis the power to impose taxes on mineral rights which is evident on a reading of Entry 50 List II. The reason being, exercise of mineral rights is related to mineral development which is a subject under Entry 54 List I. This coalescing of the subjects in Entry 50 List II with Entry 54 List I has not been noticed whereas in India Cement as well as in Laddu Mal and in Laxminarayana Mining Co., this aspect has been the foundation of the reasoning. 28. In view of the aforesaid discussion, I differ from the judgment of Hon ble the Chief Justice of India, and hold that India Cement, Orissa Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that there was a clear distinction between tax directly on land and tax on income arising from land such as from minerals extracted from the land. 31.1 In fact, this Court in New Manek Chowk Spinning Weaving Mills Co. Ltd. vs. Municipal Corporation of the City of Ahmedabad, (1967) 2 SCR 679 ( New Manek Chowk Spinning Weaving Mills ), had observed that Entry 49 - List II only permitted levy of tax on lands and buildings and not on machinery contents in or situated on the buildings even though the machinery was there for the use of the buildings for a particular purpose. Also construing the said Entry, this Court in Sudhir Chandra Nawn vs. Wealth Tax Officer, Calcutta, (1969) 1 SCR 108 ( Nawn ), observed that Entry 49 - List II contemplated a levy on land as a unit and the levy must be directly imposed on land and must bear a definite relationship to it. The aforesaid decision was affirmed in Assistant Commissioner of Urban Land Tax vs. The Buckingham Carnatic Co. Ltd., (1970) 1 SCR 268 ( The Buckingham Carnatic Co. ). Similarly, in Second Gift Tax Officer, Mangalore vs. D.H. Nazareth, (1971) 1 SCR 195 ( D.H. Nazareth ), it was held that a tax on the gift of land is not a tax im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance was placed by State of Tamil Nadu on the judgment of this Court on HRS Murthy wherein it was observed that land cess paid on royalty has a direct relation to the land and only a remote relation with mining. This was held to be an incorrect approach in the matter by the seven-judge Bench in India Cement. In paragraph 30 of India Cement, it was further clarified that in HRS Murthy, attention of this Court was not invited to the provisions of Section 9 of the MMDR Act. It was also observed that Section 9(3) of the MMDR Act, 1957 in terms states that royalties payable under the Second Schedule of the said Act shall not be enhanced more than once during a period of three years. Therefore, this created a clear bar on the State Legislatures taxing royalty in any manner so as to in effect amend Second Schedule of the MMDR Act as additional taxes on royalty imposed by the States would vary the tax structure from State to State leading to variance in the price of a particular mineral in the country which is not in the interest of mineral development. Therefore, it was observed that tax on royalty cannot be a tax on land. This is ultra vires the State legislative power particularly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for saying so are as follows : (i) Firstly, royalty as a tax on the value of the minerals extracted is paid by the lessee or the person who would exercise mineral rights to the State or lessor, as the case may be, under the provisions of MMDR Act, 1957 which is a Parliamentary law. Whereas, a tax or cess on land is paid by the owner or the occupier of the land as the case may be as per particular statute or by an agreement between the owner and the occupier. (ii) Secondly, on a reading of the lease-deed executed in terms of Form-K appended to the Mineral Concession Rules, 1960, which are Central Rules, in light of Section 9 of the MMDR Act, 1957 and the Second Schedule thereof, it is clear that the lessee is under an obligation to pay royalty to the Government on the mineral extracted which is in exercise of his mining rights as per the provisions of MMDR Act, 1957, which is a Parliamentary legislation enacted in terms of Entry 54 - List I for regulation of mines and mineral development uniformly throughout the country. (iii) Thirdly, the royalty is paid as a tax as a tax in respect of minerals removed or consumed by the holder of a mining lease from the leased area at the rate fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1957 is repealed and the Parliament leaves it to the wisdom of State legislatures to impose royalty, then, there cannot be a duplication of taxes on mineral bearing land: one under Entry 49 - List II and another under Entry 50 - List II. A tax on mineral bearing land cannot fall under two Entries of the same List. Taxation Entries are mutually exclusive from each other in a particular List, the State List List II in the instant case, unless they are made subject to an Entry in another List i.e., Union List - List I as in the instant case, Entry 50 - List II is subject to Entry 54 - List I. 34. In view of the aforesaid discussion, I also observe that 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 so to say imposed by two different Legislatures: 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 under Section 9 of MMDR Act, 1957, which is a Parliamentary law also paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciated by the majority in Kesoram. Instead the judgment in Kesoram proceeded on an imagined typographical error in paragraph 34 of India Cement without appreciating the reasoning therein for holding that royalty is a tax. 35.2 Apart from questioning the verdict of a larger Bench on the premise that there was a typographical error , the majority in Kesoram lost sight of the implication and the adverse impact that its view would have on mineral development in the country. If royalty is not held to be a tax and the same being covered under the provisions of the MMDR Act, 1957, it would imply that despite Entry 54 List I and the declaration made in Section 2 of the MMDR Act, 1957 and Section 9, 9A and other provisions thereof, taxes on mineral rights could be imposed by the States over and above payment of royalty on a holder of a mining lease. This would also mean that the limitation that the Parliament has made by law on the taxing power of a State explicitly stated in Entry 50 List II would be given a go by. This would further imply that despite such a Parliamentary limitation, the States could pass laws imposing taxes, cesses, surcharge on cess, etc. on the basis of royalty whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II so as to not be bound by any limitation that the Parliament had imposed by law on the power of the States to levy taxes on mineral rights. The circle would come around when Parliament would have to again step in to bring about a uniformity in the prices of minerals and in the interest of mineral development so as to curb the States from imposing levies, taxes, etc. on mineral rights. Why should that happen again? There would then be legal uncertainty which would cause adverse economic consequences including on mineral development in India. For the above reason also, the majority judgment in Kesoram is not a good law and ought to be overruled to the extent that it holds that royalty is not a tax. Federalism in India: 36. According to Louise Tillin, in her article Building a National Economy : Origins of Centralized Federalism in India published by the Oxford University Press in 2021, India s postcolonial Constitution introduced 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. According to Tillin, the distinctive elements of Indian federalism were shaped at thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntieth century welfare States guided the constitutional blueprint for a model of federalism in which provincial initiative should not preclude national coordination, particularly, in the fields of socio-economic spheres. 36.4 According to Tillin, in the case of India, political economy considerations intersect with the accommodation of diversity in shaping the resulting forms of federalism . The question of a 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. Sarkaria Commission Report on Centre-State Relations: 37. Resolved to study and reform the existing arrangements between the Union and the States in an evolving socioeconomic scenario, the Ministry of Home Affairs vide Order dated 09.06.1983 constituted a Commission under the Chairmanship of Justice R.S. Sarkaria with Shri B. Sivaraman and Dr. S.R. Sen having due regard to the framework of the Constitution. At this stage, reference to Section 5, Chapter II Legislative Relations of the Report of the Sarkaria Commission ( Sarkaria Commission Report ) may be of assistance: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm view that the principles of Union Supremacy cannot be undermined from Articles 246 and 254. While the immediate paragraph is concerned with legislative actions taken under the List III - Concurrent List, they provide us a beneficial lens to both the importance of Union supremacy in matters that demand national uniformity and the Commission s following discussion on Mines and Minerals in Chapter XIII. 37.1 As the extract hereunder reflects, the Commission noted that the tug-of-interpretation between Centre and States was causing adverse impact on prices of petroleum which is necessarily not in the interest of national conformity and uniformity. It reads as under: 13.5.10 .We are informed by the government of India that one State has levied mineral rights tax, approximately 300 percent of royalty on coal and lime-stone and 100 percent of royalty on other minerals. The Union Government, while conceding the States rights under Entries 49 and 50 (subject to such limitation as may be imposed by Parliament), has pointed out the need for the States to exercise restraint on imposition of such levies, so as not to affect uniformity or competitiveness. xxx 13.5.12 The controversy, is ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lative powers between the Union and the States were thought of in a manner that would give an upper hand to Parliamentary supremacy, so to say, over the legislative power of the State. Therefore, the respective Entries in Lists I and II, namely, the Union List and the State List respectively, have been so drafted in order to ensure that there is overall mineral development in the country as a whole, rather than particular States possessing the mineral wealth acting contrary to the overall welfare of the country and against the economic interest of the other States. 39. In view of the aforesaid discussion, I find that the learned Attorney General is right in contending that the MMDR Act, 1957 contemplates all manner of levies, charges, impost or demands that could be provided for having a nexus with mineral rights. Therefore, the Act itself has to be construed as a limitation on the power of the States to demand or impose levies to the extent to which is stated in the Act. Although, Entry 50 List II is a taxing Entry, it will be subject to the limitations enacted by the Parliament by law under Entry 54 List I. The answer to the question raised by learned Solicitor General, whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 50 List II can be construed to mean even a prohibition apart from a restriction. Conclusions : 40. What follows are my answers to the conclusions reached on the issues raised in the judgment of Hon ble the Chief Justice of India, which read as under : Question Issues My Conclusions a. What is the true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act? Whether royalty is in the nature of tax? The true nature of royalty determined under Section 9 read with Section 15(1) of the MMDR Act, 1957 is that it is in the nature of a tax coming within the scope and ambit of Article 366(28) of the Constitution 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. b. What is the scope of Entry 50 - List II of the Seventh Schedule? What is the ambit of the limitations imposable by Parliament in exercise of its legislative powers under Entry 54 - List I? Does Section 9, or any other provision of the MMDR Act, contain any limitation with respect to the field in Entry 50 - List II? Entry 50 - List II of the Seventh Schedule is, no doubt, a taxation Entry which d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 50 - List II is a specific Entry in relation to Entry 49 - List II, and would consequently subtract mining land from the scope of Entry 49 - List II? Yes, 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. This is particularly so having regard to Entry 50 - List II to be read with Entry 54 - List I and Section 2 of the MMDR Act, 1957. 41. Consequently, the following conclusions are arrived at by me: a. I hold that royalty is in the nature of a tax or an exaction. It is not merely a contractual payment but a statutory levy under Section 9 of the Act (Section 9A relating to dead rent). The liability to pay royalty does not arise purely out of the contractual conditions of a binding lease. The 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 Section 2 of the MMDR Act, 1957. b. Entry 50 - List II is an exception to the position of law laid down in MPV Sundararamier vs. State of Andhra Pradesh, AIR 1958 SC 468 ( MPV Sundararamier ). Moreover, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tates can tax such mineral bearing lands which are not covered within the scope of MMDR Act, 1957 i.e., 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. g. 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. In my view, the decision in Goodricke does not apply to the present case and hence does not require any clarification. h. Entries 49 and 50 - List II, no doubt, operate in different fields. Entry 49 - List II deals with taxes on lands and buildings but Entry 50 - List II deals with taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. There is no constitutional limitation on the competence of the State legislature to tax lands and buildings. However, the State s competence to tax mineral rights is subject to any limitations imposed by the Parliament by law relating to mineral development. Entry 49 - List II and Entry 50 - List II are distinct and operate in distinct ways ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse, the scope of expression any limitations in Entry 50 - List II is wide enough to include the imposition of restrictions, conditions, principles as well as a prohibition. 43. In the result, in my view, the judgments in India Cement, Orissa Cement, Mahalaxmi Fabric Mills, Saurasthra Cement, Mahanadi Coalfields, Kannadasan excluding to the extent overruled in Tata Iron and Steel, and Tata Iron and Steel are correct and therefore are binding precedent and cannot be overruled. On the other hand, the majority judgment in Kesoram, is overruled to the extent it holds that royalty is not a tax. 44. The Registry is directed to place these matters before Hon ble the Chief Justice of India for directions on listing the matters before the appropriate Bench. I must place on record my sincere appreciation to the learned Attorney General, learned Solicitor General and their teams, learned senior counsel appearing for the respective parties, learned instructing counsel and learned counsel for the respective parties for their valuable assistance to this Bench. Foot Note 137 W R Sorley, Mining Royalties and their Effect on the Iron and Coal Trades (1889) 52(1) Journal of Royal Statistical Societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170 1989 Supp (2) SCC 744 171 (1991) Supp 1 SCC 430 [36] 172 (2001) 1 SCC 91 173 1995 Supp (1) SCC 642 [12] 174 Quarry Owners Association v. State of Bihar, (2000) 8 SCC 655 [34]. 175 Kesoram (supra) [71] 176 Kesoram (supra) [115]. 177 See Rules 27 and 45, Mineral Concession Rules 1960 178 Goodyear India Ltd v. State of Haryana, (1990) 2 SCC 71 [27] 179 (2005) 6 SCC 499 180 (2021) 10 SCC 165 [56] 181 Rules 27 and 45, Mineral Concession Rules 1960 182 Ramanatha Aiyar Advanced Law Lexicon (Volume 3) 4778. 183 (1985) 2 SCC 116 [19] 184 State of Tamil Nadu v. Hind Stone, (1981) 2 SCC 205 [10]; State of Uttar Pradesh v. Maharaja Dharmander Prasad Singh, (1989) 2 SCC 505 [52] 185 Talcher Municipality v. Talcher Regulated Market Committee, (2004) 6 SCC 178 [14]; Union of India v. Asian Food Industries Ltd, (2006) 13 SCC 542 [43] 186 UP Coop. Cane Unions Federations v. West UP Sugar Mills Association, (2004) 5 SCC 430 [20]; Balmer Lawrie Company Limited v. Partha Sarathi Sen Roy, (2013) 8 SCC 345 [24] 187 Subramanian Swamy v. State of Tamil Nadu, (2014) 5 SCC 75 [67] 188 Lord Provost and Magistrates of Glasgow v. Faire, (1888) [L.R] 13 App. Cas. 657 189 Section 2(j) mine means any excavati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of this Act. 191 Working Conditions Code 2020 192 Section 2(1)(zm), Working Conditions Code 2020. 193 Section 4, MMDR Act 194 Section 5, MMDR Act 195 Section 7, MMDR Act 196 Section 8, MMDR Act 197 Section 9, MMDR Act 198 Section 17, MMDR Act 199 (1994) 2 SCC 691 [48] 200 (1996) 9 SCC 709 [64] 201 Mineral Conservation and Development Rules 2017 202 (1961) 2 SCR 537 203 Orissa Act 204 Hingir-Rampur (supra) [19] 205 Section 2, MMRD Act 1948. [It read: 2. Declaration as to expediency of control by Central Government:- It is hereby declared that it is expedient in the public interest that the Central Government should take under its control the regulation of mines and oilfields and the development of minerals to the extent hereinafter provided. ] 206 Hingir-Rampur (supra) [35] [ 35. [ ] We reach this position that the field covered by Act 53 of 1948 is substantially the same as the field covered by the impugned Act but the declaration made by Section 2 of the said Act does not constitutionally amount to the requisite declaration by Parliament, and so the limitation imposed by Entry 54 does not come into operation in the present case. ] 207 Hingir-Rampur (supra) [37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the terms of Section 18(1) it appears clear to us that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that until the rules were framed, there was no inconsistency and no supersession, of the State Act. ] 226 Ishwari Khetan Sugar Mills v. State of Uttar Pradesh, (1980) 4 SCC 136; Rajasthan Roller Flour Mills Association v. State of Rajasthan, 1994 Supp (1) SCC 413 [14] 227 (1980) 4 SCC 136 228 IDR Act 229 Ishwari Khetan Sugar Mills (supra) [11] 230 Lloyd George, The Budget, The Land and The People: The New Land Value Taxes Explained and Illustrated (2nd edn, 1909) 48. 231 Royal Commission on Mining Royalties, Final Report of the Royal Commission appointed to inquire into the subject of mining royalties (1893) 14. 232 Lloyd George (n 230) 51 233 Mr. Lloyd George (Hansard, Volume 11) 28 September 1909 234 Hansard, Volume 11, 22 September 1909 235 Hansard, Volume 35, 5 March 1912 236 Jeremy Waldron, What is Private Property? (1985) 5(3) Oxford Journal of Legal Studies 313, 327. 237 Ibid, 327. 238 James Y Stern, The Essential Structure of Property Law (2017) 115(7) Michigan Law Review 1167, 1176. 239 Thressiamma Jacob v. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Mohit Minerals (P) Ltd., (2022) 10 SCC 700 [97] 255 Chhotabhai Jethabhai Patel and Co. v. Union of India, 1962 Supp (2) SCR 1 [68] 256 Goodyear India Ltd. v. State of Haryana, (1990) 2 SCC 71 257 (1964) 3 SCR 787 [23] 258 Godfrey Phillips India Ltd v. State of UP, (2005) 2 SCC 515 [47] 259 (2001) 4 SCC 60 [13] 260 See Anant Mills Co. Ltd. v. State of Gujarat (1975) 2 SCC 175 261 Entry 54 of List II, before substitution by the Constitution (One Hundred and First Amendment) Act 2016 read: 54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I) 262 Entry 33, List III, Seventh Schedule, Constitution of India. (It reads: [ 33. Trade and commerce in, and the production, supply and distribution of (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; [ ] ] 263 Constituent Assembly Debates, Volume 9 (1 September 1949) 264 (1981) 2 SCC 318 [6-A] 265 See All India Federation of Tax Practitioners v. Union of India, (2007) 7 SCC 527 [46] 266 (1942) 4 FCR 90 267 1995 Supp (1) SCC 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rry and Wade, The Law of Real Property (9th edn, Sweet and Maxwell) 305 Megarry and Wade (supra). [ Although prima facie a tenant in fee simple is entitled to all mines and minerals under the land, this is subject to some exceptions. Thus at common law, as modified by statute, the Crown is entitled to all gold and silver mines; and under the Petroleum Act 1998 petroleum existing in its natural condition in strata is vested in the Crown. Licences for extraction (including fracking) can be granted under the Petroleum Act 1998. Under the Coal Act 1938 all interests in coal (except interests arising under a coal mining lease) were vested in the Coal Commission in return for compensation. These interests (including coal-mining leases) were vested subsequently in the National Coal Board, then in the British Coal Corporation, and finally, (following the privatization of coal industry) in the Coal Authority. That body has extensive powers to license coal-mining operations. ] 306 S Sundararaja Iyengar, Land Tenures in the Madras Presidency (1921) 25 307 Section 2, Regulation XXV of 1802. [It read: 2. Assessment on all lands liable to revenue. Proprietary right vested in zamindars In conform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aja Iyengar (supra) 28. 314 ibid. 315 See Dalmia Cement (Bharat) Ltd. v. State of TN, (2014) 2 SCC 279 [30] 316 1913 Regulations 317 Rule 13, 1913 Rules. [It read: 13. A licence to prospect for minerals, called hereinafter a prospecting licence, shall confer on the licensee the sole right, subject to the conditions contained in the licence, to mine, quarry, bore, dig and search for, win, work and carry away any specified minerals or, in the event of no minerals being specified, all minerals lying, or being within, under or throughout the land specified in the licence. ] 318 Rule 14, 1913 Rules. [It read: 14. A prospecting licence shall be granted only in respect of land in which the mines or minerals are the property of the Government. ] 319 1966 SCC OnLine SC 89 [13] 320 (2013) 9 SCC 725 321 Section 48, Maharashtra Land Revenue Code 1966 322 Section 6, UP Zamindari Abolition and Land Reforms Act 1950 323 Maharashtra Abolition of Subsisting Proprietary Rights to Mine and Minerals in Certain Lands Act 1985. 324 Thressiamma Jacob (supra) [55] 325 Section 16, MMDR Act. 326 OAMDR Act 327 Section 5, MMDR Act 328 Section 6, OAMDR Act 329 (1977) 1 SCC 340 330 Chanan Mal (supra) [38] 331 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he completion of the manufacturing process and the point of sale by the manufacturer. 369 (2018) 7 SCC 233 370 Express Hotels (P) Ltd. v. State of Gujarat, (1989) 3 SCC 677 [25] 371 Section 23, I T Act 1961 372 Patel Gordhandas Hargovindas v. Municipal Commissioner, 1963 SCC OnLine SC 57 [10] 373 1960 SCC OnLine SC 7 [8] 374 (1969) 1 SCR 645 375 Also see New Manek Chowk Spg. Wvg. Mills v. Ahmedabad Municipality, 1967 SCC OnLine SC 116 [13] 376 Ahmedabad Municipal Corporation v. GTL Infrastructure Limited, (2017) 3 SCC 545 [19] 377 1992 Supp (2) SCC 239 [5] 378 Mahanadi Coalfield Ltd. (supra) [19] 379 (1989) 3 SCC 211 380 1976 Act 381 1995 Supp (1) SCC 707 382 Section 25, Tea Act 1953. [It reads: 25. Imposition of cess on tea produced in India (1) There shall be levied and collected as a cess for the purposes of this Act a duty of excise on all tea produced in India at such rate not exceeding fifty paise per kilogram as the Central Government may, by notification in the Official Gazette, fix: Provided that different rates may be fixed for different varieties or grades of tea having regard to the location of, and the climatic conditions prevailing in, the tea estates or garden produc ..... 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