Holding

Royalty is not a tax but a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights, and the State legislatures have legislative competence under Entry 49 List II to tax mineral-bearing land using the yield of such land as a measure.

Summary

The case involved a reference to a nine-judge bench to resolve the divergence between India Cement Ltd. v. State of Tamil Nadu (which held royalty is a tax) and State of West Bengal v. Kesoram Industries Ltd. (which held royalty is not a tax). The core issues were the true nature of royalty under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957, and the scope of legislative entries in the Seventh Schedule, particularly Entry 50 List II (taxes on mineral rights) and Entry 49 List II (taxes on lands and buildings). The majority opinion, authored by Chief Justice Chandrachud, held that royalty is not a tax but a contractual consideration paid by the lessee to the lessor for the enjoyment of mineral rights. It further held that the legislative power to tax mineral rights vests with the State legislatures, and Parliament can impose limitations under Entry 50 List II through a law relating to mineral development, but the MMDR Act as it stands has not imposed such limitations. The majority also held that mineral-bearing land falls within the description of 'lands' under Entry 49 List II, and the yield of such land (quantity of mineral produced or royalty) can be used as a measure to tax the land. Consequently, the decisions in India Cement and other cases were overruled to the extent they held otherwise. Justice Nagarathna dissented, holding that royalty is a tax and that the MMDR Act imposes limitations on the States' taxing power, and that Entry 49 List II does not apply to mineral-bearing lands. The reference was answered accordingly, and the matters were directed to be placed before an appropriate bench.

Issues considered

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?
What is the scope of Entry 50 of 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 of List I? Does Section 9, or any other provision of the MMDR Act, contain any limitation with respect to the field in Entry 50 of List II?
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?
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 in relation to Entry 49 of List II, and would consequently subtract mining land from the scope of Entry 49 of List II?

Legislation cited

Constitution of Indias. Article 246, s. Article 265, s. Article 366(28), s. Entry 49 List II, s. Entry 50 List II, s. Entry 54 List I
Mineral Concession Rules, 1960s. 27, s. 45
Mines and Minerals (Development and Regulation) Act, 1957s. 15, s. 2, s. 25, s. 9, s. 9A, s. 9B, s. 9C

Subjects

Mines and MineralsRoyaltyTaxConstitutional LawFederalismLegislative EntriesEntry 50 List IIEntry 49 List IIEntry 54 List IMMDR Act

Judgment

[2024] 7 S.C.R. 1549 : 2024 INSC 554

Mineral Area Development Authority & Anr.
v.
M/s Steel Authority of India & Anr. Etc.
(Civil Appeal Nos. 4056-4064 of 1999)
25 July 2024
[Dr. Dhananjaya Y. Chandrachud,* CJI, Hrishikesh Roy,
Abhay S Oka, B.V. Nagarathna,* J.B. Pardiwala,
Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma
and Augustine George Masih, JJ.]

Issue for Consideration
The questions which arose for determination are as to what is the
true nature of royalty determined u/s.9 r/w s.15(1) of the Mines
and Minerals (Development and Regulation) Act, 1957; whether
royalty is in the nature of tax; what is the scope of Entry 50 List II
Seventh Schedule; what is the ambit of the limitations imposable
by Parliament in exercise of its legislative powers under Entry 54
List I; does s.9, or any other provision of the MMDR Act, contain
any limitation with respect to the field in Entry 50 List II; whether
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, which is a non-taxing
general entry; whether there is any departure from the general
scheme of distribution of legislative powers as enunciated in
M P V Sundararamier’s case; what is the scope of Entry 49 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 List II r/w
Entry 54 List I; and whether Entry 50 List II is a specific entry in
relation to Entry 49 List II, and would thus, subtract mining land
from the scope of Entry 49 List II.

Headnotes†
Mines and Minerals (Development and Regulation) Act,
1957 – s.9 read with s.15(1) – Royalties in respect of mining
leases – Nature of royalty determined u/s.9/15(1) – Royalty, if
in the nature of tax:
* Author
Ed. Note: Hon’ble Dr. Justice Dhananjaya Y. Chandrachud, Chief Justice of India pronounced the judgment on
behalf of himself, Hon’ble Mr. Justice Hrishikesh Roy, Hon’ble Mr. Justice Abhay S. Oka, Hon’ble Mr. Justice
J.B. Pardiwala, Hon’ble Mr. Justice Manoj Misra, Hon’ble Mr. Justice Ujjal Bhuyan, Hon’ble Mr. Justice Satish
Chandra Sharma and Hon’ble Mr. Justice Augustine George Masih. Hon’ble Mrs. Justice B.V. Nagarathna
pronounced a separate judgment.
1550 [2024] 7 S.C.R.

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Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax – Royalty is a contractual
consideration paid by the mining lessee to the lessor for enjoyment
of mineral rights – Liability to pay royalty arises out of the
contractual conditions of the mining lease – Payments made to
the Government cannot be deemed to be a tax merely because
the statute provides for their recovery as arrears. [Para 342a] –
Held: (per B.V. Nagarathna, J.) (Dissenting) Royalty determined
u/s.9 r/w s.15(1) is in the nature of a tax or an exaction coming
within the scope and ambit of Art.366(28) 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 – It is
not merely a contractual payment but a statutory levy u/s.9 – Liability
to pay royalty does not arise purely out of the contractual conditions
of a binding lease – 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 s.2
of the MMDR Act – Constitution of India – Art.366(28), Entry 54
List I, Entry 50 List II. [Paras 40a, 41a]
Mines and Minerals (Development and Regulation) Act, 1957 –
s.9 – Royalties in respect of mining leases – Constitution of
India – Entry 50 List II Seventh Schedule – Taxes on mineral
rights subject to any limitations imposed by Parliament by law
relating to mineral development – Scope of Entry 50 List II –
Ambit of the limitations imposable by Parliament in exercise
of its legislative powers under Entry 54 List I – s.9, or any
other provision of the MMDR Act, if contains any limitation
with respect to the field in Entry 50 List II:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Legislative power to tax mineral rights
vests with the State legislatures – Parliament does not have
legislative competence to tax mineral rights under Entry 54
List I, it being a general entry – Since the power to tax mineral
rights is enumerated in Entry 50 List II, Parliament cannot use its
residuary powers with respect to that subject-matter – Entry 50
List II envisages that Parliament can impose “any limitations” on
[2024] 7 S.C.R. 1551

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

the legislative field created by that entry under a law relating to
mineral development – MMDR Act as it stands has not imposed
any limitations as envisaged in Entry 50 List II – Entry 54 List I,
Entry 50 List II Seventh Schedule. [Para 342b, c] – Held: (per
B.V. Nagarathna, J.) (Dissenting) – Entry 50 List II dealing with
taxes on mineral rights, is subject to any limitations imposed by
Parliament by law relating to mineral development – Use of the
word “any” means the limitation could be in any form which can
be imposed only by the Parliament by law relating to mineral
development – Use of the expression ‘any limitations’ must be
given the widest possible meaning to include a limitation in the
form of ss.9 and 9A, 25 or any other provision of the MMDR Act
and Rules made thereunder which act as a limitation to Entry 50
List II – Scope of the expression “any limitations” under Entry
50 List II is wide enough to include the imposition of restriction,
conditions, principles as well as a prohibition by Parliament by law
relating to mineral development – Thus, in view of the declaration
u/s.2 of the MMDR Act made in terms of Entry 54 List I and to
the extent of the provisions of the said Act, the State legislature
is denuded of its powers under Enry 50 List. [Paras 40b, 41d, e]
Mines and Minerals (Development and Regulation) Act, 1957 –
s.9 – Royalties in respect of mining leases – Constitution of
India – Entry 50 List II Seventh Schedule – Expression “subject
to any limitations imposed by Parliament by law relating to
mineral development” in Entry 50 List II, if pro tanto subjects
the Entry to Entry 54 List I, which is a non-taxing general
Entry – If there is any departure from the general scheme
of distribution of legislative powers as enunciated in MPV
Sundararamier’s case:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) – Legislative power to tax mineral rights
vests with the State legislatures – Parliament does not have
legislative competence to tax mineral rights under Entry 54 List I,
it being a general entry – Since the power to tax mineral rights is
enumerated in Entry 50 List II, Parliament cannot use its residuary
powers with respect to that subject-matter – Entry 50 List II does
not constitute an exception to the position of law laid down in
M P V Sundararamier’s case. [Para 342b, c, d] – Held: (per B.V.
1552 [2024] 7 S.C.R.

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Nagarathna, J.) (Dissenting) 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 – Use
of the expression “any limitations” would mean that the taxing Entry
would be subject to a non-taxing or general Entry such as in Entry
54 List I which could also be termed as a regulatory Entry – Thus,
there is a departure from the general scheme of distribution of
legislative powers as enumerated in MPV Sundararamier’s case
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 –
Entry 50 List II is an exception to the position of law laid down in
MPV Sundararamier’s case. [Paras 40c, 41b]
Mines and Minerals (Development and Regulation) Act, 1957 –
ss.9, 2 – Royalties in respect of mining leases – Constitution
of India – Entry 49 List II Seventh Schedule – Scope of Entry
49 List II – Entry 49 List II, if covers tax involving a measure
based on the value of the produce of land – Constitutional
position, if different qua mining land on account of Entry 50
List II read with Entry 54 List I:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) State legislatures have legislative competence
u/Art.246 read with Entry 49 List II to tax lands which comprise
of mines and quarries – Mineral-bearing land falls within the
description of “lands” under Entry 49 List II – Yield of mineral
bearing land, in terms of the quantity of mineral produced or the
royalty, can be used as a measure to tax the land under Entry 49
List II – Decision in Goodricke’s case clarified to this extent [Para
342 e, f] – Held: (per B.V. Nagarathna, J.) (Dissenting) Entry 49
List II deals with taxation of lands and buildings – It does not cover
taxes on mineral bearing lands – Constitutional position is different
qua mineral bearing lands on account of Entry 50 List II read with
Entry 54 List I and s.2 of the MMDR Act – Thus, any imposition
on the basis of royalty by a State Legislature or involving royalty
as a measure of the value of the minerals extracted from the land
is impermissible – State legislatures have legislative competence
under Art.246 read with Entry 49 List II to tax lands and buildings
but not lands which comprise of mines and quarries or have mineral
[2024] 7 S.C.R. 1553

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

deposits as mineral bearing lands do not fall within the description
of lands (under Entry 49 List II) – Similarly, States can tax such
mineral bearing lands which are not covered within the scope of
MMDR Act-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 – 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 – Decision in Goodricke’s
case does not require any clarification – Entry 50 List II read with
Entry 54 List I Seventh Schedule. [Paras 40d, 41f, g]
Mines and Minerals (Development and Regulation) Act, 1957 –
ss.9, 2 – Constitution of India – Entry 49 List II, Entry 50 List
II Seventh Schedule – Entry 50 List II, if a specific Entry in
relation to Entry 49 List II, and would consequently subtract
mining land from the scope of Entry 49 List II:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Entries 49 and 50 of List II deal with distinct
subject matters and operate in different fields – Mineral value
or mineral produce can be used as a measure to impose a
tax on lands under Entry 49 List II – “Limitations” imposed by
Parliament in a law relating to mineral development with respect
to Entry 50 List II do not operate on Entry 49 List II because there
is no specific stipulation under the Constitution to that effect.
[Para 342g, h] – Held: (per B.V. Nagarathna, J.) (Dissenting)
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, having regard to Entry 50 List II to be read with Entry
54 List I and s.2 of the MMDR Act. [Para 40e]
Mines and Minerals – Royalty, in the nature of tax or not –
Divergence between India Cement’s case and Kesoram’s
case – India Cement’s case held 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 s.9 of the Central
Act covers the field and the State legislature is denuded of its
competence under Entry 23 List II whereas Kesoram’s case held
that royalty is not a tax, but a payment made to the owner of
land who may be a person and may not necessarily be the State:
1554 [2024] 7 S.C.R.

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Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) – Kesoram held that India Cement’s case
was caused by “an apparent typographical error or inadvertent
error” and should not be understood as a correct declaration
of law – Kesoram’s case also expressed its disagreement with
Mahalaxmi Fabric Mills’s case to the extent it had held that there
was no “typographical error” in India Cement’s case – Kesoram’s
case concurred with India Cement’s case on the aspect that cess
on royalty is beyond the legislative competence of the State
legislatures – Divergence on the point of law between India
Cement’s case and Kesoram’s case is apparent and pertains to
whether or not royalty is a tax – Thus, the royalty does not meet
the characteristic requirements of a tax. [Paras 117, 121, 122] –
Held: (per B.V. Nagarathna, J.) Majority decision in Kesoram is
a serious departure from the law laid down by the seven-judge
Bench in India Cement which was wholly unwarranted and thus,
the said majority judgment is liable to be overruled and is overruled
to the extent of holding that royalty is not a tax – India Cement
was correctly decided wherein it was held that royalty is in the
nature of tax. [Paras 42 (ii), 1.1]
Constitution of India – Legislative entries – Interpretation –
Entries 49 and 50 List II in the context of mineral bearing
lands – Interplay of:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Entries 49 and 50 of List II deal with distinct subject
matters – Both the entries operate in different fields without any
overlap – Nature of taxes under the entries are distinct – Fact that
mineral value or mineral produced is used as a measure under
Entry 50 List II does not preclude the legislature from using the
same measure for taxing mineral bearing land under Entry 49
List II – Doctrine of generalia specialibus non derogant has no
application because Entries 49 and 50 List II operate in different
fields – Though Parliament can limit the taxing field entrusted to
the State under Entry 50 List II through a law relating to mineral
development, the limitation operates on the field of taxing mineral
rights – Such a limitation cannot operate on Entry 49 List II
because there is no specific stipulation under the Constitution to
[2024] 7 S.C.R. 1555

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

that effect – Constitution envisages the imposition of limitations
by Parliament on the legislative field of the state of taxes on
mineral rights, and not taxes on lands. [Para 339] – Held: (per
B.V. Nagarathna, J.) (Dissenting) Entry 49 List II is of the widest
amplitude – 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”,
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 u/s.9 of MMDR Act, which is
Parliamentary law also paid to the State Government – This is
impermissible having regard to the constitutional intent and scheme
of Entries in the Lists – Thus, royalty cannot also be a measure
to impose tax on mineral bearing land – State Legislature using
royalty on mineral produce as a measure to impose a cess under
Entry 49 List II on mineral bearing land would overlap Entry 50
List II, because minerals are extracted by virtue of mining activity
which is in exercise of mineral right and taxes on mineral rights are
envisaged under Entry 50 List II subject to any limitation imposed
by Parliament – Thus, Entry 50 List II would have to be viewed
distinctly from Entry 49 List II – If so viewed, it becomes subject
to Parliamentary law in the form of MMDR Act and the rules made
thereunder which would be a limitation on the power of State to
tax under Entry 50 List II – Hence to get over the rigour of Entry
50 List II, States cannot resort to Entry 49 List II. [Paras 33, 34]
Mines and Minerals – Dead rent – Explanation:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Dead rent acts as a deterrent against a
leaseholder cornering a mining lease and keeping the mineral
resources idle – Similar to royalty, dead rent is also a statutory
imposition and an integral part of the mining lease, but it generally
does not serve as a consideration for the removal or consumption
of minerals – Dead rent is determined on the basis of the area
of land covered by the lease – Imposition of dead rent ensures
that the proprietor obtains a fixed rent from the lessee even if
the mine remains unworked – Thus, dead rent is not in addition
to royalty but an alternative – Principles applicable to royalty
apply to dead rent because dead rent is imposed in the exercise
1556 [2024] 7 S.C.R.

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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 of income to the proprietor; the liability
to pay dead rent flows from the terms of the mining lease; dead
rent is an alternate to royalty; if the rates of royalty are higher
than dead rent, the lessee is required to pay the former and not
the latter; and the Central Government prescribes the dead rent
not in the exercise of its sovereign right, but as a regulatory
measure to ensure uniformity of rates. [Paras 99, 129] –
Held: (per B.V. Nagarathna, J.) Entry 49 List II does not apply
to mineral bearing lands as such lands are taxed in the form of
royalty or dead rent in the context of exercise of mineral rights –
Exercise of mineral rights is the basis for payment of royalty or
dead rent – Insofar as extraction of minerals is concerned, being
an exercise of a mineral right, royalty is payable by a holder of
a mining lease and when no mining activity is carried on, dead
rent is payable by such a person. [Paras 33, 41]
Constitution of India – Federalism – Explanation – Distinctive
elements:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Federalism is one of the basic features of
the Constitution which embodies a division of powers between
the units of the federation-the Union and the States – Indian
federalism is defined as asymmetric because it tilts towards the
Centre, producing a strong Central Government – Yet, it has not
necessarily resulted in weak State governments – Indian States
are sovereigns within the legislative competence assigned to
them – Delicate balance of power is secured by constitutional
courts by interpreting the scheme of distribution of powers – In a
federal form of government, each federal unit should be able to
perform its core constitutional functions with a certain degree of
independence – Constitution has to be interpreted in a manner
which does not dilute the federal character of our constitutional
scheme – 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. [Paras 48, 49] – Held: (per
B.V. Nagarathna, J.) India’s postcolonial Constitution introduced
[2024] 7 S.C.R. 1557

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 – Distinctive
elements of Indian federalism were shaped at their foundations by
the desire to boost industrial development and lay the foundation
for a national welfare state in a post-colonial future by preventing
the consolidation of ‘‘race to the bottom’’ dynamics arising from
unregulated inter-provincial economic competition – Distinctive
element of Indian federalism is the combination of a strong Centre
and a substantial sphere of shared Centre-State jurisdiction –
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. [Paras 36, 36.3, 36.4]
Mines and Minerals (Development and Regulation)
Act, 1957 – s.9 – Royalty – Royalty, in nature of tax or not:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax – It 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 – Liability to pay royalty arises out of the
contractual conditions of the mining lease – s.9 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 – Rates of royalty prescribed u/s.9 does not make it a
“compulsory exaction by public authority for public purposes” – s.25
allows recovery of royalty due to the Government under the MMDR
Act or “under the terms of the contract” as arrears of land does not
make royalty “an impost enforceable by law” – Furthermore, there
is difference between royalty and a tax – Proprietor charges royalty
as a consideration for parting with the right to win minerals, while a
tax is an imposition of a sovereign, royalty is paid in consideration
of doing a particular action, that is, extracting minerals from the
soil, while tax is generally levied with respect to a taxable event
determined by law, and royalty generally flows from the lease deed
as compared to tax which is imposed by authority of law – Since
royalty is a consideration paid by the lessee to the lessor under
a mining lease, it cannot be termed as an impost – Furthermore,
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both royalty and dead rent do not fulfil the characteristics of tax or
impost – Thus, observation in India Cement’s case that royalty
is a tax is incorrect. [Paras 327, 123-130]
Mines and Minerals (Development and Regulation)
Act, 1957 – s.9 – Royalties in respect of mining leases –
Purpose of s.9:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) s.9 sought to remedy the disparity of royalty rates across
India – Rates of royalty were primarily governed by the terms of
lease prior to the enactment of the MMDR Act – Once a mining lease
was entered into between a lessor and lessee, the rates of royalty
would remain static during the subsistence of the lease – s.9 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 – 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 – 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. [Paras 77, 78]
Mines and Minerals (Development and Regulation) Act, 1957 –
Meaning of “royalty” – Explanation – Essential characteristics:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Royalty is generally understood as compensation
paid for rights and privileges enjoyed by the grantee – It has
its genesis in the agreement entered into between the grantor
and grantee – Royalty is a payment made by the lessee to the
lessor or proprietor of the minerals for the removal of minerals –
Royalty also serves to compensate the lessor for the degradation
of the value of the mine because of the extraction of minerals –
Essential characteristics of royalty are that-it is a consideration or
payment made to the proprietor of minerals, either government or
[2024] 7 S.C.R. 1559

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

private person, it flows from a statutory agreement (mining lease)
between lessor and lessee, it represents a return for the grant of
privilege (to lessee) of removing or consuming the minerals, and
it is generally determined on basis of the quantity of the minerals
removed. [Paras 94, 96, 98]
Mines and Minerals (Development and Regulation)
Act, 1957 – s.9 – Royalty – Nature of – Calculation of royalty:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Royalty is not a tax but a statutory
consideration payable by the lessee to the lessor for the exercise
of mineral rights – Specification of rates of royalty with respect
to major minerals under the MMDR Act limits the powers of the
State Government in terms of Entry 54 List I read with Entry 23
List II – Royalty is payable u/s.9 on the removal or consumption
of minerals by the lessee in the leased area – Thus, essentially
royalty is payable on the dispatch of minerals from the leased
area – Rates of royalty are generally calculated on per tonnage
basis or ad valorem basis on the basis of the formula laid down –
Royalty is calculated on the basis of the quantity of minerals
extracted or removed – Yield from mineral bearing land is nothing
but the quantity of mineral produced – Royalty is per se not the
yield from a mineral bearing land, but the yield (mineral produced)
is the important factor in determination of the rate of royalty –
Moreover, royalty can be considered as an income if it is paid to
a private landowner – In case minerals are vested in the State,
royalty is paid to the State Government, and hence assumes the
form of non-tax revenues – Thus, royalty is relatable to the yield
of the mineral-bearing land as well as the income in case the
minerals vest in a private person. [Paras 87, 327-332]
Mines and Minerals (Development and Regulation)
Act, 1957 – s.9 – If serve as a limitation on the taxing powers
of State under Entry 50 List II – Expression ‘any limitation’
under Entry 50 List II, if can be extended to prohibition:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Scheme of the MMDR Act does not in itself serve as a
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limitation on the field of taxation under Entry 50 List II – MMDR Act
empowers the Central Government to specify the rates of royalty
u/s.9 r/w Second Schedule – Since royalty payable u/s.9 is not
a tax on mineral rights, any limitation on the enhancement of the
rates of royalty is not the imposition of a tax under Entry 50 List II –
ss.9, 9A, 9B, and 9C do not impose any limitations on the powers
of State to tax mineral rights under Entry 50 List II – Under Entry
50 List II, phrase “any limitations” is specifically used – 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 include even
“prohibition” – Thus, the expression ‘any limitations’ include the
power to prohibit the States from taxing mineral rights – Overall
scheme of Art. 246 r/w Entry 54 List I and Entry 50 List II makes it
clear that Parliament, in the interests of mineral development, can
impose “any limitations” – Purport of expression “any limitations”
is wide enough to include the imposition of restrictions, conditions,
principles, as well as prohibition – Constitution of India – Entry 50
List II. [Paras 229, 231, 244, 245]
Mines and Minerals (Development and Regulation) Act, 1957 –
Mineral-bearing land – Measure to tax – Minerals produced,
if a measure to tax mineral bearing land:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Tax on lands and buildings under Entry 49 List II is
often measured with respect to the income derived from the land
or building sought to be taxed – 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 – Income merely serves
as the measure to calculate the levy of taxes on land – MMDR
Act does not serve as a limitation on the legislative competence
of the States to tax mineral rights under Entry 50 List II, including
the power to levy taxes on mineral-bearing lands under Entry
49 List II – Mineral value or mineral produce could be used as
a measure of the tax on land under Entry 49 List II – Entry 50
[2024] 7 S.C.R. 1561

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

List II pertains to taxes on mineral rights would not preclude the
State legislature to use the measure of mineral value or mineral
produce under Entry 49 List II – State legislature has legislative
discretion to determine the appropriate measure for the purposes
of quantifying taxes, so long as there is a reasonable nexus
between the measure and the nature of the tax – Measure does
not determine the nature of the tax – Lands under Entry 49 List II
includes mineral bearing land – Mineral produce is the yield from
a mineral bearing land – Since royalty is determined on the basis
of the mineral produce, royalty can also be used as a measure
to determine the tax on royalty – Fact that the State legislature
uses mineral produce or royalty as a measure does not overlap
with Entry 50 List II. [Paras 291, 294, 302, 341]
Mines and Minerals (Development and Regulation)
Act, 1957 – Mineral bearing land – Decoupling of minerals
from land – When:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Minerals are decoupled from land only upon
the exercise of mineral rights by the lessee – Although the title to
minerals vests in the State Government, the mining lease transfers
the interest in the mineral from the State Government to the mining
lessee – During the whole process, minerals continue to remain
embedded in the earth, either over or above – Thus, there is no
decoupling of minerals from land – When a mining lease is granted,
the lease holder necessarily has to occupy the surface rights of
the area specified in the lease – Leaseholder has rights to both
the minerals and surface during the subsistence of the mining
lease – It cannot be said 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 – 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.
[Paras 323, 324]
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Mines and Minerals (Development and Regulation) Act,
1957 – ss.2, 4, 9, 9A, 9B, 9C, 13, 15, 25 – Royalty under the
MMDR Act – Explained. (per Dr Dhananjaya Y Chandrachud,
CJI) (for himself and for Hrishikesh Roy, Abhay S Oka,
J.B. Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra
Sharma and Augustine George Masih, JJ.) [Paras 62-74]
Mines and Minerals (Development and Regulation) Act, 1957 –
Mines and Minerals – Contours of a mining lease – Explanation:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Expressions ‘lease’ and ‘licence’ have been used in the
context of mining operations in the Constitution and in the MMRD
Act – “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 – Expression “mining
operations” has been defined to mean any operations undertaken for
the purpose of winning any mineral – Expression “winning” means
getting or extracting minerals from the mines – Under a lease deed
for mining operations, the owner transfers the interest in the minerals
to the lessee in lieu of the payment of rent, which usually takes the
form of royalty – Under the MMDR Act, a “prospecting licence” is
granted for the purpose of undertaking prospecting operations for
the purpose of exploring, locating, or proving a mineral deposit –
Under a prospecting licence, the licensee does not get an interest
in the land or in the minerals contained therein – Licensee is only
allowed to carry away a limited quantity of minerals after payment
of specified royalty. [Paras 86, 87]
Mines and Minerals (Development and Regulation) Act, 1957 –
Mineral Concession Rules, 1960 – Nature of a mining lease
under the MMDR Act and Mineral Concession Rules:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) MMDR Act and the Mineral Concession Rules detail the
procedure for the grant of mining leases in three situations-where
the minerals vest in the government, where the minerals vest in a
person other than the government, and where the minerals vest
partly in the government and partly in a private person – Right
of proprietors to grant leases and receive royalty stems from the
[2024] 7 S.C.R. 1563

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

proprietary interest in the immovable property including the minerals –
MMDR Act regulates the exercise of the proprietary rights in the
minerals in the larger public interest – Statute specifies the terms
of the lease, but the lease deed is ultimately entered between the
State Government (or the private person, as the case may be) and
the lessee – Similarly, the rates of royalty are fixed by the Central
Government u/s. 9, but royalty is received by the mining lessor, that
is the State Government or a private person. [Paras 89, 93]
Constitution of India – Federalism – Fiscal federalism, in the
context of mineral resources:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Basic features of fiscal federalism is that both the Union
government and the State governments ought to have adequate
fiscal resources to discharge their constitutional responsibilities –
List I and List II of the Seventh Schedule contain various subject-
matters under which Parliament and the State legislatures can
respectively levy taxes – Purpose of such a distribution is to entrust
adequate fiscal powers with the legislatures to raise revenues to
meet the growing fiscal expenditures and rein in the fiscal deficit –
Legislatures can formulate the principles underlying any taxing
legislation, define the taxing event or the charge of tax as well
the mode and manner of its implementation – As regards fiscal
federalism in the context of mineral resources, not all states are
equally endowed with mineral resources – Few States have greater
reserves of mineral resources, resultantly, the contribution of the
mining sector in the state domestic product is higher – Despite the
abundance of mineral wealth, many of these states lag economically
and suffer from, “resource curse” – Taxation is among the important
sources of revenue for these States, impacting on their ability
to deliver welfare schemes and services to the people – Fiscal
federalism entails that the power of the States to levy taxes within the
legislative domain carved out to them and subject to the limitations
laid down by the Constitution must be secured from unconstitutional
interference by Parliament. [Paras 51-54]
Constitution of India – Arts.366(28), 265 – Expression ‘tax’ –
Explanation – Essential characteristics of tax:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala,
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Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and
Augustine George Masih, JJ.) Taxes are monetary burdens or
charges imposed by legislative power upon persons, or property
to raise revenues to fund public expenditure – Objects to be
taxed can be taxed by the legislature according to the exigencies
of its needs so long as they happen to be within the legislative
competence of the legislature – Although the power of taxation
is pervasive and an incidence of sovereignty, it is subject to well-
defined constitutional limitations – Tax is a compulsory exaction
of money by a public authority, it is imposed under statutory
power without the consent of the tax payer, the demand is
enforceable by law, it is an imposition made for public purposes
to meet the general expenses of the state without reference to
any special benefit to be conferred on the payer of the tax, and
it is part of the common burden – Art. 366(28) defines “taxation”
to include “the imposition of any tax or impost, whether general
or local or special” – Expression “tax” u/Art.265 includes every
kind of impost in the form of a compulsory exaction – Liability
arising out of contract cannot be termed as an impost or tax –
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” u/Art.
366(28) – 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 which is neither a
tax nor a fee. [Paras 102, 104, 105, 108, 109]
Constitution of India – Entry 23 List II and Entry 54 List I – Inter-
relationship between – “Regulation of mines” and “mineral
development” – Meaning and explanation of:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) As regards, inter-relationship between Entry 54 List I
and Entry 23 List II the State legislatures possess plenary legislative
power in respect of regulation of mines and mineral development
under Entry 23 List II; Entry 23 List II is, however, subject to the
operation of Entry 54 List I; field under Entry 23 List II is subordinated
to the extent to which Parliament has brought under its control the
regulation of mines and development of minerals under the MMDR
Act; expression of the legislative intention to cover a particular field
[2024] 7 S.C.R. 1565

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

relating to mines and mineral development excludes or denudes
the legislative powers of the State with respect to that particular
field; and Parliamentary intention to cover a particular field relating
to the regulation of mines and mineral development and the extent
to which control of the Union is regarded to be in the public interest
has to be ascertained from the language of the statute – Entry 54
List I and Entry 23 List II are general or regulatory entries dealing
with the same subject matter, namely of “regulation of mines and
mineral development” – By making Entry 23 List II subordinate to
Entry 54 List I, Constitution tilts the balance of legislative powers
with respect to the regulation of mines and mineral development
in favor of the Union – Expression “regulation of mines” mean the
management of both the process of extracting minerals as well
the place where such minerals will be extracted from sub-surface
levels – MMDR Act gives shape and meaning to the expression
“regulation of mines and mineral development” through its provisions
and the rules – Entry 54 List I and Entry 23 List II do not use the
expression “minerals” simpliciter – Entries use the term “mineral
development” – As a concept, mineral development is a term of
wide import – It encompasses exploitation of minerals, reduction of
wastage in the beneficiation process, regulation of mining activities
for ecological and environmental factors and equitable distribution
of mineral resources and mining leases – Expression “mineral
development” has 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.
[Paras 132, 137, 138, 140, 141, 163]
Constitution of India – Entry 50 List II and Entry 54 List I –
Inter-relationship between:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Entry 50 List II has two elements, the legislative
field governing taxes on mineral rights is given exclusively to the
states and the field given to the states is subject to any limitations
imposed by Parliament by law relating to mineral development –
Entry 50 List II is a taxing entry – Limitations on the field created
by Entry 50 List II is however, contemplated to be created by a law
which relates to mineral development – Legislative competence of
Parliament to enact a “law relating to mineral development” can
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be traced to Entry 54 List I, a general entry – Thus, the taxing
powers of the state with respect to mineral rights under Entry 50
List II can be restricted by Parliament by its regulatory power under
Entry 54 List I. [Para 165]
Constitution of India – Entry 50 List II – Expression “mineral
rights” – Meaning of – Taxes on mineral rights:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Constitution does not define “mineral rights” –
Though the expression “mineral rights” is used in Entry 50 List II, it
does not find mention in any of the other related legislative entries
Entry 54 List I and Entry 23 List II – Expression has to be given
its ordinary and natural meaning by adopting an interpretative
approach which eschews rigidity – Mineral rights are inextricably
connected to property – Any understanding of “mineral rights” must
be prefaced on an understanding of the basics of property law –
Right to minerals entails the right to monetize mineral resources by
either consuming them or selling them to third parties – Expression
“mineral rights” under Entry 50 List II envisages a bundle of rights
associated with the ownership of minerals, including rights which
can be transferred to lessee through a mining lease – Usually,
the right to mine includes excavation of minerals and removal or
consumption of the extracted minerals – Expression “mineral rights”
must be construed in this spirit to ensure that the taxing powers of
the State under Entry 50 List II are not unnecessarily curtailed –
Breadth and scope of mineral rights has also been recognized
under the MMDR Act – As regards, the “taxes on mineral rights”,
it is the subject matter of Entry 50 List II – Taxable event under
Entry 50 List II would relate to exercise of mineral rights – Right
to receive royalty is an integral part of the mineral rights of the
lessor – However, royalty is not a tax – Thus, royalty would not
be comprehended within the meaning of the expression “taxes on
mineral rights” – Scope of taxes on mineral rights includes taxes
on the right to extract minerals, 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 List II does not foray into a duty of excise or a tax on the
sale of minerals. [Paras 170, 172, 175, 178, 179, 185, 187, 188]
[2024] 7 S.C.R. 1567

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Constitution of India – Entry 50 List II – Limitations on the
taxing power of the State under Entry 50 List II – Entry 50 List II,
if constitutes an exception to the Sundararamier principle:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Entry 50 List II is unique because though it is a taxing
entry, it is made subject to “any limitations imposed by Parliament
by law relating to mineral development” – Thus, the taxing power of
the state is capable of being controlled by a non-fiscal enactment
by Parliament relating to the development of minerals – This
seems to recognize that a fiscal imposition in the nature of a tax
on mineral rights by a state may impact on the development of
minerals – Position enunciated in Sundararamier’s case is that the
field of taxation is distinct from the general subjects of legislation
in the Union and State lists of the Seventh Schedule – While Entry
50 List II is sui generis, it does not constitute an exception to the
Sundararamier’s principle – Entry 50 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 – Question of an overlap between the
taxing entry and general entry does not arise because Parliament
cannot impose taxes on minerals under Entry 54 List I – There is
no direct conflict between the taxing powers of the States under
Entry 50 List II and regulatory powers of the Union. [Paras 190,
192, 205, 207]
Constitution of India – Taxing powers of the states – Limitations
imposed by Parliament – Nature of – Determination:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala,
Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and
Augustine George Masih, JJ.) There is a distinction between
the nature of the restraints imposable by Parliament on the
legislative field of the states to regulate mines and development
of minerals, the Parliamentary restraints contemplated on the
taxing power of the states over mineral rights – In relation to
the former, distinction emerges from the language of Entry 54
List I and Entry 23 List II and as regards the latter, it is Entry
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50 List II – Relationship between Entry 23 List II and Entry 54
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 – Expression ‘extent’ leaves it entirely to Parliament to
determine whether the extent of the control by the Union is to
be total or partial – Denudation of the legislative field of the
states follows such a declaration by Parliament and the extent
would be determined by the MMDR Act enacted by Parliament –
Entry 50 List II gives the legislative field of taxing mineral
rights to the states however, subject to limitations imposed by
Parliament by law relating to mineral development – Entry 50
List II does not result in the field of taxing mineral rights being
conferred on Parliament, because there is no specific entry
in List I giving the field of taxing mineral rights to the Union –
Field of taxing mineral rights is exclusive to the states and
continues to remain with them but subject to limitations
imposed by Parliamentary law relating to mineral development –
Parliament can determine as to how the taxing power of the
states over mineral rights should be limited in order to ensure
that it does not impede or retard mineral development – If
Parliament does so and indicates the nature of the limitations,
states are bound to abide by them while exercising the taxing
power over mineral rights. [Paras 208, 210, 211]
Constitution of India – Entry 50 List II – Expression ‘any
limitations’ – Construction of:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Use of the expression “any” before “limitations” under
Entry 50 of List II indicates that the scope of the limitations is
expansive and includes “all” or “every” limitation that could be
imposed by Parliament by law relating to mineral development –
Expression “any” has to be construed in its context, taking into
consideration the scheme, purpose, and subject matter of the
enactment, or the scheme of distribution of legislative powers
under the Constitution – Expression “any limitations” is indicative
of the fact that Parliament has been provided with ample legislative
freedom to conceive limitations or restrictions on the legislative
powers of the State to tax minerals. [Para 233]
[2024] 7 S.C.R. 1569

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Constitution of India – Taxes on mineral rights on mineral
development – Impact of:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Uniformity of prices of mineral commodities
ensures the objective of mineral development as envisaged under
the MMDR Act – Levy of a tax on mineral rights by the State
legislatures may lead to an increase in the prices of the mineral
commodity in India – An increase in the rate of tax on a particular
commodity cannot per se be said to impede free trade and
commerce in that commodity – To counteract any adverse impact
on the development of minerals in India that the Constitution has
empowered Parliament under Entry 50 List II to impose limitations
on the basis of which the State legislature can tax mineral
rights – Parliament has the responsibility to ensure that there is
no adverse effect on development of mineral rights – Legislative
powers granted to the State legislatures cannot be whittled down
impliedly based on the presumption that all taxes on mineral rights
imposed by the State will have adverse economic consequences on
mineral development – 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. [Paras 248, 249]
Constitution of India – Entry 49 List II – Taxes on lands and
buildings – Principles governing ‘taxes on lands and buildings’
under Entry 49 List II – Explanation – State legislatures, if
competent to levy a tax on mineral-bearing land as a unit
under Entry 49 of List II:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself and
for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) Entry 49 List II contemplates levy of tax on land as
a unit, irrespective of the use to which it is put – Thus, the State
legislature is competent while designing the levy under Entry 49
List II to tax lands which comprise of mines and quarries – Mineral-
bearing land also falls within the description of “lands” under Entry
49 List II – State legislature has wide discretion to classify lands
and levy taxes on them under Entry 49 List II – Subject of taxation
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in Entry 49 List II is land as a unit – Subject of tax in Entry 50
List II is the mineral rights – There is a distinction between the
two legislative entries – Legislative competence of the States to
tax lands under Entry 49 List II will not be affected by the MMDR
Act. [Paras 275, 278-280]
Constitution of India – Arts.245, 246, 265 – Scheme of
distribution of legislative powers between the Parliament and
the State Legislature and constitutional limitations – Stated.
(per Dr Dhananjaya Y Chandrachud, CJI) (for himself and for
Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj Misra,
Ujjal Bhuyan, Satish Chandra Sharma and Augustine George
Masih, JJ.) [Paras 29-37]
Constitution of India – Seventh Schedule – Legislative entries –
Interpretation of – Stated. (per Dr Dhananjaya Y Chandrachud,
CJI) (for himself and for Hrishikesh Roy, Abhay S Oka, J.B.
Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma
and Augustine George Masih, JJ.) [Paras 38, 40-47]
Doctrines/Principles – Public trust doctrine – Natural resources
and the public trust doctrine:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Public trust doctrine is founded on the
principle that certain resources are nature’s bounty which
ought to be reserved for the whole populace, for the present
and for the future – State holds all natural resources, including
minerals, as a trustee of the public and must deal with them in
a manner consistent with the nature of such a trust – Central
Government or State Government may not always be the owner
of the underlying minerals – Constitution has entrusted the
Union and the States with the responsibility to regulate mines
and mineral development in consonance with the principles
of the public trust doctrine and sustainable development of
mineral resources – Entrustment to the State being subject to
the power of Parliament to regulate the domain – Under the
MMDR Act, the Central Government, acting as a public trustee
of minerals, regulates prospecting and mining operations in
public interest. [Paras 55, 57-60]
[2024] 7 S.C.R. 1571

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Tax/Taxation – Nature of – True test – Measure of tax and levy
of tax – Nexus between:
Held: (per Dr Dhananjaya Y Chandrachud, CJI) (for himself
and for Hrishikesh Roy, Abhay S Oka, J.B. Pardiwala, Manoj
Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine
George Masih, JJ.) Among its elements tax has to provide for
the charge of tax, the incidence of tax, the measure of the tax
and would contain provisions in the nature of the machinery for
assessment and recovery – Measure of tax is not a true test of the
nature of tax – Standard adopted as a measure of tax may be a
relevant consideration in determining the nature of tax, but is not
conclusive – Nexus between the measure and levy of tax need
not be “direct and immediate” – Nexus has to be “reasonable” and
must have some relationship with the nature of levy – Reasonability
of the nexus would largely depend upon the nature of the tax and
the means available with the legislature to design the measure of
the tax – Since the measure of the levy is a matter of legislative
policy and convenience, the reasonability of the nexus between
the measure and tax has to be determined by the courts on a
case-to-case basis. [Paras 283, 286, 290]
Mines and Minerals (Development and Regulation) Act, 1957 –
Object and scope of – MMDR Act vis-a-vis Entry 50 List II:
Held: (per B. V. Nagarathna, J.) MMDR Act contemplates all manner
of levies, charges, impost or demands that could be provided for
having a nexus with mineral rights – Thus, 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 – Though,
Entry 50 List II is a taxing Entry, it would be subject to the limitations
enacted by the Parliament by law under Entry 54 List I – States
cannot impose levies under Entry 50 List II over and above the
amount of royalty received by them under the MMDR Act – Entry
50 List II is sui generis because it is the only legislative Entry which
limits the taxing powers of the State legislatures by reference to
a general law – Thus, expression “mineral development” found in
Entry 50 List II has to be traced to the entire architecture of the
MMDR Act which serves as limitation of taxing power of the State
legislature under Entry 50 List II – To read it otherwise would lead
to destruction of the federal balance – Further, tax on mineral right
would also include royalty as envisaged u/s.9 and other Sections
of the MMDR Act and every holder of mining lease is bound to
pay royalty irrespective of the owner of the mineral bearing land,
1572 [2024] 7 S.C.R.

Digital Supreme Court Reports

in terms of s.9 read with Second Schedule to the said Act – Thus,
royalty is in the nature of a tax on mineral rights – Also the MMDR
Act and the Rules made thereunder is a complete Code on the
regulation of mineral development – State legislature cannot, on
the basis of royalty paid, levy any other tax, cess or surcharge on
cess – States can only levy tax on sale of mineral as per Entry 54
List II which is not a tax on mineral rights – Moreover, Entry 50
List II is a recognition of parliamentary superiority via imposition
of a limitation. [Paras 39, 39.1]
Mines and Minerals (Development and Regulation)
Act, 1957 – ss.2, 9, 9A – India Cement’s case holding that
royalty is a tax – Effect of overruling India Cement:
Held: (per B.V. Nagarathna, J.) If royalty is not held to be a tax
and the same being covered under the provisions of the MMDR
Act, it would imply that despite Entry 54 List I and ss.2, 9, 9A and
other provisions, taxes on mineral rights could be imposed by
States over and above payment of royalty on a holder of a mining
lease – Limitation that 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 and the States could pass laws imposing taxes, cesses,
surcharge on cess, etc. on the basis of royalty which is in addition
to payment of royalty – Such levies could also be imposed under
Entry 49 List II thereby making Entry 50 List II redundant which is
not acceptable – There would be unhealthy competition between
the States to derive additional revenue and consequently, the steep,
uncoordinated and uneven increase in cost of minerals, subjecting
the national market being exploited for arbitrage – Overall economy
of the country would be affected adversely – This would lead to
breakdown of the federal system envisaged under the Constitution in
the context of mineral development and mineral rights – Overruling
the judgment in India Cement would mean that all judgments akin
to India Cement’s case whether prior to or subsequent thereto,
stand overruled irrespective of whether they are of High Courts or
this Court – Thus, all States would once again start levying taxes
on mineral rights under Entry 49 List II, thereby bypassing Entry 50
List II so as to not be bound by any limitation that Parliament had
imposed by law on power of the States to levy taxes on mineral
rights – Parliament would have to again step in to bring about
uniformity in the prices of minerals and in the interest of mineral
development so as to curb the States from imposing levies, taxes
on mineral rights. [Paras 35.2, 35.3]
[2024] 7 S.C.R. 1573

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Precedent – Typographical error in a judgment of a larger
Bench – If can be questioned by smaller Benches on the
basis thereof:
Held: (per B.V. Nagarathna, J.) Judgments of larger Benches
cannot be questioned by smaller Benches on the basis of an
imagined “typographical error” – Entire judgment must be read and
understood including its under currents before negating it for what
it stands – Judgment of a Court of law is not a piece of legislation
but one pregnant with reasoning and it becomes the duty of a
succeeding Bench considering a precedent to be cautious in opining
something contrary on the premise of a “typographical error” in a
judgment of a larger Bench by failing to understand the import of
the reasoning – Opinion of the majority in the Kesoram’s case is
per incuriam as it failed to follow the dictum in India Cement on the
basis of a “typographical error” where there was none. [Para 27]

Case Law Cited

In the judgment of Dr. Dhananjaya Y. Chandrachud, CJI:
State of West Bengal v. Kesoram Industries Ltd. [2004] 1 SCR
564 : (2004) 10 SCC 201 – affirmed.
Goodricke Group Ltd. v. State of West Bengal [1994] Supp. 6
SCR 120 : (1995) Supp 1 SCC 707 – clarified.
M P V Sundararamier & Co. v. State of Andhra Pradesh [1958] 1
SCR 1422 – explained.
India Cement Ltd. v. State of Tamil Nadu [1989] Supp. 1 SCR
692 : (1990) 1 SCC 12; Orissa Cement Ltd. v. State of Orissa
[1991] 2 SCR 105 : (1991) Supp 1 SCC 430; Federation of Mining
Associations of Rajasthan v. State of Rajasthan (1992) Supp 2
SCC 239; State of M P v. Mahalaxmi Fabric Mills Ltd. [1995] 1 SCR
756 : (1995) Supp 1 SCC 642; Saurashtra Cement & Chemical
Industries Ltd. v. Union of India [2000] Supp. 4 SCR 44 : (2001) 1
SCC 91; State of Orissa v. Mahanadi Coalfields Ltd. [1995] 3 SCR
639 : (1995) Supp 2 SCC 686; P Kannadasan v. State of Tamil
Nadu [1996] Supp. 4 SCR 92 : (1996) 5 SCC 670 – overruled.
Banarsi Dass Chadha v. Lt Governor, Delhi Administration [1979]
1 SCR 271 : (1978) 4 SCC 11; V P Pithupitchai v. Special Secretary
to the Government of TN [2003] 3 SCR 1045 : (2003) 9 SCC 534;
Jindal Stainless Steel v. State of Haryana [2016] 10 SCR 1 : (2017)
1574 [2024] 7 S.C.R.

Digital Supreme Court Reports

12 SCC 1; State of West Bengal v. Committee for Protection of
Democratic Rights [2010] 2 SCR 979 : (2010) 3 SCC 571; State
of Kerala v. Mar Appraem Kuri Company Ltd. [2012] 4 SCR 448 :
(2012) 7 SCC 106; Hoechst Pharmaceuticals v. State of Bihar
[1983] 3 SCR 130 : (1983) 4 SCC 45; Calcutta Gas Company
(Proprietary) Ltd. v. State of West Bengal [1962] Supp 3 SCR 1;
Ujagar Prints (II) v. Union of India [1989] 1 SCR 344 : (1989) 3
SCC 488; Ch Tika Ramji v. State of U P [1956] 1 SCR 393 : (1956)
SCC OnLine SC 9; State of Maharashtra v. Bharat Shanti Lal
Shah [2008] 12 SCR 1083; Kishori Shetty v. The King (1949-50)
11 FCR 650; Offshore Holdings (P) Ltd. v. Bangalore Development
Authority [2011] 1 SCR 453 : (2011) 3 SCC 139; Mafatlal Industries
v. Union of India [1996] Supp. 10 SCR 585 : (1997) 5 SCC 536;
R M D Chamarbaugwalla v. Union of India [1957] 1 SCR 930 :
(1957) SCC OnLine SC 11; R Abdul Quader & Co. v. STO [1964]
6 SCR 867; In Re. Sea Customs Act, s. 20(2) [1964] 3 SCR 787;
Godfrey Phillips India Ltd. v. State of UP [2005] 1 SCR 732 :
(2005) 2 SCC 515; Navinchandra Mafatlal v. Commissioner of
Income Tax, Bombay City [1955] 1 SCR 829 : (1954) 3 SCC 623;
Hans Muller of Nurenburg v. Superintendent, Presidency Jail [1955]
1 SCR 1284; Elel Hotels & Investments Ltd. v. Union of India
[1989] 2 SCR 880 : (1989) 3 SCC 698; State of Rajasthan v. G
Chawla [1959] Supp. 1 SCR 904 : (1958) SCC OnLine SC 33;
United Provinces v Atiqa Begum (1940) 2 FCR 110; Express Hotels
(P) Ltd. v. State of Gujarat [1989] 2 SCR 893 : (1989) 3 SCC 677;
Sardar Baldev Singh v. CIT [1961] 1 SCR 482 : (1960) SCC
OnLine SC 147; A L S P P L Subrahmanyan Chettiar v. Muthuswami
Goundan (1940) 2 FCR 188; A S Krishna v. State of Madras [1957]
SCR 399; K C Gajapathi Narayan Deo v. State of Orissa [1954]
1 SCR 1 : (1953) 2 SCC 178; South India Corporation (P) Ltd. v.
Secretary, Board of Revenue [1964] 4 SCR 280; State of Bihar v.
Kameshwar Singh [1952] 1 SCR 889 : (1952) 1 SCC 528; S R
Bommai v. Union of India [1994] 2 SCR 644 : (1994) 3 SCC 1;
Dr Indramani Pyarelal Gupta v. W R Natu [1963] 1 SCR 721;
Union of India v. Mohit Minerals Private Limited [2022] 9 SCR
300 : (2022) 10 SCC 700; Khazan Chand v. State of Jammu and
Kashmir [1984] 2 SCR 858 : (1984) 2 SCC 456; M C Mehta v.
Kamal Nath [1996] Supp. 10 SCR 12 : (1997) 1 SCC 388; M C
Mehta v. Union of India (2009) 6 SCC 142; T N Godavarman
Thirumulpad v. Union of India [2005] Supp. 3 SCR 552 : (2006)
1 SCC 1; Centre for Public Interest Litigation v. Union of India
[2024] 7 S.C.R. 1575

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

[2012] 3 SCR 147 : (2012) 3 SCC 1; Reliance Natural Resources
Ltd. v. Reliance Industries [2010] 5 SCR 704 : (2010) 7 SCC 1;
Fomento Resorts & Hotels Ltd. v. Minguel Martins [2009] 3 SCR
1 : (2009) 3 SCC 571; Natural Resources Allocation, In re, Special
Reference No. 1 of 2012 [2012] 9 SCR 311 : (2012) 10 SCC 1;
State of Rajasthan v. Gotan Lime Stone Khanji Udyog (P) Ltd.
[2016] 1 SCR 216 : (2016) 4 SCC 469; Orissa Mining Corporation
Ltd. v. Ministry of Environment & Forests [2013] 6 SCR 881 :
(2013) 6 SCC 476; Pradeep S Wodeyar v. State of Karnataka
[2021] 11 SCR 985 : (2021) 19 SCC 62; State (NCT of Delhi) v.
Sanjay [2014] 9 SCR 1063 : (2014) 9 SCC 772; State of Haryana
v. Ram Kishan [1988] 3 SCR 1015 : (1988) 3 SCC 416; National
Mineral Development Corporation Ltd. v. State of M P [2004] Supp.
2 SCR 1 : (2004) 6 SCC 281; Tata Steel Ltd. v. Union of India
[2015] 6 SCR 29 : (2015) 6 SCC 193; D K Trivedi & Sons v. State
of Gujarat [1986] 1 SCR 479 : (1986) Supp SCC 20; Federation
of Indian Mineral Industries v. Union of India [2017] 12 SCR 724 :
(2017) 16 SCC 186; K P Varghese v. ITO [1982] 1 SCR 629 :
(1981) 4 SCC 173; Gujarat Pottery Works v. B P Sood, Controller
of Mining Leases for India [1967] 1 SCR 695; State of Punjab v.
British India Corporation [1964] 2 SCR 114; Associated Hotels of
India Ltd. v. R N Kapoor [1960] 1 SCR 368; State of Karnataka
v. Subhash Rukmayya Guttedar (1993) Supp 3 SCC 290; Sri
Tarkeshwar Sio Thakur jiu v. Dar Dass Dey (1979) 3 SCC 106;
Mangal Amusement Park Private Ltd. v. State of Madhya Pradesh
[2012] 10 SCR 388 : (2012) 11 SCC 713; Bhagwan Dass v. State
of Uttar Pradesh [1976] 3 SCR 869 : (1976) 3 SCC 784; State of
Meghalaya v. All Dimasa Students Union [2019] 8 SCR 297 :
(2019) 8 SCC 177; Inderjeet Singh Sial v. Karam Chand Thapar
[1995] Supp. 4 SCR 53 : (1995) 6 SCC 166; H R S Murthy v.
Collector of Chittoor [1964] 6 SCR 666; Bherulal v. State of
Rajasthan (1956) SCC OnLine Raj 9; Amrit Banaspati Co. Ltd. v.
State of Punjab [1992] 2 SCR 13 : (1992) 2 SCC 411; Dena Bank
v. Bhikabhai Prabhudas Parekh & Co. [2000] 3 SCR 509 : (2000)
5 SCC 694; Commissioner, Hindu Religious Endowment, Madras
v. Sri Lakshmindra Thirta Swamiar of Sri Shirur Mutt [1954] 1 SCR
1005 : (1954) 1 SCC 412; CIT v. McDowell and Co. Ltd. [2009]
8 SCR 983 : (2009) 10 SCC 755; Mahant Sri Jagannath Ramanuj
Das v. State of Orissa [1954] 1 SCR 1046 : (1954) 1 SCC 455;
D G Gose and Co. (Agents) (P) Ltd. v. State of Kerala [1980] 1
SCR 804 : (1980) 2 SCC 410; Indian Banks’ Association v. Devkala
1576 [2024] 7 S.C.R.

Digital Supreme Court Reports

Consultancy Service [2004] Supp. 1 SCR 225 : (2004) 11 SCC
1; CCE v. Chhata Sugar Co. Ltd. [2004] 2 SCR 790 : (2004) 3
SCC 466; State of Punjab v. Devans Modern Breweries [2003]
Supp. 5 SCR 930 : (2004) 11 SCC 26; Har Shankar v. Excise
and Taxation Commissioner [1975] 3 SCR 254 : (1975) 1 SCC
737; State Bank of India v. Jage Ram [1980] 3 SCR 746 : (1980)
3 SCC 599; Government of Andhra Pradesh v. Anabeshahi Wine
and Distilleries Pvt Ltd. (1988) 2 SCC 25; Laddu Mal v. State of
Bihar (1965) SCC OnLine Pat 30; Laxminarayana Mining Co. v.
Taluk Development Board (1972) SCC OnLine Kar 80; Dr. Shanti
Swaroop Sharma v. State of Punjab, AIR 1969 Punj and Har 79;
Saurashtra Cement & Chemical Industries Ltd. v. Union of India
(1979) SCC OnLine Guj 23; Laxmi Narayan Agarwalla v. State
of Orissa (1983) SCC OnLine Ori 16; Raojibhai Jivabhai Patel v.
State of Gujarat [1989] Supp. 2 SCR 406 : (1989) Supp 2 SCC
744; Quarry Owners Association v. State of Bihar [2000] Supp. 2
SCR 211 : (2000) 8 SCC 655; State of H P v. Gujarat Ambuja
Cement Ltd. [2005] Supp. 1 SCR 684 : (2005) 6 SCC 499; Indsil
Hydro Power & Manganese Ltd. v. State of Kerala [2019] 10 SCR
647 : (2021) 10 SCC 165; Goodyear India Ltd. v. State of Haryana
[1989] Supp. 1 SCR 510 : (1990) 2 SCC 71; K Ramanathan v.
State of Tamil Nadu [1985] 2 SCR 1028 : (1985) 2 SCC 116; State
of Tamil Nadu v. Hindu Stone [1981] 2 SCR 742 : (1981) 2 SCC
205; State of Uttar Pradesh v. Maharaja Dharmander Prasad Singh
[1989] 1 SCR 176 : (1989) 2 SCC 505; Talcher Municipality v.
Talcher Regulated Market Committee [2004] Supp. 3 SCR 167 :
(2004) 6 SCC 178; Union of India v. Asian Food Industries Ltd.
[2006] Supp. 8 SCR 485 : (2006) 13 SCC 542; UP Coop. Cane
Unions Federations v. West UP Sugar Mills Association [2004]
Supp. 2 SCR 238 : (2004) 5 SCC 430; Balmer Lawrie & Company
Limited v. Partha Sarathi Sen Roy [2013] 4 SCR 1018 : (2013) 8
SCC 345; Subramanian Swamy v. State of Tamil Nadu [2014] 1
SCR 308 : (2014) 5 SCC 75; Premium Granites v. State of Tamil
Nadu [1994] 1 SCR 579 : (1994) 2 SCC 691; Tata Iron & Steel
Co. Ltd. v. Union of India [1996] Supp. 3 SCR 808 : (1996) 9 SCC
709; Hingir-Rampur Coal Co. Ltd. v. State of Orissa [1961] 2 SCR
537; State of Orissa v. M A Tulloch [1964] 4 SCR 461; Baijnath
Kedia v. State of Bihar [1970] 2 SCR 100 : (1969) 3 SCC 838;
Bharat Coking Coal Ltd. v. State of Bihar [1990] 3 SCR 744 :
(1990) 4 SCC 557; State of Assam v. Om Prakash Mehta [1973]
3 SCR 169 : (1973) 1 SCC 584; Sandur Manganese & Iron Ores
[2024] 7 S.C.R. 1577

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Ltd. v. State of Karnataka [2010] 11 SCR 240 : (2010) 13 SCC 1;
Sayyed Ratanbhai Sayeed v. Shirdi Nagar Panchayat [2016] 11
SCR 476 : (2016) 4 SCC 631; Meerut Development Authority v.
Association of Management Studies [2009] 6 SCR 663 : (2009)
6 SCC 171; Ishwari Khetan Sugar Mills v. State of Uttar Pradesh
[1980] 3 SCR 331 : (1980) 4 SCC 136; Rajasthan Roller Flour
Mills Association v. State of Rajasthan [1993] Supp. 2 SCR 72 :
(1994) Supp 1 SCC 413; Thressiamma Jacob v. Geologist,
Department of Mining & Geology [2013] 7 SCR 863 : (2013) 9
SCC 725; State of West Bengal v. Union of India [1964] 1 SCR
371; Tata Chemicals Ltd. v. State of Gujarat (1988) SCC OnLine
Guj 13; Kumar Ramessur Malia v. Ram Nath Bhattacharjee (1905)
SCC OnLine Cal 55; Saurabh Chaudri v. Union of India [2003]
Supp. 5 SCR 152 : (2003) 11 SCC 146; Navtej Singh Johar v.
Union of India [2018] 7 SCR 379 : (2018) 10 SCC 1; Govind Saran
Ganga Saran v. CST [1985] 3 SCR 985 : (1985) Supp SCC 205;
Mathuram Agrawal v. State of M P [1999] Supp. 4 SCR 195 :
(1999) 8 SCC 667; State of Karnataka v. Drive-In Enterprise [2001]
2 SCR 378 : (2001) 4 SCC 60; Chhotabhai Jethabhai Patel and
Co. v. Union of India [1962] Supp 2 SCR 1; Anant Mills Co. Ltd.
v. State of Gujarat [1975] 3 SCR 220 : (1975) 2 SCC 175;
International Tourist Corporation v. State of Haryana [1981] 2 SCR
364 : (1981) 2 SCC 318; Province of Madras v. Boddu Paidanna
(1942) 4 FCR 90; All India Federation of Tax Practitioners v. Union
of India [2007] 9 SCR 147 : (2007) 7 SCC 527; Federation of
Hotel & Restaurant Association of India v. Union of India [1989]
2 SCR 918 : (1989) 3 SCC 634; State of Karnataka v. State of
Meghalaya [2022] 18 SCR 516 : (2023) 4 SCC 416; State of
Mysore v. D Cawasji and Co [1971] 2 SCR 799 : (1970) 3 SCC
710; Umeg Singh v. State of Bombay [1955] 2 SCR 164; Kalpana
Mehta v. Union of India [2018] 4 SCR 1 : (2018) 7 SCC 1; In re
Powers, Privileges and Immunities of State legislature, Special
Reference No. 1 of 1964 [1965] 1 SCR 413; Firm Bansidhar
Premsukhdas v. State of Rajasthan [1966] Supp 1 SCR 81;
Kesavananda Bharati v. State of Kerala [1973] Supp. 1 SCR 1 :
(1973) 4 SCC 225; I R Coelho v. State of Tamil Nadu [2007] 1
SCR 706 : (2007) 2 SCC 1; Vishaka v. State of Rajasthan [1997]
Supp. 3 SCR 404 : (1997) 6 SCC 241; Anoop Baranwal v. Union
of India [2023] 9 SCR 1 : (2023) 6 SCC 161; LDA v. M K Gupta
[1993] Supp. 3 SCR 615 : (1994) 1 SCC 243; Raj Kumar Shivhare
v. Directorate of Enforcement [2010] 4 SCR 608 : (2010) 4 SCC
1578 [2024] 7 S.C.R.

Digital Supreme Court Reports

772; Vivek Narayan Sharma v. Union of India [2023] 1 SCR 1 :
(2023) 3 SCC 1; State of Assam v. Labanya Probha Devi [1967]
3 SCR 611; Sharma Transport v. Government of AP [2001] Supp.
5 SCR 390 : (2002) 2 SCC 188; Vrajilal Manilal & Co. v. State of
M P [1986] 2 SCR 98 : (1986) Supp SCC 201; State of Kerala v.
A B Abdul Kadir [1970] 1 SCR 700 : (1969) 2 SCC 363; Durga
Prasad Singh v. Braja Nath Bose (1912) SCC Online PC 9;
Secretary of State for India in Council v. Srinivasa Chariar (1920)
SCC OnLine PC 89; State of A P v. Duvvuru Balarami Reddy
[1963] 1 SCR 173 : (1962) SCC OnLine SC 182; Gopalan v. State
of Madras (1958) 2 MLJ 117; Dalmia Cement (Bharat) Ltd. v. State
of TN [2013] 17 SCR 529 : (2014) 2 SCC 279; Raja Anand Brahma
Shah v. State of U P [1967] 1 SCR 373 : (1966) SCC OnLine SC
89; State of Haryana v. Chanan Mal [1976] 3 SCR 688 : (1977)
1 SCC 340; Raja Jagannath Baksh Singh v. State of Uttar Pradesh
[1963] 1 SCR 220; Ajoy Kumar Mukherjee v. Local Board of
Barpeta [1965] 3 SCR 47; Government of A P v. Hindustan Machine
Tools Ltd. [1975] Supp. 1 SCR 394 : (1975) 2 SCC 274; Ahmedabad
Municipal Corporation v. GTL Infrastructure Ltd. [2016] 11 SCR
172 : (2017) 3 SCC 545; Jalkal Vibhag Nagar Nigam v. Pradeshiya
Industrial & Investment Corp [2021] 12 SCR 210 : (2021) 20 SCC
657; Sudhir Chandra Nawn v. WTO (1968) 69 ITR 897; Second
Gift Tax Officer, Mangalore v. D H Nazareth [1971] 1 SCR 195 :
(1970) 1 SCC 749; Assistant Commissioner of Urban Land Tax v.
Buckingham and Carnatic Co. Ltd. [1970] 1 SCR 268 : (1969) 2
SCC 55; Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality
[1970] 1 SCR 388 : (1969) 2 SCC 283; Union of India v. H S
Dhillon [1972] 2 SCR 33 : (1971) 2 SCC 779; East India Tobacco
Company v. State of Andhra Pradesh [1963] 1 SCR 404 : (1962)
SCC OnLine SC 145; Hiralal Rattanlal v. State of U P [1973] 2
SCR 502 : (1973) 1 SCC 216; Khyerbari Tea Co. Ltd. v. State of
Assam [1964] 5 SCR 975; Union of India v. A Sanyasi Rao [1996]
2 SCR 570 : (1996) 3 SCC 465; R K Garg v. Union of India [1982]
1 SCR 947 : (1981) 4 SCC 675; Spencer & Co. v. State of Mysore
[1971] Supp. 1 SCR 502 : (1971) 2 SCC 217; K T Moopil Nair v.
State of Kerala [1961] 3 SCR 77 : (1960) SCC OnLine SC 7;
Khandige Sham Bhat v. Agricultural Income Tax Officer Kasargod
[1963] 3 SCR 809 : (1962) SCC OnLine SC 15; Western Coalfields
Ltd. v. Special Area Development Authority [1982] 2 SCR 1 : (1982)
1 SCC 125; Rai Ramkrishna v. State of Bihar [1964] 1 SCR 897 :
(1963) SCC OnLine SC 31; S Kodar v. State of Kerala [1975] 1
[2024] 7 S.C.R. 1579

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

SCR 121 : (1974) 4 SCC 422; Shaktikumar M Sancheti v. State
of Maharashtra [1994] Supp. 6 SCR 98 : (1995) 1 SCC 351;
Sainik Motors, Jodhpur v. State of Rajasthan [1962] 1 SCR 517;
Sir Byramjee Jeejeebhoy v. The Province of Bombay (1942) SCC
OnLine Bom 30; B Shama Rao v. Union Territory of Pondicherry
[1967] 2 SCR 650 : (1967) SCC OnLine SC 29; R R Engineering
Co. v. Zilla Parishad, Bareilly [1980] 3 SCR 1 : (1980) 3 SCC 380;
Ralla Ram v. The Province of East Punjab (1948) SCC OnLine
FC 9; Union of India v. Bombay Tyre International Ltd. [1984] 1
SCR 347 : (1984) 1 SCC 467; CCE v. Grasim Industries Ltd.
[2018] 6 SCR 1099 : (2018) 7 SCC 233; Patel Gordhandas
Hargovindas v. Municipal Commissioner [1964] 2 SCR 608 : (1963)
SCC OnLine SC 57; State of Kerala v. Haji K Kutty Naha [1969]
1 SCR 645; New Manek Chowk Spg. & Wvg. Mills v. Ahmedabad
Municipality [1967] 2 SCR 679 : (1967) SCC OnLine SC 116;
Buxa Dooars Tea Co. Ltd. v. State of West Bengal [1989] 3 SCR
293 : (1989) 3 SCC 211; Kaviraj Basudevanand v. Mahant Harihar
Gir [1975] 1 SCR 590 : (1974) 2 SCC 514; Burrakur Coal Co. Ltd.
v. Union of India [1962] 1 SCR 44 : AIR 1961 SC 954; Union of
India v. Pramod Gupta [2005] Supp. 3 SCR 48 : (2005) 12 SCC
1; State of Bihar v. Indian Aluminium Company [1997] Supp. 4
SCR 222 : (1997) 8 SCC 360; P M Ashwathanarayana Setty v.
State of Karnataka [1988] Supp. 3 SCR 155 : (1989) Supp 1 SCC
696 – referred to.
McCulloch v. Maryland, 17 U.S. 316; Matthews v. Chicory
Marketing Board, 60 CLR 263; Lord Provost and Magistrates of
Glasgow v. Faire (1888) [L.R] 13 App. Cas. 657; Pennsylvania
Coal Co. v. Mahon, 260 US 393 (1922); Assessment Committee
of the Metropolitan Borough of Poplar v. Roberts [1922] 2 AC
93 – referred to.

In the judgment of B.V. Nagarathna, J.
District Mining Officer v. Tata Iron and Steel Company [2001] Supp.
1 SCR 147 : (2001) 7 SCC 358 – correct law.
India Cement Limited v. State of Tamil Nadu [1989] Supp. 1 SCR
692 : (1990) 1 SCC 12 : AIR 1990 SC 85; State of Madhya Pradesh
v. Mahalaxmi Fabric Mills Ltd. [1995] 1 SCR 756 : (1995) Supp 1
SCC 642; Orissa Cement Limited v. State of Orissa [1991] 2 SCR
105 : (1991) Supp 1 SCC 430; Saurashtra Cement & Chemicals
1580 [2024] 7 S.C.R.

Digital Supreme Court Reports

Industries Ltd. v. Union of India [2000] Supp. 4 SCR 44 : (2001) 1
SCC 91; State of Orissa v. Mahanadi Coalfields Ltd. [1995] 3 SCR
639 : (1995) Supp. 2 SCC 686; P. Kannadasan v. State of Tamil
Nadu [1996] Supp. 4 SCR 92 : (1996) 5 SCC 670 – correct law
excluding to the extent overruled in Tata Iron and Steel’s case.
State of West Bengal v. Kesoram Industries Limited [2004] 1 SCR
564 : (2004) 10 SCC 201 – overruled to the extent that royalty
is not a tax.
Goodricke Group Ltd. v. State of West Bengal [1994] Supp. 6 SCR
120 : (1995) Supp. 1 SCC 707; MPV Sundararamier v. State of
Andhra Pradesh [1958] 1 SCR 1422 : AIR 1958 SC 468 – held
inapplicable.
Mineral Area Development Authority v. Steel Authority of India
[2011] 4 SCR 19 : (2011) 4 SCC 450; Hingir-Rampur Coal Co.
Ltd. v. State of Orissa [1961] 2 SCR 537; State of Orissa v. M.A.
Tulloch [1964] 4 SCR 461; Baijnath Kedia v. State of Bihar [1970]
2 SCR 100 : (1969) 3 SCC 838; State of Karnataka v. State of
Meghalaya [2022] 18 SCR 516 : (2023) 4 SCC 416; Prafulla
Kumar Mukherjee v. Bank of Commerce, Khulna, AIR 1947 P.C. 60;
State of Bombay v. FN Balsara [1951] 1 SCR 682 : AIR 1951 SC
318; United Provinces v. Atiqa Begum, AIR 1941 FC 16; Calcutta
Gas Company v. State of West Bengal [1962] Supp 3 SCR 1 :
AIR 1962 SC 1044; RMDC v. Union of India [1957] 1 SCR 930 :
AIR 1957 SC 628; Govind Saran Ganga Saran v. Commissioner
of Sales Tax [1985] 3 SCR 985 : (1985) Supp SCC 205; HRS
Murthy v. Collector of Chittoor [1964] 6 SCR 666 : AIR 1965 SC
177; Guruswamy & Co. v. State of Mysore [1967] 1 SCR 548 :
AIR 1967 SC 1512; M/s Laxminarayana Mining Co., Bangalore v.
Taluk Development Board, AIR 1972 Mys 299; Laddu Mal v. The
State of Bihar, AIR 1965 Pat 491; Bherulal v. State of Rajasthan,
AIR 1956 Rajasthan 161; Dr. Shanti Saroop v. State of Punjab,
AIR 1969 P & H 79; Saurashtra Cement and Chemical Industries
Ltd. Ranavav v. Union of India, AIR 1979 Guj 180; Laxmi Narayan
Agarwalla v. State of Orissa, AIR 1983 Ori 210; Corporation of
Calcutta v. Liberty Cinema [1965] 2 SCR 477 : AIR 1965 SC 1107;
State of Orissa v. Titaghur Paper Mills Company Limited [1985] 3
SCR 26 : (1985) Supp. SCC 280; A.R. Antulay v. R.S. Naik [1987]
1 SCR 91 : (1986) Supp SCC 510; Raja Jagannath Baksh Singh
v. State of U.P. [1963] 1 SCR 220; New Manek Chowk Spinning
& Weaving Mills Co. Ltd. v. Municipal Corporation of the City of
Ahmedabad [1967] 2 SCR 679; Sudhir Chandra Nawn v. Wealth
[2024] 7 S.C.R. 1581

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Tax Officer, Calcutta [1969] 1 SCR 108; Assistant Commissioner
of Urban Land Tax v. The Buckingham & Carnatic Co. Ltd. [1970]
1 SCR 268; Second Gift Tax Officer, Mangalore v. D.H. Nazareth
[1971] 1 SCR 195; Union of India v. Harbhajan Singh Dhillon
[1972] 2 SCR 33 : (1971) 2 SCC 779 – referred to.

Books and Periodicals Cited

In the judgment of Dr. Dhananjaya Y. Chandrachud, CJI
Ramanatha Aiyar Advanced Law Lexicon (Volume 3) 3543, 2789,
4778, 3254; Ligia Norohna et al, ‘Resource Federalism in India:
The Case of Minerals’ (2009) 44(8) Economic and Political Weekly
51, 52; Debates in the House of Commons on the Government
of India Act 1919 (3rd December 1919); Government of India
Bill, Seventh Schedule (Legislative Lists) Hansard (Volume 301)
(13 May 1935); H M Seervai, Constitutional Law of India, Volume
3 (4th edn.) [22.6] 2306, 2468; Constituent Assembly Debates,
Vol. 11 (25 November 1949); Dr. B R Ambedkar, CAD Volume 7
(4 November 1948); Granville Austin, Cornerstone of a Nation
(OUP, 1966) 187; Wallace E Oates, ‘An Essay on Fiscal Federalism’
(1999) 37(3) Journal of Economic Literature 1120, 1121; Dr. B R
Ambedkar, The Evolution of Provincial Finance in British India:
A Study in the Provincial Decentralization of Imperial Finance’
(1923) 152-171; ‘State Finances: A Study of Budgets of 2023-2024,
Revenue Dynamics and Fiscal Capacity of Indian States’ Reserve
Bank of India (December 2023) 28; Ligia Noronha, et al, ‘Resource
Federalism in India: The Case of Minerals’ (2009) 44(8) Economic
and Political Weekly 51, 53; Economic Survey 2016-2017, Ministry
of Finance, Government of India (January 2017) 292; Joseph
L Sax, ‘The Public Trust Doctrine in Natural Resource Law: Effective
Judicial Intervention’ (1970) Michigan Law Review 471, 484;
Mr K D Malviya, Lok Sabha Debates, Volume X (9th December to
21st December 1957) 7123; Mr J R Mehta, Lok Sabha Debates,
Volume X (9th December to 21st December 1957) 7111; Lok Sabha
Debates, Volume VIII (11th November to 22nd November, 1957,
Third Session) 395, 463; J U Nef, The Rise of the British Coal
Industry (Routledge, 1966); Royal Commission on Mining Royalties,
Final Report of the Royal Commission Appointed to Inquire into the
Subject of Mining Royalties (1893) 4; W R Sorley, ‘Mining Royalties
and their Effect on the Iron and Coal Trades’ (1889) 52(1) Journal
of Royal Statistical Society 60, 66; Government of India, Ministry
of Mines, ‘Mineral Royalties’ 27 (January 2011); Thomas Cooley,
1582 [2024] 7 S.C.R.

Digital Supreme Court Reports

The Law of Taxation (4th edn, 1924) 149, 74; Constituent Assembly
Debates, Volume IX, 898 (31st August 1949), (2nd September
1949); Lloyd George, ‘The Budget, The Land and The People:
The New Land Value Taxes Explained and Illustrated’ (2nd edn,
1909) 48, 51; Royal Commission on Mining Royalties, Final Report
of the Royal Commission appointed to inquire into the subject of
mining royalties (1893) 14; Mr. Lloyd George (Hansard, Volume
11) 28 September 1909; Hansard, Volume 11, 22 September 1909;
Hansard, Volume 35, 5 March 1912; Jeremy Waldron, ‘What is
Private Property?’ (1985) 5(3) Oxford Journal of Legal Studies
313, 327; James Y Stern, ‘The Essential Structure of Property
Law’ (2017) 115(7) Michigan Law Review 1167, 1176; Black’s Law
Dictionary (6th edn,1990) 995; Corpus Juris Secundum (Volume
58) 15; Constituent Assembly Debates, Volume 9 (1 September
1949); Megarry and Wade, The Law of Real Property (9th edn,
Sweet and Maxwell); S Sundararaja Iyengar, Land Tenures in the
Madras Presidency (1921) 25, 120, 151; B Shiva Rao, ‘The Framing
of India’s Constitution: A Study’ (1966, Volume 3) 181, 269, 502;
Peter Brown and Patrick Bond, ‘Rating Valuation: Principles and
Practice) (3rd edn, Elsevier) 13 – referred to.

In the judgment of B.V. Nagarathna, J.
“Building a National Economy : Origins of Centralized Federalism
in India” by Louise Tillin published by the Oxford University Press
in 2021; M.P. Jain, Nehru and the Indian Federalism, Journal of
the Indian law Institute, Vol.19, No.4, 1977, p.408 – referred to.

List of Websites

In the judgment of Dr. Dhananjaya Y. Chandrachud, CJI:
Ministry of Statistics and Programme Implementation, State-wise
date on per capita income’ (24 July 2023) <https://www.pib.gov.in/
PressReleasePage.aspx?PRID=1942055> – referred to.

List of Acts

In the judgment of Dr. Dhananjaya Y. Chandrachud, CJI:
Constitution of India; Mines and Minerals (Development and
Regulation) Act, 1957; Bihar Coal Mining Area Development Authority
(Amendment) Act 1992; Bihar Mineral Area Development Authority
(Land Use Tax) Rules 1994; Bihar Coal Mining Area Development
[2024] 7 S.C.R. 1583

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Authority Act 1986; Government of India Act 1915-19; Government
of India Act 1935; Constitution (Seventh Amendment) Act 1956;
Mines and Minerals (Regulation and Development) Act 1948; Mineral
Concession Rules 1960; Mineral Concession Rules 1948; General
Clauses Act 1897; Transfer of Property Act 1882; Registration Act
1908; Indian Easements Act 1882; Income Tax Act 1961; Sea
Customs Act; Essential Commodities Act; Bihar Minor Mineral
Concession Rules 1964; Punjab Minor Mineral Concession Rules
1964; Madras Panchayat Act 1958; Working Conditions Code 2020;
Offshore Areas Mineral (Development and Regulation) Act 2002;
Mineral Conservation and Development Rules 2017; Orissa Mining
Areas Development Fund Act 1952; Industries (Development and
Regulation) Act 1951; Finance Act 1910; Gujarat Mineral Rights
Tax Act 1985; Mineral (Auction) Rules 2015; Madras Permanent
Settlement Regulation XXV of 1802; Petroleum Act 1998; Coal Act
1938; Madras Mining Manual of 1929; Waste Land Rules; Madras
Forest Act 1882; Mineral Concession Rules 1949; Maharashtra Land
Revenue Code 1966; Uttar Pradesh Zamindari Abolition and Land
Reforms Act 1950; Maharashtra Personal Inams Abolition Act 1953;
Maharashtra Abolition of Subsisting Proprietary Rights to Mine and
Minerals in Certain Lands Act 1985; Haryana Minerals (Vesting of
Rights) Act 1973; UP Large Land Holdings Tax Act 1957; Wealth Tax
Act 1957; Kerala Building Tax Act 1975; Coal Mines (Nationalisation)
Act 1973; Punjab Urban Immoveable Property Tax Act 1940; Kerala
Buildings Act 1961; Orissa Cess Act 1962; Orissa Rural Employment,
Education and Production Act 1992; West Bengal Rural Employment
and Production Act 1976; Tea Act 1953; West Bengal Taxation Laws
(Second Amendment) Act 1989; Central Excises and Salt Act, 1944;
Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act 2013; Coal Bearing Areas
(Acquisition and Development) Act 1957; Gujarat Land Revenue Code
1879; Madhya Pradesh Land Revenue Code 1959; Chhattisgarh
Land Revenue Code 1959; Goa, Daman and Diu Land Revenue
Code 1968; Madras Urban Land Tax Act 1966; Non-Domestic Rating
(Miscellaneous Provisions) Regulations 1989.

In the judgment of B.V. Nagarathna, J.
Mines and Minerals (Development and Regulation) Act, 1957;
Constitution of India; Government of India Act, 1919; Government
of India Act, 1935; Mineral Concession Rules, 1960; Orissa
Mining Areas Development Fund Act, 1952; Orissa Mining Areas
1584 [2024] 7 S.C.R.

Digital Supreme Court Reports

Development Act Rules, 1955; Mines and Minerals (Regulation
and Development) Act, 1948; Bihar Land Reforms Act, 1950;
Bihar Minor Mineral Concession Rules, 1964; Bihar Land Reforms
(Amendment) Act, 1964; Madras District Boards Act, 1920; Madras
Panchayats Act, 1958; Madras Act, 1964; Tamil Nadu Panchayats
(Amendment and Miscellaneous Provisions) Act, 1964; Bihar Minor
Mineral Concession Rules, 1984; Mysore Village Panchayats and
Local Boards Act, 1959; Orissa Rural Employment, Education
and Production Act, 1992; West Bengal Taxation Laws (Second
Amendment) Act, 1989; Cess Act, 1880; West Bengal Rural
Employment and Production Act, 1976; Uttar Pradesh Special
Area Development Authorities Act, 1986; Shakti Nagar Special
Area Development Authority (Cess on Mineral Rights) Rules, 1997;
Cess and Other Taxes on Minerals (Validation) Act, 1992.

List of Keywords
Mines and Minerals; Royalty; Royalties in respect of mining
leases; Royalty, in nature of tax; Royalty is not a tax; Contractual
consideration; Mining lessee; Mineral rights; Contractual conditions;
Tax; Recovery as arrears; Imposition of tax or impost; Contractual
payment; Statutory levy; Entry 50 List II Seventh Schedule; Taxes
on mineral rights; Mineral development; Limitations imposable by
Parliament; Legislative powers under Entry 54 List I; Legislative
competence to tax mineral rights; Residuary powers; Any limitations;
Denude or limit; Non-taxing general Entry; Distribution of legislative
powers; MPV Sundararamier’s case; Subject to any limitations
imposed by Parliament by law relating to mineral development;
Regulatory Entry; Description of “lands” under Entry 49 List II; Yield
of mineral bearing land; Quantity of mineral produced; Measure to
tax; Minor minerals; Subtract mining land; Mineral value or mineral
produce; India Cement’s case; Kesoram’s case; Cess on royalty;
Typographical error or inadvertent error; Characteristic requirements
of tax; Doctrine of generalia specialibus non derogant; Federalism;
Indian federalism; Balance of power; Distribution of powers;
Postcolonial Constitution; National welfare state; Unregulated
inter-provincial economic competition; Centre-State jurisdiction;
Economic growth; Uniformity in mineral prices; Compulsory exaction
by public authority for public purposes; Exclusive privileges; Doctrine
of pith and substance; Transgresses its legislative competence;
Colourable legislation; Vice of unconstitutionality; Potential overlaps
or conflicts between and among entries in three Lists; Terminologies
[2024] 7 S.C.R. 1585

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

“other than”, “not including”, “subject to”; “Declared by or under
law”; “Declared by Parliament by law”; “Imposed by Parliament
by law”; Fiscal federalism; Imbalance between resources; Inter-
governmental distribution and grants; Fiscal powers; Fiscal
expenditures; Fiscal deficit; Heterogenous distribution of legislative
powers; Resource curse; Public trust doctrine; Sustainable
development of mineral resources; Public trustee of minerals;
Prospecting and mining operations; Disparity of royalty; Industrial
Policy Resolution; ‘Lease’ and ‘licence’; Immoveable property;
“Mining lease”; “Mining operations”; “Winning”; Getting or extracting
minerals from the mines; “Prospecting licence”; Exploring, locating,
or proving a mineral deposit; Proprietary rights in the minerals;
Rates of royalty; Essential characteristics of royalty; Royalty a
statutory consideration; Royalty calculated on per tonnage basis
or ad valorem basis; Quantity of mineral removed or dispatched;
Indian Bureau of Mines; Non-tax revenues; Dead rent; Proprietary
right; Sovereign right; Monetary burdens or charges; “Regulation of
mines”; Plenary legislative power; Taxing entry; Regulatory power;
Non-fiscal enactment by Parliament; Overlap between the taxing
entry and general entry; Principle of federal supremacy; Regulation
of mines; Decoupling of minerals from land; Sarkaria Commission
Report; Principles of Union Supremacy; Destruction of the federal
balance; Recognition of parliamentary superiority; Typographical
error; Precedent; Per incuriam.

Case Arising From
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal Nos.
4056-4064 of 1999
From the Judgment and Order dated 22.03.1999 of the High Court of
Judicature at Patna, Ranchi Bench, Ranchi in C.W.J.C. No. 1885/94
(R), 178/94 (R), 2251/94 (R), 2252/94 (R), 1783/9 (R), 2591 (R),
3113/93 (R), 269/9 (R) and 268/94 (R)
With
Civil Appeal No. 7937 of 2019, Writ Petition (Civil) No. 512 of 2018,
Civil Appeal Nos. 7938 and 7936 of 2019, Civil Appeal No. 6221 of
2008, Civil Appeal No. 5250 of 2019, Writ Petition (Civil) Nos. 729 and
1029 of 2019, Special Leave Petition (Civil) No. 16028 of 2021, Civil
Appeal No. 4286 of 2023, Civil Appeal No. 5682 of 2007, Civil Appeal
No.1295 of 2008, Civil Appeal Nos. 874, 8269-8271, 8268, 8267, 6135,
1586 [2024] 7 S.C.R.

Digital Supreme Court Reports

8272 and 9458 of 2013, Special Leave Petition (Civil) No.18600 of
2013, Civil Appeal No.4332 of 2013, Civil Appeal No.5329 of 2002,
Civil Appeal No.4993 of 2006, Civil Appeal Nos.8273 and 8274 of
2013, Civil Appeal No.3869 of 2014, Civil Appeal No.2632 of 2013,
Civil Appeal No.14685 of 2015, Civil Appeal No.6784 of 2014, Writ
Petition (Civil) No.376 of 2015, Civil Appeal No.10082 of 2016, Civil
Appeal Nos.886, 4588 and 205 of 2017, Civil Appeal Nos.5728-5729
of 2018, Civil Appeal Nos.4722-4724 of 1999, Civil Appeal Nos.5333,
5335-5336 and 5332 of 2002, Civil Appeal No.1352 of 2005, Civil
Appeal No.1883 of 2006, Transfer Petition (Civil) No.722 of 2006,
Civil Appeal Nos.4745, 4990, 5599 and 5649 of 2006, Civil Appeal
Nos.378, 665 and 1180 of 2007, Transfer Petition (Civil) No.481 of
2007, Transfer Petition (Civil) No.906 of 2007, Civil Appeal No.3401,
3400 and 3402 of 2008, Civil Appeal No.8311 of 2011, Civil Appeal
No.4293 of 2012, Civil Appeal No.2055 of 2009, Transfer Petition
(Civil) No.951 of 2006, Civil Appeal Nos.4991 and 4992 of 2006,
Special Leave Petition (Civil) No.763 of 2007, Special Leave Petition
(Civil) No.15900 of 2007, Civil Appeal No.3403 of 2008, Civil Appeal
No.98 of 2009, Transfer Petition (Civil) Nos.613 and 626 of 2009, Civil
Appeal Nos.4479 and 4478 of 2010, Civil Appeal No.3643 of 2011,
Civil Appeal Nos.4710-4721 of 1999, Civil Appeal No.2174 of 2009,
Civil Appeal Nos.6497, 6498, 6137 and 7397 of 2008, Civil Appeal
No.96 of 2009, Civil Appeal No.6499 of 2008, Civil Appeal No.97 of
2009 and Special Leave Petition (Civil) No.26160 of 2008
Appearances for Parties
R. Venkataramani, AG, Tushar Mehta, SG, Ms. Aishwarya Bhati,
K.M. Nataraj, ASGs, Nalin Kohli, Sr. AAG, Tapesh Kumar Singh,
Nachiketa Joshi, Amit Anand Tiwari, Mrs. Nilofar Khan, Shiv Mangal
Sharma, Avdhesh Kumar Singh, Atul Jha, K. Parameshwar, AAGs,
V.V.M.B.N.S. Pattabhiram, Vikrant Singh Bais, Ravi Sharma, DAGs,
Rakesh Dwivedi, Arvind P. Datar, Dr. A.M. Singhvi, Darius J.
Khambata, Sujit Ghosh, Ashok Grover, S.K. Bagaria, Kailash Vasdev,
Ajit Kumar Sinha, Ravi Shankar Jaiswal, Ravi Jaiswal, Rupesh
Kumar, Harish N. Salve, Ciccu Mukhopadhaya, Indrajit Mahanty,
Gopal Jain S. Niranjan Reddy, S.P. Singh, Vijay Hansaria, Sr. Advs.,
Ms. Sansriti Pathak, Eklavya Dwivedi, Sukant Vikram, Aditya Pratap
Singh, Prashant Bhardwaj, Ayush Agrawal, Mohit Paul, Vikrant Singh
Bloria, Sushant Tomar, Ms. Rangoli Seth, Ms. Sanjleena Lal, Gaurav
[2024] 7 S.C.R. 1587

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Juneja, Aakash Bajaj, Ms. Monika Singh, Avirat Kumar, Muskan
Narang, Sanjeev K. Kapoor, M/s. Khaitan & Co., Naveen Kumar,
Abhimanyu Bhandari, Ms. Roohe Hina Dua, Ms. Stuti Bisht, Arav
Pandit, Nitesh Bhandari, Harshit Khanduja, Ms. Rashmi Priya, Ms.
Dhanakshi Gandhi, Prabhat Kumar Rai, Shourajeet Chakravarty,
Sahib Kochhar, Ms. Aprajita Bhardwaj, Randeep Sachdeva, Ms.
Shreya Arora, Utkarsh Chandra, Ms. Anchal Kushwaha, Syed Shahid
Hussain Rizvi, Zeeshan Rizvi, Gagan Gupta, Ram Lal Roy, Shiv
Singh Yadav, Mahesh Agarwal, Ninad Laud, Anshuman Srivastava,
Ankur Saigal, Chirag Nayak, Rishi Agrawala, Rajesh Kumar, M.S.
Ananth, Ms. S. Lakshmi Iyer, Zubin Dash, Himanshu Saraswat, E.C.
Agrawala, Dhananjay Mishra, Gokula Krishnan T, Siddharth Seem,
Amit Bhandari, Ms. Ananyaa Mazumdar, Ms. Mannat Waraich,
Ashray Behura, P.S. Sudheer, Rishi Maheshwari, Mrs. Shally Bhasin,
Ms. Anne Mathew, Bharat Sood, Ms. Miranda Solaman, Prateek
Gupta, Surender Kumar Gupta, Ms. Muskan Gupta, Prashant Rawat,
Ms. Priya Mishra, Siddhartha Sinha, Mrs. Sheela Goel, Ujjwal A.
Rana, Himanshu Mehta, M/s. Gagrat & Co., K.V. Mohan, K.V.
Balakrishnan, R.K. Raghavan, Praveen Kumar, Kumar Ajit Singh,
Ms. Sunaina Kumar, Karuppaiah Meyyappan, Abhishek Kalaiyarasan,
Shailendra Swarup, Ms. Bindu Saxena, Ms. Aparajita Swarup, Dhruv
C Saxena, Umrao Singh Rawat, Ms. Shagun Sabharwal, Ms. Aashtha
Bhardwaj, Pallav Mongia, Sarad Kumar Singhania, Uddyam
Mukherjee, Swapnil Pattanayak, Ms. Manisha Chava, Agnibha
Chatterjee, Ms. Shagun Thakur, Ms. Bln Shivani, Abhijeet Singh,
Rustam Singh Chauhan, Ms. Sthavi Asthana, Ashwin Joseph, Ms.
Poornima Singh, Annirudh Singh, Ms. Shreya Jain, Sumit Teterrwal,
Mrinmay Bhattmewara, Ms. Samprati Bhattmewara, Vivek Gupta,
Amit Singh, Rajvir Singh Bhati, Ankit Verma, Krishna Kant Dubey,
Rajeev Ranjan, Varun Chugh, Adarsh Kumar Pandey, Arun Kanwa,
Vignesh Singh, Divyansh Rai, Sanjay Kumar Tyagi, D.D. Thanvi,
H.D. Thanvi, Nikhil Kumar Singh, Achal Singh Bule, Rishi Matoliya,
Mrs. Prabha Swami, Nikhil Swami, Ms. Divya Swami, Mrs. Kirti
Renu Mishra, Mrs. Apurva Upmanyu, Gp. Capt. Karan Singh Bhati,
Hemendra Sharma, Ms. Chitrangda Rastravara, Aishwary Mishra,
Dhananjai Shekhwat, Shiv Autar Singh Sengar, Anirudh Singh,
Dashrath Singh, Ms. Gunjan Negi, Yogeshwar Krishna, Ms. Anjali
Sexena, Ms. Gagandeep, Ms. Sharmila Upadhyay, Pawan R
Upadhyay, Sarvjit Pratap Singh, Ashwarya Sinha, Ms. Priyanka
1588 [2024] 7 S.C.R.

Digital Supreme Court Reports

Sinha, Ms. Nandini Sen Mukherjee, Suyash Mohan Guru, T.G.
Narayanan Nair, Ms. Swathi H Prasad, Ms. Samyuktha H Nair, Sunil
Kumar Jain, S.K. Verma, Kunal Verma, Abhishek Sharma, Milind
Kumar, Ms. Ruby Singh Ahuja, Saurav Agarwal, Saurajay Nanda,
Anshuman Chowdhury, Ms. Kavya Pahwa, Shivam Chowdhury,
Rajat Chhabra, Ms. Saloni Paliwal, Aman Sahani, Ms. Manjeet
Kirpal, Guntur Prabhakar, Ms. Prerna Singh, Guntur Pramod Kumar,
Mrs. Yugandhara Pawar Jha, Ms. Lavanya Dhawan, Shivraj Sanjeev
Pawar, Ritik Gupta, Shantanu Sagar, Prabhat Ranjan Raj, Anil
Kumar, Gunjesh Ranjan, Shashwat Anand, Mrs. Divya Mishra,
Vaibhav Jain, Akshay Singh, Ms. Pragya Singh, Shantwanu Singh,
Ashok Kumar Singh, P.V. Yogeswaran, M/s. Lawyer’s Knit & Co.,
Debesh Panda, Ms. Amrita Panda, Udbhav Gady, Sri Aditya Kumar,
Rahul Unnikrishnan, Ms. M. Jannani, V.D. Verma, Kanishk Aggrawal,
Ojaswa Pathak, Ms. Sumita Hazarika, Neeraj Kumar Gupta, Rahul
Kumar Verma, Akshay, Kaushik Choudhury, Ms. Anusha Agarwal,
Shaantanu Jain, Deepanshu Jain, Achintya Kumar Sinha, Manish
Jain, Ms. Rashika Swarup, Sachin Sharma, Ms. Kanika Kalaiyarasan,
Saksham Garg, Jyotirmoy Chatterjee, Abhishek Kumar Pandey,
Raman Chitwan Singh, Ms. Pankhuri Srivastav, Ms. Shreya Mathur,
Ms. Neelam Sharma, Jatinder K. Bhatia, Gurmeet Singh Makker,
Shailesh Madiyal, K. Parameshwaran, Siddhartha Dharmadhikari,
Ms. Rukhmini Bobde, Chitvan Singhal, Raman Yadav, Kartikay
Aggarwal, Ms. Ameya Vikrama Thanvi, Kanu Agrawal, Raghav
Sharma, Karan Lahiri, Mukesh Kumar Singh, Ms. Ruchi Kohli, Ajay
Aggarwal, Adarsh Aggarwal, Rajan Narain, Sunny Choudhary,
Abhimanyu Singh, Padmesh Mishra, Sandeep Sharma, Karan
Bishnoi, Ms. Ruchira Goel, Abhishek Gupta, Sabarish Subramanian,
Ms. Devyani Gupta, C. Kranthi Kumar, Vishnu Unnikrishnan, Ms.
Tanvi Anand, Ms. Saushriya Havelia A, Naman Dwivedi, Danish
Saifi, Aman Prasad, Ms. Arjoo Rawat, Khushi Mohammed, Joydeep
Mukherjee, Mohd Yusuf, Mohit Gaurav, Anjum Parvez, Ms. Nilofar
Khan, G.N. Reddy, T. Harish Kumar, Sandeep Kumar Jha, Ankit
Roy, Nimisha Menon, Anshul Malik, Sarthak Sharma, Ayuushman
Arora, Shuvodeep Roy, Kedar Nath Tripathy, Mishra Saurabh, Sunil
Roy, Ms. Ritika Gambhir Kohli, Omar Ahmad, Vikram Shah, Tuhin
Dey, Ms. Chetna N. Rai, Nikhil Kohli, Satyajit Mahanty, P Vamshi
Rao, Abhishek Choudhury, Madhusudan Jena, Soubhagya Ranjan
Pati, Aashish Saini, Ms. Prakshi Narang, Vanshdeep Dalmia, Ms.
[2024] 7 S.C.R. 1589

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Natasha Dalmia, Ms. Kritika Khurana, Kushank Garg, Ms. Shrishti
Jeswani, Arjun Garg, M/s. ARS Associates, Ambhoj Kumar Sinha,
Priyadarshi Kumar, V.K. Verma, Ms. Ankita Sharma, Arjun Singh,
Vishnu Thulasi Menon, Ms. Nandini Gore, Mrs. Manik Karanjawala,
Indrajit Sinha, Ms. Sonia Nigam, Ms. Tahira Karanjawala, Akhil
Abraham Roy, Rajat Dasgupta, Ms. Manvi Rastogi, Ms. Suvarna
Kashyap, Vinayak Sharma, Prashant Singh, Mrs. Prerna Dhall,
Piyush Yadav, Anjani Kumar Rai, S.S. Shroff, Rajeev Kumar Dubey,
Ashiwan Mishra, Kamlendra Mishra, Ms. Devina Sehgal, Gaurav
Kejriwal, Gitanshu Rustogi, Anmoldeep Singh, Ramendra Mohan
Patnaik, Santosh Krishnan, Girish Chowdhary, Siddhant Buxy, Ms.
Sonam Anand, Shaik Mohammed Haneef, Ms. Akhila Palem, Sahil
Raveen, R. Krishnaamorthi, Abhisth Kumar, Syed Imtiyaz Ali, Ms.
Mrinal Gopal Elker, Saurabh Singh, Vaibhav Misra, Ms. Punam
Kumari, Rohit K. Singh, Sanjeev Kumar Singh, Pritam Bishwas,
Sandeep Sudhakar Deshmukh, Nishant Sharma, Rakesh K. Sharma,
Harsh Parashar, Ms. Manjula Gupta, Ms. Pragati Neekhra, Aditya
Bhanu Neekhra, Aniket Patel, Prem Sunder Jha, Akshat Sharma,
Rutwik Panda, Ms. Nikhar Berry, Ms. Anshu Malik, Rajiv Shanker
Dvivedi, Ms. Tulika Mukherjee, Ms. Ekta Bharati, Beenu Sharma,
Zain A. Khan, Venkat Narayan, Ms. Sheenu Chauhan, Sanjeev
Malhotra, Gaurav Jain, Ms. Abha Jain, Ms. Kavya Jhawar,
Pawanshree Agarwal, Ms. Sneha Kalita, Abhinav Hansaria, Ms.
Nandini Rai, Parijat Kishore, Praveen Swarup, Ameet Siingh, Ms.
Pareena Swarup, Ravi Kumar, Devesh Maurya, K.P. Singh, Ms.
Payal Swarup, Rohit Singh Lodhi, Nithin Chowdary Pavuluri, Gopal
Prasad, Shibashish Misra, Manish Kumar Saran, Ms. Anuradha
Dutt, Ms. Fereshte D. Sethna, Ms. Suman Yadav, Ms. Priyanka
M.P., Haaris Fazili, Kunal Dutt, Yash Mittal, Ms. B. Vijayalakshmi
Menon, Kartik Seth, Ms. Shriya Gilhotra, Prashanth R Dixit, Abhishek
Kandwal, Mahesh Bhati, Saurabh Chaturvedi, M/s. Chambers of
Kartik Seth, K.R. Sasiprabhu, Jaydeep Patel, Vishnu Sharma A.S.,
S. Mahesh Sahasranaman, Ms. Shilpa Balani, Tushar Bhardwaj,
Kumar Visalaksh, Udit Jain, Archit Gupta, Abhishek Vikas, Himanshu
Sinha, Samyak Jai, M/s. Trilegal, Rajat Mittal, Sudipta Bhattacharjee,
Onkar Sharma, Suprateek Neogi, Vivek Sharma, Anand Varma, Ms.
Apoorva Pandey, Ms. Adyasha Nanda, Akshat Shrivastava, M.K.S.
Menon, Ms. Usha Nandini V., Biju P. Raman, Shashank Menon,
Amit Mital, John Thomas Arakal, Advs. for the appearing parties.
1590 [2024] 7 S.C.R.

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Judgment / Order of the Supreme Court

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........................................................ 41
iv. Natural resources and the public trust doctrine...... 45
F. Whether royalty is tax....................................................... 48
i. Royalty under the MMDR Act.................................... 48
ii. Purpose of Section 9 of the MMDR Act...................... 54
iii. Contours of a mining lease........................................ 56
a. Lease and license...................................................... 56
b. The nature of a mining lease under the MMDR Act
and the Mineral Concession Rules 1960.................. 61
iv. Meaning of “royalty”.................................................. 65
v. Characteristics of Tax................................................ 68
vi. Royalty is not in the nature of tax............................. 73
a. Prelude to India Cement........................................... 73
b. Divergence between India Cement and Kesoram.... 76
c. Royalty is not a tax.................................................... 80

** Ed. Note: Pagination as per the original Judgment.
[2024] 7 S.C.R. 1591

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

G. Inter-relationship between Entry 23 of List II and Entry
54 of List I............................................................................ 84
i. Meaning of “regulation of mines” and “mineral
development”............................................................... 84
ii. Analysis of Hingir-Rampur, M A Tulloch, and Baijnath
Kedia.............................................................................. 90
iii. Examination of the “extent” of the MMDR Act.......... 98
H. Inter-relationship between Entry 50 of List II and Entry
54 of List I............................................................................ 104
i. Taxes on mineral rights............................................... 106
a. Mineral rights duty..................................................... 106
b. Meaning of the expression “mineral rights”.............. 107
c. Taxes on mineral rights........................................... 113
ii. The limitations on the taxing power of the State 116
under Entry 50 of List II..............................................
a. Entry 50 of List II does not constitute an exception 117
to the Sundararamier principle.................................
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 134
taxing powers of State..............................................
e. “Any limitation” can extend to prohibition................... 135
f.
Impact of taxes on mineral rights on mineral 142
development..............................................................
I. Scope of Entry 49............................................................... 146
i. Land System in India................................................... 146
ii. Tax on land and buildings........................................... 157
a. Principles governing ‘taxes on lands and buildings’...... 158
a. States can impose tax on mineral bearing land.......... 162
iii. Measure of tax.............................................................. 166
a. Taxing mineral-bearing land...................................... 170
b. Goodricke.................................................................. 176
iv. Measure of tax on mineral-bearing land................... 180
a. Decoupling of minerals from land.............................. 180
b. Minerals as measure of tax on land......................... 188
J. Conclusions......................................................................... 198
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A. Background
1. The present batch of appeals bears on the distribution of legislative
powers between the Union and the States on the taxation of
mineral rights. The legislative entry which lies at the core of the
present reference is Entry 50 of List II of the Seventh Schedule
to the Constitution. The entry deals with taxes on mineral rights
subject to “any limitations imposed by Parliament by law relating
to mineral development.” Regulation of mines and mineral
development is enumerated under both the Union List (Entry 54
of List I) and the State List (Entry 23 of List II) of the Seventh
Schedule. The entrustment of the subject to the State legislatures
under Entry 23 of List II is made subject to the provisions of
Entry 54 of List I.
2. Parliament enacted the Mines and Minerals (Development and
Regulation) Act, 19571 in exercise of its legislative powers under
Article 246 of the Constitution. The subject which the legislation
predominantly covers is relatable to Entry 54 of List I. The MMDR
Act is a comprehensive code for the regulation of mines and
development of minerals. Section 9 provides that the holder of a
mining lease shall pay royalty in respect of any mineral removed
or consumed from the leased area at the specified rates. In India
Cement Ltd. v. State of Tamil Nadu,2 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.3 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
mineral-bearing land in pursuance of Entry 49 of List II by applying

1 “MMDR Act”
2 [1989] Supp. 1 SCR 692 : (1990) 1 SCC 12 [34]
3 [2004] 1 SCR 564 : (2004) 10 SCC 201 [71]
[2024] 7 S.C.R. 1593

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

the mineral value or royalty as the measure of the tax.4 States such
as Rajasthan5 and Uttar Pradesh6 also sought to impose environment
and health cess and fees for transporting coal and coal-dust collected
from mines. The constitutional validity of these levies was challenged
before the High Courts on the ground that they were beyond the
legislative competence of the State legislatures. The levies were
also assailed on the ground that they were in violation of the law
laid down in India Cement (supra).
4. One such matter is Civil Appeal No. 4056-64 of 1999, where the
petitioners initially filed writ petitions before the High Court of
Judicature at Patna challenging the validity of the Bihar Coal Mining
Area Development Authority (Amendment) Act 1992 and the Bihar
Mineral Area Development Authority (Land Use Tax) Rules 1994,
which levied tax7 on land being used for mining. Relying on India
Cement (supra), the High Court allowed the petition by holding
that the tax was not within the scope of Entry 49 of List II of the
Seventh Schedule. The correctness of the High Court’s decision
was assailed before this Court. On 30 March 2011, a Bench of three
Judges noticed the divergence between India Cement (supra) and
Kesoram (supra) and referred the following questions to a Bench
of nine Judges to provide a decisive ruling:
a. Whether ‘royalty’ determined under Sections 9/15(3) of 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,

4 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.
5 Ambuja Cement v. State of Rajasthan, Diary No. 21291 of 2023; Wolkem Industries v. State of Rajasthan,
Civil Appeal No. 8273 of 2013; Wonder Cement Ltd. v. State of Rajasthan, Civil Appeal No. 4588 of 2017.
6 Kanoria Chemicals v. State of UP, Civil Appeal No. 1295 of 2008; Hindalco Industries Ltd. v. State of UP,
Civil Appeal No. 3869 of 2014.
7 Section 89, Bihar Coal Mining Area Development Authority Act 1986. [It reads:
Levy of Tax on Use of Land for Other Than Agricultural and Residential Purposes –
(1) The Authority shall subject to the provisions of this Act and Rules framed thereunder levy tax,
by notification published in the Official Gazette on land being by any person, group of persons,
company, the Central Government or the State Government, Local or Corporate Body for mining,
commercial or industrial purposes with the prior approval of the State Government.
Provided that the tax so levied shall not exceed Rupees 1.50 per square meter annually for any
such land but such tax shall not be levied on land which is subject to Holding Tax.
(2) The State Government shall, out of the tax so levied and collected, determine the amount to be
deposited into the consolidated Fund of the State Government from time to time.”]
1594 [2024] 7 S.C.R.

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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. Whether “taxes on lands and buildings” in Entry 49 List II of
the Seventh Schedule to the Constitution contemplate a tax
levied directly on the land as a unit having definite relationship
with the land?
g. What is the scope of the expression “taxes on mineral rights” in
Entry 50 of List II of the Seventh Schedule to the Constitution?
h. Whether the expression “subject to any limitation imposed by
Parliament by law relating to mineral development” in Entry 50
of List II refers to the subject matter in Entry 54 of List I of the
Seventh Schedule to the Constitution;
i. Whether Entry 50 of List II read with Entry 54 of List I of the
Seventh Schedule to the Constitution constitute an exception to
the general scheme of Entries relating to taxation being distinct
from other Entries in all the three Lists of the Seventh Schedule
to the Constitution as enunciated in M P V Sundararamier &
Co. v. State of Andhra Pradesh;8

8 [1958] 1 SCR 1422
[2024] 7 S.C.R. 1595

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

j. Whether in view of the declaration under Section 2 of the
MMDR Act made in terms of Entry 54 of List I of the Seventh
Schedule to the Constitution and the provisions of the said Act,
the State legislature is denuded of its power under Entry 23 of
List II and/ or Entry 50 of List II; and
k. What is the effect of the expression “subject to any limitation
imposed by Parliament by law relating to mineral development”
on the taxing power of the State legislature in Entry 50 of List
II, particularly in view of its uniqueness in the sense that it is
the only entry in all the entries in three Lists (Lists I, II, and
III) where the taxing power of the State legislature has been
subjected to “any limitation imposed by Parliament by law
relating to mineral development.”
B. Issues
5. During the course of the hearing,9 counsel for the petitioners and
respondents agreed that the main questions that fall for determination
by this Court could be reframed in the following terms:
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;
b. What is the scope of Entry 50 of 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 of List I? Does
Section 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

9 Civil Appeal No. 4056-4064 of 1999, Mineral Area Development Authority v. Steel Authority of India,
Transcript of Hearing, 27 February 2024, 8-9.
1596 [2024] 7 S.C.R.

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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
sides have not addressed submissions on any issues pertaining to
the interpretation of Entry 53 of List I. We have accordingly neither
discussed nor considered any issues pertaining to Entry 53 of
List I. We have circumscribed the scope of the reference to the above-
mentioned issues referred to the nine-Judge Bench as reframed in
the above terms.
C. Submissions
i. Submissions of the petitioners
7. Mr Rakesh Dwivedi, learned senior counsel, made the following
submissions:
a. Royalty is the consideration for parting with the right to work
the mine and win minerals which are vested either in the
Government or a private person. Section 9 of the MMDR Act
statutorily determines the price to be compulsorily paid by the
lessee to the lessor in lieu of the grant of rights under a mining
lease. Royalty paid by the lessee under Section 9 does not
meet either the criteria of a ‘tax’ or an ‘impost’ under Article
366(28) of the Constitution. Therefore, royalty is not a tax on
either minerals or mineral rights;
b. Entry 49 of List II - “taxes on lands and buildings” - must be
construed expansively because it is not subordinated to any
other entry in the Seventh Schedule. The expression “lands”
in Entry 49 has been interpreted to include all kinds of lands,
including mineral-bearing land. Minerals continue to remain
a part of the land until they are extracted. Therefore, the
value of minerals can be used as a measure to tax mineral
bearing land;
[2024] 7 S.C.R. 1597

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

c. Entry 54 of List I and Entry 23 of List II are general entries
relating to the subject matter of regulation of mines and
mineral development. Entry 23 of List II has been expressly
subordinated to the provisions of List I with respect to regulation
and development under the control of the Union. Thus, the
subject matter available to the State legislature under Entry
23 of List II is the residue of what is left after declaration by
Parliament under Entry 54 of List I. Moreover, Entries 54 of
List I and 23 of List II, being general entries, do not provide a
source of imposing any kind of tax;
d. The legislative power of the State legislatures to levy tax on
mineral rights under Entry 50 of List II has been made subject
to “any limitations imposed by Parliament by law relating to
mineral development.” Parliament has no legislative competence
to tax with respect to any subject matter enumerated in List II
of the Seventh Schedule. Parliament cannot 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 legislative
power of Union and States to tax is mutually exclusive and
clearly demarcated under the Seventh Schedule.
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8. Mr S Niranjan Reddy, learned senior counsel, made the following
submissions:
a. It is a settled law that the rights to sub-soil minerals vest in
the title holder of the land. The ownership to sub-soil minerals
generally follows the ownership of the land, unless the owner of
the land is deprived of the same by some valid legal process;
b. Ordinarily, the land owner, or the mining lessor, contractually
requires the lessee to pay royalty as a compensation for the
loss of the value of minerals from the land. Under Section
9 of the MMDR Act, Parliament has statutorily capped the
amount of royalty that can be contractually collected by the
lessor. Moreover, Section 9(3) of the MMDR Act (which limits
the power of the Central Government to increase the rates of
royalty) does not serve as a limitation on the taxing power of
the State legislatures under Entry 50 of List II;
c. The Constitution is cognizant of the fact that the legislative
power of the States to tax mineral rights may impede mineral
development. Therefore, the Constitution has empowered
Parliament to limit or restrict the taxing powers of the State
legislatures under Entry 50 of List II by a law relating to mineral
development; and
d. The word “lands” under Entry 49 of List II includes lands of every
character. The measure of a tax cannot determine the nature
of tax. The productivity of land can be used as a measure for
levy of taxes on lands. Resultantly, mineral produced from a
land can always be used as a measure to tax lands.
9. Mr Vijay Hansaria, learned senior counsel, made the following
submissions:
a. The MMDR Act only deals with the regulation of mines and
mineral development. Further, the legislation does not seek to
legislate on the entire field of mines and minerals, but only to
the extent provided. The levies such as royalty and dead rent
payable under the MMDR Act are not in the nature of tax but
only a payment for a right to enjoy the land and the usufruct
of the land;
b. Entry 50 of List II, being a taxing entry, has to be construed
with clarity and precision. The expression “law relating to
[2024] 7 S.C.R. 1599

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

mineral development” occurring in Entry 50 of List II has to be
construed in light of Section 18 of the MMDR Act which deals
with mineral development. Section 18 does not impose any
express 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 whether royalty is designated as a tax. Any levy
relating to mineral development, in so far as it is in relation to
mineral rights, will serve as a limitation on the taxing powers
of the State legislature under Entry 50 of List II;
c. Both Entry 54 of List I and Entry 50 of List II constitute a family
of entries. Taxes on minerals rights must be understood as
such levies, charges, impositions or demands that are related
to mineral development. Entry 50 of List II cannot be a source
of authority for imposing any levy, charge, impost, or demand
which is either unconnected with mineral development or in
relation to any other alien purpose, such as education cess;
1600 [2024] 7 S.C.R.

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d. The MMDR Act contemplates all manner of levies, charges,
imposts, or demands that can be legitimately provided for having
a nexus with mineral rights. Therefore, the provisions of the
MMDR Act will be treated as a limitation on the power of the
States to demand or impose similar levies, imposts or demands
of the same nature. Although Entry 50 of List II is a taxing entry,
it will be limited by a law relating to mineral development enacted
under a general entry, that is, Entry 54 of List I; and
e. Entry 49 of List II cannot include any matter in relation to mineral
rights activities. Any levy with reference to the value of mineral
produced from a mineral bearing land will be treated as a levy
in relation to mineral rights.
12. Mr Tushar Mehta, the learner Solicitor General of India, made the
following submissions:
a. The only pertinent issue in this reference is whether the State
Government can impose levies under Entry 50 of List II over
and above the amount of royalty received by them under the
MMDR Act. The State legislature’s competence to tax mineral
rights under Entry 50 does not extend to taxing other aspects
such as mining activities and minerals produced;
b. The Central Government fixes the rates of royalty to ensure
harmonized development of minerals in India. The MMDR Act
exhausts the field of statutory charges and levies on minerals
and thereby denudes the power of the State legislature to
impose any levy relating to mineral development. The MMDR
Act occupies the entire field of legislation covered by both
Entries 23 and 50 of List II;
c. In the context of mineral-bearing lands, the words “lands”
used in Entry 49 of List II can only mean the surface of the
land. It cannot be interpreted expansively 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
[2024] 7 S.C.R. 1601

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 mineral
rights are granted according to the provisions of the central
legislation regardless of whether that the minerals vest in the
State Government;
c. The important issue in this reference pertains to the nature of
“any limitations” mentioned under Entry 50 of List II. The State
legislature’s power under Entry 50 of List II is excluded if taxes
on mineral rights become incompatible with mineral development
as contemplated by a regulatory law enacted under Entry 54
of List I. Any levy by State legislatures under Entry 50 of List
II impinges upon mineral development;
d. Royalty belongs to the same genus as a tax on mineral rights in
the sense that both are exactions by the sovereign in exercise of
their statutory powers. The expression “taxes on mineral rights”
has a very narrow focus and has to be interpreted accordingly.
In a constitutional sense, the expression “tax on mineral rights”
connotes that exaction which gives the States the share of the
mineral produced. The royalty payable under Section 9 of the
MMDR Act meets that definition;
e. The expression “mineral development” used in Entry 50 of List
II has to be traced to the entire architecture of the MMDR Act.
Therefore, the entirety of the MMDR Act serves as a limitation
on the taxing powers of the State legislatures under Entry 50
of List II. Further, other provisions of the MMDR Act cover the
1602 [2024] 7 S.C.R.

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taxing powers of the State legislature by satisfying the threshold
of “any limitation” under Entry 50 of List II;
f. The tax on mineral rights can only be a tax on an owner (who
is a private person) of minerals seeking to monetize the mineral
resources. Resultantly, the State Government can exercise its
legislative powers under Entry 50 of List II only in situations
where the mineral rights vest in private persons; and
g. The measure of tax must have a nexus with the nature of tax.
In India, all minerals vest in the State. Ownership of land does
not give the owner the right to the sub-soil minerals. Therefore,
a tax on mineral bearing land cannot be imposed on the owner
on the basis of the value of the sub-soil minerals.
14. Dr A M Singhvi, learned senior counsel, made the following
submissions:
a. Royalty and dead rent are compulsory imposts under the MMDR
Act, and not a result of negotiations leading to a contractual
agreement. Royalty meets the criteria of tax under Article
366(28) of the Constitution;
b. The legislative 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).
[2024] 7 S.C.R. 1603

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

15. Mr Darius Khambata, learned senior counsel, made the following
submissions:
a. The limitations imposed by Parliament under Entry 50 of List II
need not be express, they can also be implied. Therefore, once
Parliament imposes charges or levies under a law relating to
mineral development, it occupies the entire field pertaining to
the subject-matter of Entry 50 of List II; and
b. The MMDR Act is a complete code on the regulation of mineral
development, including the field of taxation or exactions on
minerals and mineral rights. The scheme of the MMDR Act is
such that Parliament not only imposes a tax on mineral rights,
but also curtails the powers of the State legislature under Entry
50 of List II.
16. Mr A K Ganguly, learned senior counsel, submitted that minerals
cannot constitute as a measure for tax on land because they cease
to be a part of land once extracted.
17. Mr S K Bagaria, learned senior counsel, submitted that the totality
of levies pertaining to minerals and mineral rights are comprised in
Sections 9, 9A, 9B, and 9C of the MMDR Act which leave nothing
for the State legislature to tax under Entry 50 of List II. Moreover,
the expression ‘tax on mineral rights’ under Entry 50 of List II will
not empower State legislatures to levy tax on minerals.
18. Mr Arvind Datar, learned senior counsel, made the following
submissions:
a. Since Entry 50 of List II is “subject to” any limitations imposed
by Parliament by law relating to mineral development, the
legislative power of the State legislature to tax mineral rights
must yield to parliamentary legislation, that is, the MMDR Act.
The taxing powers under Entry 50 of List II are made subject to
a law made by Parliament to maintain uniformity and promote
mineral development; and
b. The scope of taxes on mineral rights under Entry 50 of List II is
limited and only entails a taxation on the activity of excavation
and mining. This has already been accounted for under the
MMDR Act. The taxes on minerals produced is akin to an excise
duty and can only be levied under Entry 84 of List I, and the
taxes on sale of minerals can be levied under Entry 54 of List II.
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19. Mr Sujit Ghosh, learned senior counsel, submitted that the sovereign
right of the State legislature can be curtailed by Parliament in the
interests of mineral development. Counsel further contended that
the ‘aspect’ of taxation of mineral rights has been taken over by
Parliament by virtue of Section 9 of the MMDR Act.
20. Ms Aishwarya Bhati, the Additional Solicitor-General of India,
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.10 Minerals are natural and non-renewable
resources. They serve as vital raw materials for the core sectors
of the economy. India produces a diversity of minerals such as
coal, iron-ore, bauxite, manganese and chromite. Many industries,
especially those critical to the infrastructure sector such as power,
steel, cement, and aluminum, are heavily dependent on minerals.
For example, coal is an essential raw material for several key
industries such as iron, steel, and cement, which in turn are basic
ingredients for almost all manufacturing industries and physical
infrastructure.
22. Most of the minerals are spatially located in a few mineral rich
states, namely, Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand,
Karnataka, Madhya Pradesh, Orissa, Rajasthan, and West Bengal.11

10 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 substances obtained from underneath the surface of the earth by digging or
quarrying.”); V P Pithupitchai v. Special Secretary to the Government of TN (2003) 9 SCC 534
11 Ligia Norohna et al, ‘Resource Federalism in India: The Case of Minerals’ (2009) 44(8) Economic and
Political Weekly 51, 52.
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Since mineral resources are a shared inheritance of the people, it has
always been the imperative of the Indian state to ensure equitable
distribution of mineral wealth to sub-serve the common good.12
Considering the socio-economic importance of mineral resources
to economic development, the Constitution has emphasized that
the state shall play an important role in facilitating and regulating
mining activities.
23. The history of the distribution of legislative powers relating to the
regulation of minerals and development of mineral rights could be
traced to the Government of India Act 1915-19.13 Section 45A of the
GOI Act 1915 provided for the classification of subjects in relation to
the functions of government as central and provincial subjects for the
purpose of distinguishing the functions of the Governor-General in
Council and the Indian Legislature from those of the local governments
and local legislatures. Pursuant to Section 45A and Section 129A
(which empowered the Governor-General to make further provisions
for the regulation of certain matters by rules), the Governor-General
prescribed the Devolution Rules. The Devolution Rules prescribed
the distribution of the subject-matter of the regulation of mines and
mineral resources 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.14
However, the colonial state reserved to itself almost the entirety of

12 Government of India, Ministry of Mines, ‘National Mineral Policy 2019’
13 “GOI Act 1915”
14 See Debates in the House of Commons on the Government of India Act 1919 (3rd December 1919)
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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 193515 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.16 The relevant entries relating
to mines and mineral development were as follows:
“List I. – Federal Legislative List
36. Regulation of mines and oilfields and mineral
development to which such regulation and development
under a Federal control is declared by Federal law to be
expedient in the public interest.
List II. – Provincial Legislative List
23. Regulation of mines and oilfields and mineral
development subject to the provisions of List I with respect
to regulation and development under Federal control.
44. Taxes on mineral rights, subject to any limitations
imposed by any Act of the Federal Legislature relating to
mineral development.”
25. During the debates in the House of Commons on the above entries,
the then Solicitor General stated that the provinces could enact
their own regulations if there was any “inaction” by the Federal
Legislature.17 Thus, legislative power in relation to regulation of

15 “GOI Act 1935”
16 GOI Act 1935, Section 100. (It read:
Subject matter of Federal and Provincial Laws:
(1) Notwithstanding anything in the two next succeeding subsections, the Federal Legislature has and a
Provincial Legislature has not, power to make laws with respect to any of the matters enumerated in List
I in the Seventh Schedule to this Act (hereinafter called the “Federal Legislative List”).
(2) Notwithstanding anything in the next succeeding sub-section, the Federal Legislature, and subject to
the preceding sub-section, a Provincial Legislature also, have power to make laws with respect to any
of the matters enumerated in List III in the said Schedule (hereinafter called the “Concurrent Legislative
List”).
(3) Subject to the two preceding sub-sections, the Provincial Legislature has, and the Federal Legislature
has not, power to make laws for a Province or any part thereof with respect to any of the matters
enumerated in List II in the said Schedule (hereinafter called the “Provincial Legislative List”).
(4) The Federal Legislature has power to make laws with respect to matters enumerated in the Provincial
Legislature List except for a Province of any part thereof.”)
17 Government of India Bill, Seventh Schedule (Legislative Lists) Hansard (Volume 301) (13 May 1935).
[The Solicitor General said: “If there is inaction at the Centre the Provinces can go ahead with their
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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 subject-matter 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. Regulation of mines and mineral development to the
extent to which such regulation and development under
the control of the Union is declared by Parliament by law
to be expedient in the public interest.
List II – State List
23. 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.
50. Taxes on mineral rights subject to any limitation imposed
by Parliament by law relating to mineral development.”
28. Although the above entries are substantially similar to the scheme
under the GOI Act 1935, one of the differences lies in the removal
of “oil fields” from Entry 54 of List I and Entry 23 of List II. The
regulation and development of oil fields is now enumerated under

own regulations and developments, but to the extent to which the Centre desires and declares by law
that there shall be central regulations and control, then the subject comes out of the purely restricted
Provincial field and becomes a subject of control at the Centre.”]
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Entry 53 of List I.18 The other difference is that while the GOI Act
1935 required a declaration by Federal law, the Constitution now
requires a declaration by Parliament. The entry pertaining to taxes on
mineral rights is largely similar to Entry 44 of the Provincial Legislative
List, except for the fact that Entry 44 provided for imposition of “any
limitations” by “any Act” enacted by the Federal Legislature relating
to mineral development, while Entry 50 of List II does not include
the expression “any Act” enacted by Parliament. Before we delve
into the intricacies of the interpretation of the legislative entries, we
need to bear in mind the constitutional philosophy underlying the
Indian federal setup.
E. Underlying constitutional philosophy
i. Scheme of distribution of legislative powers and
constitutional limitations
29. Part XI of the Constitution deals with the relations between the Union
and the States. Article 245 provides that subject to the provisions
of the Constitution, Parliament may make laws for the whole or any
part of the territory of India and the Legislature of a State may make
laws for the whole or any part of the State.19 The power to enact
laws is inherently related to the sovereignty of the Union and State
legislatures in their respective fields.20 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.21 It is the duty of constitutional courts to
resolve disputes regarding a breach of constitutional limits by the
Union and State legislatures.22

18 Entry 53 of List I, Seventh Schedule, Constitution of India. [It reads: “53. Regulation and development
of oil fields and mineral oil resources; petroleum and petroleum products; other liquids and substances
declared by Parliament by law to be dangerously inflammable.”]
19 Article 245, Constitution of India
20 Jindal Stainless Steel v. State of Haryana (2017) 12 SCC 1 [617]
21 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]
22 State of West Bengal v. Committee for Protection of Democratic Rights (2010) 3 SCC 571
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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 Parliament and by
the Legislatures of States –
(1) Notwithstanding anything in clauses (2) and (3),
Parliament has exclusive power to makes laws with
respect to any of the matters enumerated in List I in the
Seventh Schedule (in this Constitution referred to as the
“Union List”).
(2) Notwithstanding anything in clause (3), Parliament and,
subject to clause (1), the Legislature of any State also,
have the power to make laws with respect to any of the
matters enumerated in List III in the Seventh Schedule
(in this Constitution referred to as the “Concurrent List”)
(3) Subject to clauses (1) and (2), the Legislature of any
State has exclusive power to make laws for such State
or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule (in this
Constitution referred to as the “State List”)
(4) Parliament has power to make laws with respect to
any matter for any part of the territory of India not included
in a State notwithstanding that such matter is a matter
enumerated in the State List.”
31. Article 246 confers exclusive power on Parliament to make laws
with respect to any of the matters enumerated in List I (the Union
List) of the Seventh Schedule. The exclusive power of the State
legislatures with respect to the matters enumerated in List II is
subject to the exclusive legislative powers of Parliament. In Hoechst
Pharmaceuticals v. State of Bihar,23 this Court culled out the
following principles underlying Article 246:

23 [1983] 3 SCR 130 : (1983) 4 SCC 45
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a. Parliament has exclusive power to make laws with respect to
the matters enumerated in List I;
b. The non-obstante clause in Article 246(1) provides for
predominance or supremacy of the Union legislature;
c. The legislative powers of the Union legislature is not encumbered
by anything contained in Articles 246(2) and 246(3) for these
clauses are expressly limited and made subject to the non-
obstante clause in Article 246(1);
d. The State legislature has exclusive power to make laws with
respect to any of the matters enumerated in List II;
e. The exclusive power of the State legislature to legislate with
respect to any of the matters enumerated in List II has to be
exercised subject to Article 246(1), that is, the exclusive power
of Parliament to legislate with respect to matters enumerated
in List I;
f. Consequently, in case of any conflict between an entry in List
I and an entry in List II which is not 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.24 A legislation could be composite
in nature, drawing upon several entries in a particular list.25 Such a
legislation is referred to as a “ragbag” legislation.

24 Calcutta Gas Company (Proprietary) Ltd v. State of West Bengal [1962] Supp 3 SCR 1, [8]
25 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].
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33. Article 254 clarifies that if the law made by a State legislature is
repugnant to any provisions of a law made by Parliament with
respect to any of the matters enumerated in List III, the law made by
Parliament would prevail and the law made by the State legislature
would be void to the extent of the repugnancy. The issue of repugnancy
arises only when both the legislatures are competent to legislate on
the subject with respect to List III.26 The issue of repugnancy does
not arise if the legislations enacted by Parliament and the State
legislatures deal with separate and distinct legislative subject matters.
By virtue of Article 248, Parliament has exclusive legislative powers
to make laws with respect to any of the matters not enumerated in
List II or List III.27 However, how should courts deal with a situation
where two legislations, enacted by Parliament and State legislature
in pursuance of their respective legislative powers, appear to conflict
with each other? The answer lies in Article 246 itself.
34. Article 246 incorporates the principle of federal supremacy. 28 In
Hoechst Pharmaceuticals (supra), this Court held that the words
“notwithstanding anything contained in clauses (2) and (3)” in Article
246(1) and the words “subject to clauses (1) and (2)” in Article 246(3)
embody that principle. The principle postulates that in case of an
inevitable conflict between Union and State powers, the Union’s
power of legislation over a subject enumerated in List I shall prevail
over the State powers of legislation over a subject enumerated in
List II and III. However, it is also settled that this principle cannot be
resorted to unless there is an irreconcilable direct conflict between
the entries in the Union and State Lists.29 Such a conflict must be
an actual one and not a mere seeming conflict between the two
entries in two lists.30
35. Hoechst Pharmaceuticals (supra) laid down the following principles
to resolve any direct conflict between the entries in List I and
List II: (i) in case of seeming conflict, the two entries should be read
together without giving a narrow and restricted reading to either

26 Ch Tika Ramji v. State of U P, 1956 SCC OnLine SC 9 [26]; State of Maharashtra v. Bharat Shanti Lal
Shah, (2008)
27 Article 248, Constitution of India.
28 Kishori Shetty v. The King (1949-50) 11 FCR 650
29 State of Kerala v. Mar Appraem Kuri Co. Ltd. (2012) 7 SCC 106 [39]
30 Offshore Holdings (P) Ltd. v. Bangalore Development Authority (2011) 3 SCC 139 [99]
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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.31 This division also serves as a
constitutional limitation on legislative powers. Parliament cannot
entrench upon the plenary power of the State legislatures in the
ordinary course, except where the Constitution itself specifically allows
it.32 The appropriate legislature must possess legislative competence
to enact a law on the subject matter it seeks to legislate.
37. With respect to the powers of taxation, Article 265 provides that
no tax shall be levied or collected except by authority of law. In
Mafatlal Industries v. Union of India, a nine-Judge Bench of
this Court held that the “law” mentioned under Article 265 refers
to a valid law whose validity has to be determined with reference
to other provisions in the Constitution.33 Therefore, with respect to
taxation laws particularly, there is a constitutional requirement that
the law imposing tax must be in conformity with the provisions of
the Constitution, particularly Part III dealing with the fundamental
rights. This is also a constitutional limitation because the appropriate
legislature has to ensure that the law is in accord with the principles
of equality and non-discrimination. Any legislation enacted by the
legislature in excess of its constitutional powers is void.34

31 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 centralism. It may be that the Constitution assigns
to the Centre too large field for the operation of its legislative and executive authority than it to be found
in any other federal Constitution. It may be that the residuary powers are given to the Centre and not to
the States. But these features do not form the essence of federalism. The chief mark of federalism as I
said lies in the partition of the legislative and executive authority between the Centre and the Units by the
Constitution. This is the principle embodied in our Constitution.”]
32 See Articles 249, 250, and 252, Constitution of India.
33 [1996] Supp. 10 SCR 585 : (1997) 5 SCC 536 [25]
34 R M D Chamarbaugwalla v. Union of India (1957) SCC OnLine SC 11 [12]
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ii. Interpretation of legislative entries
38. The structure of the legislative entries in the three Lists of the Seventh
Schedule follows an express and deliberate pattern. The entries are
classified into general and taxing entries.35 In the Union List, entries
1 to 81 enumerate general subject matters, while entries 82 to 92-C
pertain to the powers of taxation. Similarly, entries 1 to 45 in the State
List enumerate the 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 respect of that trade and commerce, then Entry
83 which is “Duties of customs including export duties”
would be wholly redundant. Entries 43 and 44 relate to
incorporation regulation and winding up of corporations.
Entry 85 provides separately for Corporation tax. Turning
to List II, Entries 1 to 44 form one group mentioning the
subjects on which the States could legislate. Entries 45
to 63 in that List form another group, and they deal with
taxes. Entry 18, for example, is “Land” and Entry 45 is “Land
Revenue”. Entry 23 is “Regulation of mines” and Entry 50

35 R Abdul Quader & Co. v. STO [1964] 6 SCR 867, [8]
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is “taxes on mineral rights”. The above analysis – and
it is not exhaustive of the Entries in the Lists – leads
to the interference that taxation is not intended to be
comprised in the main subject in which it might on an
extended construction be regarded as included, but is
treated as a distinct matter for purposes of legislative
competence. And this distinction is also manifest in the
language of Art. 248, Cls. (1) and (2), and of Entry 97 in
List I of the Constitution. […]
To sum up: […] (2) Under the scheme of the Entries
in the Lists, taxation is regarded as a distinct matter
and is separately set out.”
(emphasis added)
39. The above position of law has been expressly affirmed by the
nine-Judge Bench of this Court in Jindal Stainless Ltd v. State of
Haryana.36 Thus, it is an accepted principle that the subject matter
of taxation is dealt with under distinct entries and, therefore, cannot
be traced to a non-taxing entry. The taxing powers of Parliament and
the State legislatures are mutually exclusive and clearly demarcated.
There can be no overlap between the taxing powers of the Union and
the States. Entries relating to taxing powers must be construed with
clarity and precision to maintain exclusivity and a construction of a
taxation entry which may lead to overlapping must be eschewed.37 If
a taxing power is enumerated within a particular legislative list, it is
automatically excluded from the purview of subject-matters in other
legislative lists. The residuary power of Parliament also includes the
power of making any law imposing a tax not mentioned in either
List II or List III.
40. The legislative fields or entries in the Seventh Schedule have used
general words to define and delineate the legislative 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.38 It

36 Jindal Stainless Steel (supra) [120], [237.5], [639]
37 Godfrey Phillips India Ltd. v. State of UP (2005) 2 SCC 515 [46]
38 Navinchandra Mafatlal v. Commissioner of Income Tax, Bombay City (1954) 3 SCC 623
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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.39 The ambit of the entries extends to all
ancillary and subsidiary matters which can fairly and reasonably be
said to be comprehended in them.40 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 Seventh Schedule may appear to overlap
because of the language used in the entries. The necessary corollary
to the scheme of legislative distribution is that that any invasion by
Parliament in the field assigned to the States and vice versa is a
breach of the Constitution.41 Even though the Constitution distributes
legislative powers between the Union and the States, there have been
situations where a legislation purporting to deal with a subject in one
list, touches on a subject in another list. To remedy such situation,
the doctrine of pith and substance is used to examine whether the
legislature has the competence to enact a law with regard to either
of the three lists under the Seventh Schedule of the Constitution.42
There may arise situations where a legislature may frame a law that
in substance and reality transgresses its legislative competence.
Such a piece of legislation is called “colourable legislation” because
the legislature veils its transgression by making it seem as if the
legislation is within its legislative competence.43 To examine whether
the legislature has transgressed its legislative competence, the
substance of the legislation is material. If the subject-matter is in
substance beyond the legislative powers of the legislature, the
form in which the law is clothed would not save it from the vice of
unconstitutionality.44

39 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].
40 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]
41 Dr. B R Ambedkar, CAD Volume 7 (4 November 1948).
42 A L S P P L Subrahmanyan Chettiar v. Muthuswami Goundan (1940) 2 FCR 188; A S Krishna v. State of
Madras [1957] SCR 399 [8];
43 K C Gajapathi Narayan Deo v. State of Orissa (1953) 2 SCC 178 [11]
44 K C Gajapathi Narayan Deo (supra) [12]
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42. The Constitution has used specific expressions to resolve potential
overlaps or conflicts between and among the entries in the three
Lists. The entries in the Seventh Schedule have used different
phraseologies to either subject or restrict their scope and ambit.
Some of the legislative entries in the State List have been made
subject to broad or specific limitations or restrictions with respect to
the entries in the Union List or Concurrent List. This would emerge
from the tabulation set out below:

Phraseology used Entries in State List
Subject to the provisions of any 37
law made by Parliament
Subject to the provisions of entries 2, 17, 22, 24, 33
in List I
Subject to a particular field of 23
legislation in List I
Subject to the provisions of entries 26, 27, 57
in List III
Subject to the provisions of List I 13
and List III
Subject to any limitations imposed 50
by Parliament by law
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
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or other provisions to which it is made subject.45 Therefore, where the
Constitution intends to displace or override46 the legislative powers of
the States, it has used specific terminology – “subject to”. However,
the Constitution has also indicated the extent to which a particular
legislative entry under List II is subordinated. For instance, the
subjection is either with respect to provisions of List I or List III, or it
can also be to the extent of “any limitations” imposed by Parliament
by law. Thus, it is imperative that the entries in List II must be read
and interpreted in their proper context to understand the extent of
their subordination to Union powers.
45. There are numerous entries in the State List where the Constitution
has imposed no restrictions on the exercise of the legislative powers
of the States.47 With respect to such entries, the absence of any
express limitations indicates that the Constitution did not intend to
fetter the legislative powers of the States.
46. In addition to the above terminologies, the entries in the Seventh
Schedule also indicate the manner in which a restriction or limitation
can be imposed on the legislative powers of the State. This assumes
clarity from the following tabulation:

Phraseology Used Entries
Declared by or under law 23, 27, 67 of List I
Declared by Parliament by law 24, 52, 53, 54, 56, 62, 63, 64
of List I
Imposed by Parliament by law 50 of List II

47. The Constitution deploys three expressions to signify the manner
in which the legislative power could be exercised by Parliament –
“declared by or under law”, and “declared by Parliament by law”,
and “imposed by Parliament by law” The difference in the character
of these provisions can be gathered from the Constitution (Seventh

45 South India Corporation (P) Ltd. v. Secretary, Board of Revenue [1964] 4 SCR 280 [19]
46 State of Bihar v. Kameshwar Singh (1952) 1 SCC 528. [“18. […] It was said that the words “subject to the
provisions of List III Entry 42” must be taken to mean that the law-making power under Entry 36 could
only be exercised subject to the two conditions as to public purpose and payment of compensation, both
of which are referred to in Entry 42. Those words, in my opinion, mean no more than that any law made
under Entry 36 by a State Legislature can be displaced or overridden by the Union Legislature making a
law under Entry 42 of List III.”]
47 See Entries 4, 5, 6, 8, 9, 10, etc., List II, Seventh Schedule, Constitution of India.
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Amendment) Act 1956 which substituted the expression “declared by
Parliament by law” with “declared by or under law made by Parliament”
in Entry 6748 of the Union List. The object of the amendment was
to enable the delegate under the statute to make the required
declaration.49 The expression “by law” means that the legislative
power should be effectuated through the provisions of a statute.
In comparison, “by or under law” means that the legislative intent
could be effectuated either through the provisions of the statute or
by any subordinate authority vested with powers in that behalf by
the statute.50 It is important to note that Entry 50 of List II use the
expression “by law relating to mineral development”. We will have
to bear the meaning of the expression “by law” in mind to give an
appropriate interpretation to the entry.
iii. Fiscal Federalism
48. Federalism is one of the basic features of the Indian Constitution.51
Federalism embodies a division of powers between the units of the
federation, that is, the Union and the States. Indian federalism is
defined as asymmetric because it tilts towards the Centre, producing
a strong Central Government. Yet, it has not necessarily resulted
in weak State governments.52 The Indian States are sovereigns
within the legislative competence assigned to them. The delicate

48 Entry 67, List I, 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.”]
49 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 article 49.”
50 In Dr Indramani Pyarelal Gupta v. W R Natu [1963] 1 SCR 721 a Constitution Bench of this Court
explained the difference between “by law” and “under law” in the following terms: “15. […] The meaning
of the word “under the Act” is well known. “By” an Act would mean by a provision directly enacted in
the statute in question and which is gatherable from its express language or by necessary implication
therefrom. The words “under the Act” would, in that context, signify what is not directly to be found in the
statute itself but is conferred or imposed by virtue of powers enabling this to be done; in other words;
bye-laws made by a subordinate law-making authority which is empowered to do so by the parent Act.
The distinction is thus between what is directly done by the enactment and what is done indirectly by a
subordinate law-making authority which is empowered to do so by the parent Act.”
51 Kesavananda Bharati v. State of Kerala (1973) 4 SCC 225 [582]
52 Granville Austin, Cornerstone of a Nation (OUP, 1966) 187
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balance of power is secured by constitutional courts by interpreting
the scheme of distribution of powers.53 In S R Bommai v. Union of
India,54 Justice B P Jeevan Reddy observed that the courts should
be circumspect in adopting an 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-à-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.55 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.56
50. In Union of India v. Mohit Minerals Private Limited,57 this Court
recognized fiscal federalism as an important attribute of Indian
federalism. Fiscal federalism is concerned with the assignment
of functions to different levels of government and devolution of
appropriate fiscal instruments to carry out these functions. 58 In
India, these fiscal instruments typically take the form of tax and
debt instruments. Similar to the division of constitutional powers
and responsibilities, the Constitution has also shared tax-raising
responsibilities between the Union and the States.59

53 In re, Special Reference No. 1 of 1964 [1965] 1 SCR 413; Jindal Stainless Steel (supra) [612]
54 [1994] 2 SCR 644 : (1994) 3 SCC 1
55 Jindal Stainless Steel (supra) [85].
56 Jindal Stainless Steel (supra) [615].
57 [2022] 9 SCR 300 : (2022) 10 SCC 700 [56]
58 Wallace E Oates, ‘An Essay on Fiscal Federalism’ (1999) 37(3) Journal of Economic Literature 1120,
1121.
59 The legislative power of Parliament to tax is enumerated in entries 82 to 92B of List I. Similarly, the
legislative power of state is enumerated is enumerated in entries 46 to 62 of List II.
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51. The Constitution is cognizant of the imbalance between resources at
the disposal of states and the Union. The Constitution remedies the
imbalance by way of intergovernmental distribution60 and grants.61
One of basic features of fiscal federalism is that both the Union
government and the State governments ought to have adequate fiscal
resources to discharge their constitutional responsibilities. List I and
List II of the Seventh Schedule contain various subject-matters under
which Parliament and the State legislatures can respectively levy
taxes. The purpose of such a distribution is to entrust adequate fiscal
powers with the legislatures to raise revenues to meet the growing
fiscal expenditures and rein in the fiscal deficit. The legislatures can
formulate the principles underlying any taxing legislation, define the
taxing event or the charge of tax as well the mode and manner of
its implementation.
52. The subjects in respect of which the framers of the Constitution
desired that there should be uniformity of law throughout the
country have been enumerated under the Union List, while matters
which may require laws to be made having regard to the particular
needs and peculiar problems of each State have been placed
under the State List.62 For instance, the State legislatures can tax
the consumption or sale of electricity. Although electricity is an
important raw material for many industries, the States are allowed
to determine the rates of the levy 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.63 Any dilution in the taxing powers of the State legislatures

60 Article 270(2), Constitution of India
61 Articles 273 and 275, Constitution of India
62 Khazan Chand v. State of Jammu and Kashmir (1984) 2 SCC 456 [14]
63 Dr. B R Ambedkar, The Evolution of Provincial Finance in British India: A Study in the Provincial
Decentralization of Imperial Finance’ (1923) 152-171.
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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.64 Constitutional courts have to be cognizant of this context
while adjudicating on issues affecting the taxing powers of the State
legislatures.
54. While speaking of fiscal federalism in the context of mineral resources,
we have to be mindful of the fact that not all states are equally endowed
with mineral resources. States such as Chhattisgarh, Jharkhand,
and Orissa have greater reserves of mineral resources. Resultantly,
the contribution of the mining sector in the state domestic product is
higher for these states.65 Despite the abundance of mineral wealth,
many of these states lag economically and suffer from, what many
economists refer to as, “resource curse”.66 For instance, mineral rich
states such as Jharkhand, Chhattisgarh, and Orissa have lower per
capita incomes than the national averages.67 Taxation is among the
important sources of revenue for these States, impacting on their
ability to deliver welfare schemes and services to the people. Fiscal
federalism entails that the power of the States to levy taxes within the
legislative domain carved out to them and subject to the limitations
laid down by the Constitution must be secured from unconstitutional
interference by Parliament.
iv. Natural resources and the public trust doctrine
55. The public trust doctrine is founded on the principle that certain
resources are nature’s bounty which ought to be reserved for the
whole populace, for the present and for the future.68 Since these

64 ‘State Finances: A Study of Budgets of 2023-2024, Revenue Dynamics and Fiscal Capacity of Indian
States’ Reserve Bank of India (December 2023) 28.
65 Ligia Noronha, et al, ‘Resource Federalism in India: The Case of Minerals’ (2009) 44(8) Economic and
Political Weekly 51, 53.
66 Economic Survey 2016-2017, Ministry of Finance, Government of India (January 2017) 292. (“Resource
curse” refers to the phenomenon of economies with abundant natural resources having the tendency to
grow less rapidly than resource-scarce economies.”)
67 Ministry of Statistics and Programme Implementation, State-wise date on per capita income’ (24 July
2023) < https://www.pib.gov.in/PressReleasePage.aspx?PRID=1942055>
68 Joseph L Sax, ‘The Public Trust Doctrine in Natural Resource Law: Effective Judicial Intervention’ (1970)
Michigan Law Review 471, 484.
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resources are intrinsically important to every person in society, the
State acts as a public trustee to safeguard them. In M C Mehta v.
Kamal Nath,69 Justice Kuldip Singh observed that the State is the
trustee of all natural 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.70 The environment and natural
resources are national assets and subject to intergenerational equity.71
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.72
56. While dealing with the allocation of spectrum in Centre for Public
Interest Litigation v. Union of India,73 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.74 However, the
obligation extends to every person who exercises rights over natural
resources to use them without impairing or diminishing the rights
of people and long term interests in that property or resource.75 In
Reliance Natural Resources Ltd. v. Reliance Industries,76 in the
context of Article 29777 of the Constitution, this Court held that the
nature of the word “vest” must be seen in the context of the public
trust doctrine.78
57. The principle which emanates from the above discussion is that the
State holds all natural resources, including minerals, as a trustee of

69 [1996] Supp. 10 SCR 12 : (1997) 1 SCC 388 [34]
70 ibid
71 M C Mehta v. Union of India (2009) 6 SCC 142 [45]
72 T N Godavarman Thirumulpad v. Union of India (2006) 1 SCC 1 [89]
73 [2012] 3 SCR 147 : (2012) 3 SCC 1
74 Fomento Resorts & Hotels Ltd. v. Minguel Martins (2009) 3 SCC 571 [55]
75 Fomento Resorts & Hotels Ltd. (supra) [55]
76 [2010] 5 SCR 704 : (2010) 7 SCC 1 [114]
77 Article 297, Constitution of India.
78 Reliance Natural Resources Ltd. (supra) [122]
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the public and must deal with them in a manner consistent with the
nature of such a trust.79
58. The Central Government or the State Government may not always
be the “owner” of the underlying minerals. But the Constitution
empowers both Parliament (under Entry 54 of List I) and the State
legislatures (under Entry 23 of List II) to regulate mines and mineral
development, the entrustment to the State being subject to the power
of Parliament to regulate the domain. The Constitution has entrusted
the Union and the States with the responsibility to regulate mines and
mineral development in consonance with the principles of the public
trust doctrine and sustainable development of mineral resources.
Under the MMDR Act, the Central Government, acting as a public
trustee of minerals, regulates prospecting and mining operations in
public interest.80 In the process, the legislation seeks to increase
awareness of the compelling need to restore the serious ecological
imbalance and protect against damage being caused to the nature.81
In Pradeep S Wodeyar v. State of Karnataka,82 one of us (Justice
D Y Chandrachud) observed that the essence of the MMDR Act is to
“protect humankind and every species whose existence depends on
natural resources from the destruction which is caused by rapacious
and unregulated mining.” The Court noted that the restrictions under
Section 4 of the MMDR Act are intrinsically meant 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

79 Natural Resources Allocation, In re, Special Reference No. 1 of 2012 (2012) 10 SCC 1 [88]
80 State of Rajasthan v. Gotan Lime Stone Khanji Udyog (P) Ltd. (2016) 4 SCC 469 [29]; Orissa Mining
Corporation Ltd. v. Ministry of Environment & Forests (2013) 6 SCC 476 [58]
81 State (NCT of Delhi) v. Sanjay (2014) 9 SCC 772 [32]
82 [2021] 11 SCR 985 : (2021) 19 SCC 62 [49.3]
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in the mines or for such other purposes.83 Moreover, the MMDR
Act now mandates grant of mining leases,84 exploration licences,85
and composite licences86 in respect of notified minerals through
the process of auction. The Central Government is empowered to
prescribe the terms and conditions subject to which the auction shall
be conducted.
60. The regulatory regime under the MMDR Act recognizes the important
role of the state in regulating mines and mineral development. This
emerges from the stand point of the following perspectives: (i) the
State is a public trustee of natural resources, including minerals;
(ii) pursuant to its role as a public trustee, the State has been
empowered to regulate prospecting and mining operations;
(iii) the provisions of the statute reflect the priority of the state to
regulate mining and related activities to ensure sustainable mineral
development; (iv) prospecting and mining operations may be carried
out by both the government as well as private lessees bearing in
mind the public interest; and (v) the Government has to ensure that
mineral concessions are granted in a fair and transparent manner.
61. Having encapsulated the broad drift of the constitutional and statutory
provisions, we now deal with the issues arising in this reference in
the ensuing segments.
F. Whether royalty is tax
i. Royalty under the MMDR Act
62. The MMDR Act was enacted by Parliament in exercise of its
legislative power derived from Article 246 read with Entry 54 of
List I. The Act seeks to provide for the regulation of mines and
development of minerals under the control of the Union. Section
2 contains a declaration in terms of Entry 54 of List I, providing
that “it is expedient in the public interest that the Union should

83 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,
therefore, take into account all considerations relevant to the issue, with reference to the lease in
question.”]
84 Section 10B, MMDR Act
85 Section 10BA, MMDR Act
86 Section 11, MMDR Act
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take under its control the regulation of mines and the development
of minerals to the extent hereinafter provided.”87 The declaration
indicates that Parliament intends to take the regulation of mines
and development of mines under the control of the Union to the
extent indicated in the statute.
63. Chapter II of the MMDR Act deals with general restrictions on
undertaking prospecting and mining operations. Section 4 provides
that no person shall undertake any reconnaissance, prospecting or
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, manager, employee, contractor or sub-lessee from the leased
area at the rate specified in the Second Schedule. Section 9(3)
empowers the Central Government to amend the Second Schedule
to enhance or reduce the rate at which royalty shall be payable in
respect of minerals enumerated in the Second Schedule. However,
it also provides that the enhancement in the rate of royalty in respect
of any mineral shall not be done more than once during any period
of three years. The then Minister of Mines and Oil (Mr K D Malviya)
stated during the Lok Sabha debate preceding the passage of the Bill

87 Section 2, MMDR Act.
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that the purpose of capping further increases in the rates of royalty
was to ensure financial security to the private sector.88
66. The rates of royalty payable in respect of minerals in the Second
Schedule of the MMDR Act are computed either on an ad valorem
basis at a specified percentage of the average sale price or at specific
rates on per tonnage basis. While Section 9 authorizes the charging
of royalty, the Second Schedule provides the method of computation.
The rate of royalty and method of computation differ from mineral
to mineral. This Court has held that the Second Schedule has to be
read as a part and parcel of Section 9.89
67. The process of mining generally involves two stages: (i) extraction
of the ores (also known as run-of-mine mineral) from the earth; and
(ii) mineral beneficiation which entails separating the mineral from
their ores. Rule 64-B of the 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.90 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

88 Mr K D Malviya, Lok Sabha Debates, Volume X (9th December to 21st December 1957) 7123. (The
Minister stated: “We gave consideration to the question of what should be the minimum time which could
give a sense of security to the private sector, so that they could invest their money and have a fairly
reasonable view of their investment and production programmes. Suppose we took powers to reduce or
increase the royalties every six months, it will make the position very insecure from their point of view.
As long as we want a mixed pattern of economy to go on and the private sector to flourish, surely my
hon friend does not expect me to put a sense of insecurity in the mind of the private sector, when every
six months they will have to ask “look here. Are you going to increase the royalty or are you going to
decrease it’ What are you going to do?”.)
89 National Mineral Development Corporation Ltd. v. State of M.P. (2004) 6 SCC 281 [23]
90 Tata Steel Ltd. v. Union of India (2015) 6 SCC 193 [71]
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either royalty or dead rent, whichever is higher. The dead rent is
calculated on a rate per hectare basis as specified under the Third
Schedule. Section 9A was inserted by an amendment in 1972
with a two-fold purpose, namely to: (i) provide a statutory basis for
calculation of dead rent; and (ii) prohibit the Central Government
from enhancing the rate of dead-rent more than once during any
period of three years.91
69. Section 9B provides for establishment of the District Mineral
Foundation92 in any district to work for the interest and benefit of
persons and areas affected by mining related operations. The purpose
of Section 9-B and the object of the DMF is to further the cause of
social justice for those affected by mining related operations, such
as tribals who may be dislocated or displaced from their habitat.93
Section 9B(5) provides that the holder of a mining lease shall pay,
in addition to the royalty paid under Section 9, an amount which is
equivalent to such percentage of the royalty as may be prescribed
by the Central Government.
70. Section 9C provides for the establishment of a non-profit autonomous
body called the National Mineral Exploration Trust94 for the purposes
of regional and detailed exploration in such manner as may be
prescribed by the Central Government. Section 9C(4) mandates the
holder of a mining lease to pay a sum equivalent of two percent of
the royalty paid in terms of Section 9 to the Trust. The purpose of
creating the NMET is to use the funds accrued from mining lease-
holders for encouraging exploration.
71. Section 13 authorizes the Central Government to make rules
regulating the grant of mineral concessions in respect of minerals
and for purposes connected therewith. Section 13(2) lists various
matters in respect of which the Central Government can make rules.
A similar power is vested with the State Government under Section 15
to make rules with respect to minor minerals. Section 25 empowers
the Government to recover rent, royalty, tax, fee or other sum due
to the Government under the Act as arrears of land revenue.

91 D K Trivedi & Sons v. State of Gujarat (1986) Supp. SCC 20 [45]
92 “DMF”
93 Federation of Indian Mineral Industries v. Union of India (2017) 16 SCC 186 [43]
94 “NMET”
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72. The Central Government has framed the Mineral Concession Rules
1960 in exercise of the powers conferred by Section 13. Rule 31 of
the Mineral Concession Rules 1960 provides that the lease deed
shall be executed between the lessor and lessee in terms 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.95 Part VI
contains provisions relating to rents and royalties and provides for
the mode of computing royalty:
“Mode of computation of royalty
2. For the purposes of computing the said royalties the
lessee/lessees shall keep a correct account of the mineral/
minerals produced and dispatched. The accounts as well
as the weight of the mineral/minerals in stock or in the
process of export may be checked by an officer authorized
by the Central or State Government.”
74. Part VII contains the covenants of the lessee/lessees. The lessee
undertakes to pay the rent, water rate, and royalties specified

95 Mineral Concession Rules 1960, Form K, Part V. It reads:
[“Rate and mode of payment of royalty
3. Subject to the provisions of clause 1 of this Part, the lessee/lessees shall during the subsistence of
this lease pay to the State Government at such times and in such manner as the State Government may
prescribe royalty in respect of any mineral/minerals removed by him/them from the leased area at the
rate for the time being specified in the Second Schedule to the Mines and Minerals (Development and
Regulation) Act, 1957”]
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under Parts V and VI in addition to the payment of taxes, rates,
assessments and impositions being in the nature of public demands
from time to time. Party VIII contains the covenants of the State
Government. It provides that a lessee paying the rents, water rate,
and royalties may quietly hold and enjoy the rights and premises
during the term of the lease deed without unlawful interruption from
the State Government.
ii. Purpose of Section 9 of the MMDR Act
75. The regime of mineral licensing prior to the enactment of the MMDR
Act was governed by the Mines and Minerals (Regulation and
Development) Act 194896 read with the Mineral Concession Rules
1948. Under the previous regime, all grants and permissions (such
as prospecting licences97 and mining leases98) 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.”99 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.100 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 major and minor minerals was primarily

96 “MMRD Act 1948”
97 Rule 13, Mineral Concession Rules 1948. [It read: “13. Restrictions on grant of prospecting licence –
(1) No prospecting license shall be granted to any person unless he holds a certificate of approval
from the State Government concerned. […]”; Rule 17, Mineral Concession Rule 1948. It reads: “17.
State Government may grant or refuse a license – (1) Subject to the provisions of rule 13, the State
Government may grant or refuse the license.”]
98 Rule 26, Mineral Concession Rules 1948. [It read: “26. Restrictions on grant of mining leases – (1) No
mining lease shall be granted to any person unless he holds a certificate of approval from the State
Government concerned or is covered by Rule 12.”]
99 Cabinet Secretariat, Industrial Policy Resolution (30 April 1956)
100 Mr J R Mehta, Lok Sabha Debates, Volume X (9th December to 21st December 1957) 7111.
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done considering the export trade, the earning of foreign exchange,
economic development, and industrial progress.101
76. An important distinction between the MMRD Act 1948 and the
MMDR Act which replaced it is that the former did not contain
a provision similar to Section 9 of the subsequent legislation.
Nevertheless, provisions pertaining to royalty were included in the
Mineral Concession Rules 1948 as part of the essential conditions
of a mining lease.102 At the introduction of the Mines and Minerals
(Regulation and Development) Bill in Parliament the then Minister of
Mines explained the legislative intent in the following terms:
“The existing Act did give authority to the Government
through rules to modify the rates and the quantum of royalty
that was to be charged by the State Government. We have
taken this opportunity to put a maximum limit also. With
regard to the time also, at that time there was no limit and
it could not be changed so long as the agreement lasted.
But now considering all the conditions that prevail
these days, we thought that the Government should
have the right to examine the whole structure of the
rates of royalty and see whether it was desirable to
introduce a change in the royalty by way of either an
increase or a decrease. If it was considered desirable
to increase it, the Government would recommend an
increase. If it was desirable to reduce it, a reduction
might be made.”103
(emphasis added)
77. The Minister further stated that allowing State Governments to fix
the rates of royalty “will not be a healthy feature for trade in that
particular commodity.”104 Section 9 sought to remedy the disparity
of royalty rates across India.105

101 Ibid, 7124
102 Rule 41, Mining Concession Rules 1948.
103 Lok Sabha Debates, Volume VIII (11th November to 22nd November, 1957, Third Session) 395.
104 Ibid, 462
105 K P Varghese v. ITO (1981) 4 SCC 173 [8]. It was observed that “[…] the speech made by the Mover of
the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of
ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which
the legislation is enacted.”
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78. Rates of royalty were primarily governed by the terms of lease prior
to the enactment of the MMDR Act. Once a mining lease was entered
into between a lessor and lessee, the rates of royalty would 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.106
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 13, no law
providing for –
[…]
(e) the extinguishment or modification of any rights
accruing by virtue of any agreement, lease or licence
for the purpose of searching for or winning, any
mineral or mineral oil, or the premature termination or
cancellation of any such agreement, lease or licence,
shall be deemed to be void on the ground that it is
inconsistent with, or takes away or abridges any of the
rights conferred by article 14 or article 19.”
(emphasis added)

106 Lok Sabha Debates, Volume VIII (11th November to 22nd November, 1957, Third Session) 463
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80. In Gujarat Pottery Works v. B P Sood, Controller of Mining Leases
for India,107 a Constitution Bench of this Court held that the object of
Article 31-A(1)(e) was to make laws providing for the extinguishment
or modification of leases in connection with mineral rights immune
from the provisions of Articles 14, 19, and 31.
81. The expressions ‘lease’ and ‘licence’ have been used in the context of
mining operations in the Constitution and in the MMRD Act. Therefore,
it is important to understand the meaning of these expressions in
their general legal sense to appreciate their application to mineral
operations.
82. A “lease” connotes a transfer of a right of enjoyment in immoveable
property for a certain time in lieu of consideration.108 Section 105 of
the Transfer of Property Act 1882 defines a lease of immoveable
property as a transfer of a right to enjoy such property, made for a
certain time, express or implied, or in perpetuity, in consideration of
a price paid or promised, or of money, a share of crops, service or
any other thing of value, to be rendered periodically or on specified
occasions to the transferor by the transferee, who accepts the transfer
on such terms.109 The provision defines ‘lessor’, ‘lessee’, ‘premium’,
and ‘rent’. The “transferor is called the lessor, the transferee is called
the lessee, the price is called the premium, and the money, share,
service or other thing to be so rendered is called the rent.” This Court
has interpreted the expression “rent” widely to mean any payment for
the use or occupation of land or building including the payment by a
lessee in respect of the use or occupation of any land or building.110
83. According to Section 3(26) of the General Clauses Act 1897,
immoveable property is defined to include land, benefits to arise out
of land, and things attached to the earth, or permanently fastened to
anything attached to the earth.111 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

107 [1967] 1 SCR 695
108 Mulla on the Transfer of Property Act 1882 (13th edn)
109 Section 105, Transfer of Property Act 1882
110 State of Punjab v. British India Corporation [1964] 2 SCR 114 [15]
111 Section 3(26), General Clauses Act 1897.
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fastened to anything which is attached to the earth, except for
standing timber, growing crops, and grass.112 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 105.113
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
of the grantor, something which would, in the absence of
such right, be unlawful, and such right does not amount
to an easement or an interest in the property, the right is
called a licence.”114
85. In Associated Hotels of India Ltd v. R N Kapoor,115 Justice K Subba
Rao (as the learned Chief Justice then was) observed that a lease
creates an interest in property, while a licence only permits another
to make use of the property, whose legal possession continues to
remain with the owner. A lease envisages and transfers an interest in
the demised property creating a right in rem in favour of the lessee,
while a licence only makes an action lawful which without it would
be unlawful.116
86. Under the MMDR Act, a “prospecting licence” is granted for the
purpose of undertaking prospecting operations.117 Prospecting
operations are defined to mean any operations undertaken for the

112 Section 2(6), Registration Act 1908
113 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]
114 Section 52, Indian Easements Act 1882
115 [1960] 1 SCR 368, [28]. [“28. […] The following propositions may, therefore, be taken as well established:
(1) To ascertain whether a document creates a licence or lease, the substance of the document must
be preferred to the form; (2) the real test is the intention of the parties – whether they intended to create
a lease or a licence; (3) if the document creates an interest in the property, it is a lease; but, if it only
permits another to make use of the property, of which the legal possession continues with the owner, it
is a licence; and (4) if under the document a party gets exclusive possession of the property, prima facie,
he is considered to be a tenant; but circumstances may be established which negative the intention to
create a lease.”]
116 Mangal Amusement Park Private Ltd. v. State of Madhya Pradesh (2012) 11 SCC 713 [15]
117 Section 3(g), MMDR Act
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purpose of exploring, locating, or proving a mineral deposit.118 Chapter
III of the Mineral Concession Rules 1960 deals with the grant of
prospecting licences in respect of land in which the minerals vest in
the government. Form F contained in the Mineral Concession Rules
1960 states that under a prospecting licence, the State Government
grants to the licesee the sole rights to enter upon lands and to
search, win, carry away or dispose of minerals won. Rule 14 read
with Schedule III allows the prospecting licensee to win and carry
away a limited quantity of minerals in lieu of the payment of specified
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.119 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.120 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.121 In Sri Tarkeshwar Sio Thakur Jiu v. Dar Dass
Dey & Co,122 Justice R S Sarkaria observed that the expression
“mining operations” is expansive, so as to comprehend every
activity by which the mineral is extracted or obtained from the earth
irrespective of whether such activity is carried out on the surface or
in the bowels of the earth. Section 3(fa) defines “production” or any
derivative of the word “production” to mean the winning or raising

118 Section 3(h), MMDR Act
119 Mineral Concession Rules 1960, Schedule III
120 Section 3(c), MMDR Act
121 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 1963 shows that minerals need not be subterranean and
that mining operations cover every operation undertaken for the purpose of “winning” any minor mineral.
“Winning” does not imply a hazardous or perilous activity. The word simply means “extracting a mineral”
and is used generally to indicate any activity by which a mineral is secured. “Extracting”, in turn, means,
drawing out or obtaining. A tooth is ‘extracted’ as much as is fruit juice and as much as a mineral. Only,
that the effort varies from tooth to tooth, from fruit to fruit and from mineral to mineral.”]
122 (1979) 3 SCC 106 [15]
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of mineral within the leased area for the purpose of processing or
dispatch. The expression “dispatch” has been defined to mean the
removal of minerals or mineral products from the leased area and
to include the consumption of minerals and mineral products within
such area.123 It is worth noting that royalty is payable under Section
9 on the removal or consumption of minerals by the lessee in the
leased area. Thus, essentially royalty is payable on the dispatch of
minerals from the leased area.
88. This segment indicates that under a lease deed for mining operations,
the owner transfers the interest in the minerals to the lessee in lieu
of the payment of rent, which usually takes the form of royalty. To
answer whether this payment is akin to a tax, we must understand
the nature of a mining lease under the MMDR Act.
b. The nature of a mining lease under the MMDR Act and the
Mineral Concession Rules 1960
89. The MMDR Act and the Mineral Concession Rules 1960 detail the
procedure for the grant of mining leases in three situations: first,
where the minerals vest in the government;124 second, where the
minerals vest in a person other than the government;125 and third,
where the minerals vest partly in the government and partly in a
private person.126 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.127 Rule 27(1)(d) deals
with payment of surface rents, water rents, etc. by the lessee to the
State Government.128 Rule 27(2) allows the State Government to

123 Section 3(aa), MMDR Act
124 Chapters II, III, IV, and IVA of Mineral Concession Rules 1960
125 Chapter V, Mineral Concession Rules 1960
126 Rule 53, Mineral Concession Rules 1960
127 Rule 27(c), Mineral Concession Rules 1960.
128 Rule 27(d), Mineral Concession Rules 1960
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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 Rules 41 to 52) deals with the procedure for
obtaining prospecting licences or mineral lease in respect of land in
which the minerals vest in a person other than the Government. Unlike
Rule 22(1), the provisions of Chapter V do not require the lessee
to make an application to the State Government. Rule 45 pertains
to the conditions of mining leases with respect to minerals vesting
in private persons. The relevant part of Rule 45 is produced below:
“45. Conditions of mining lease – Every mining lease shall
be subject to the following conditions –
(i) the provisions of clauses (b) to (l) and (p) to (i) of
sub-rule (1) of Rule 27 shall apply to such leases with
the modification that in clauses (c) and (d) for the words
“State Government” the word “lessor” shall be substituted;
[…]
(iii) the lease may contain such other conditions, not being
inconsistent with the provisions of the Act and these rules,
as may be agreed upon between the parties;
(iv) if the lessee makes any default in payment of royalty
as required by Section 9 or commits a breach of any of
the conditions of the lease, the lessor shall give notice to
the lessee requiring him to pay the royalty or remedy the
breach, as the case may be, within sixty days from the
date of the receipt of the notice and if the royalty is not
paid or the breach is not remedied within such period, the
lessor without prejudice to any proceeding that may be
taken against the lessee determine the lease;
(v) the lessee may determine the lease at any time by
giving not less that one year’s notice in writing to lessor.”
91. Rule 45(i) provides that certain specific conditions which apply
under Rule 27 to mining leases in respect of minerals which vest
in the Government are also applicable to leases of minerals vesting
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in private persons. While under Chapter IV the State Government
can stipulate additional conditions, Rule 45(iii) of Chapter V
provides that the lease may contain such other conditions, not
being inconsistent with the provisions of the MMDR Act and the
Mineral Concession Rules, as may be agreed upon between the
parties. If the lessee of a mining lease granted under Chapter IV,
were to default in the payment of royalty or dead rent or commit
a breach of any conditions of the lease the State Government is
empowered to determine the lease. In case of a lease governed
by Chapter V, the lessor is empowered to determine the mining
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,129 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 the larger public interest.130 The statute
specifies the terms of the lease, but the lease deed is ultimately
entered between the State Government (or the private person, as
the case may be) and the lessee. Similarly, the rates of royalty are
fixed by the Central Government under Section 9, but royalty is
received by the mining lessor, that is the State Government or a
private person.

129 [2019] 8 SCR 297 : (2019) 8 SCC 177 [129]-[130]
130 Monnet Ispat & Energy Ltd (supra) [138]
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iv. Meaning of “royalty”
94. At the outset we clarify that in this reference, we are dealing with
‘royalty’ in the context of the MMDR Act. Royalty is generally
understood as compensation paid for rights and privileges enjoyed
by the grantee. It has its genesis in the agreement entered into
between the grantor and grantee. In Inderjeet Singh Sial v. Karam
Chand Thapar,131 this Court observed that royalty is equivalent to
the expression “jura regalia” or “jura regia”. Jura regalia is defined as
royal prerogatives or rights.132 For centuries, gold and silver mines
(also called as royal metals) in the United Kingdom were treated
as belonging to the Crown. Royal metals could be mined only after
payments in the form of royalties were made to the Crown. The use
of the word “royalty” underwent change in the United Kingdom with
the decentralization of the sovereignty which was absorbed by the
landowners.133 Land ownership was concentrated in the hands of
landowners, who conceded the right to work mines to lessees in return
for consideration which took the form of dead-rent and royalties.134
95. This Court has had occasion to analyze the meaning of the expression
“royalty” in its decisions. In H R S Murthy v. Collector of Chittoor,135
a Constitution Bench observed that royalty connotes a payment made
for materials or minerals won from land. In D K Trivedi v. State of
Gujarat,136 the distinction between “royalty” and “dead rent” was
explained thus:
“39. In a mining lease the consideration usually
moving from the lessee to the lessor is the rent for
the area leased (often called surface rent), dead rent
and royalty. Since the mining lease confers upon the
lessee the right not 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

131 [1995] Supp. 4 SCR 53 : (1995) 6 SCC 166.
132 Ramanatha Aiyar, Advanced Law Lexicon (Volume 3) 2789.
133 J U Nef, The Rise of the British Coal Industry (Routledge, 1966)
134 Royal Commission on Mining Royalties, Final Report of the Royal Commission Appointed to Inquire into
the Subject of Mining Royalties (1893) 4.
135 [1964] 6 SCR 666 [6]
136 [1986] 1 SCR 479 : (1986) Supp. SCC 20
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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 interest allows the lessee to extract minerals
and consume them. Royalty is a payment made by the lessee to
the lessor or proprietor of the minerals for the removal of minerals.
Royalty also serves to compensate the lessor for the degradation
of the value of the mine because of the extraction of minerals.138
97. In Bherulal v. State of Rajasthan,139 a Division Bench of the Rajasthan
High Court explained the concept of royalty in the following terms:
“8… In Wharton’s Law Lexicon, ‘royalty’ is defined as
“payment to a patentee by agreement on every article made
according to his patent, or to an author by a publisher on
every copy of his book sold; or to the owner of minerals
for the right of working the same on every on or other
weight raised.” The present case is of the third kind,
namely payment to the owner of minerals for the right
of working the same. This payment is based on the

137 W R Sorley, ‘Mining Royalties and their Effect on the Iron and Coal Trades’ (1889) 52(1) Journal of Royal
Statistical Society 60, 66
138 Ibid.
139 1956 SCC OnLine Raj 9 [8]
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produce, and the rate is fixed as so much per ton or
other weight. It is clear that royalty has nothing to do
with where the purchaser is taking the mineral, or to
whom he is going to sell it, whether at the place where
the mine is situated or at some place hundreds of miles
away. […] It is clear, therefore, that royalty is a charge
by the owner of minerals from those to whom he gives
the concession to remove them, and the charge is on
production, the rate being fixed according to weight.”
(emphasis added)
98. The essential characteristics of royalty are that (i) it is a consideration
or payment made to the proprietor of minerals, either the government
or a private person; (ii) it flows from a statutory agreement (a mining
lease) between the lessor and the lessee; (iii) it represents a return
for the grant of a privilege (to the lessee) of removing or consuming
the minerals; and (iv) it is generally determined on the basis of the
quantity of the minerals removed.
99. In comparison, dead rent acts as a deterrent against a leaseholder
cornering a mining lease and keeping the mineral resources idle.140
Similar to royalty, dead rent is also a statutory imposition and an
integral part of the mining lease, but it generally does not serve as a
consideration for the removal or consumption of minerals. The dead
rent is determined on the basis of the area of land covered by the
lease. Imposition of dead rent ensures that the proprietor obtains
a fixed rent from the lessee even if the mine remains unworked.
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

140 Government of India, Ministry of Mines, ‘Mineral Royalties’ 27 (January 2011)
141 Thomas Cooley, The Law of Taxation (4th edn, 1924) 149
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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 persons, or property to raise revenues.143 The government needs
requisite funds to discharge its primary governmental functions.144
No responsible government can function and achieve its welfare
objectives without levying and collecting taxes.145 The objects to be
taxed can be taxed by the legislature according to the exigencies
of its needs so long as they happen to be within the legislative
competence of the legislature.146 Although the power of taxation is
pervasive and an incidence of sovereignty, it is subject to well-defined
constitutional limitations.
103. In Matthews v. Chicory Marketing Board,147 Latham CJ defined “tax”
as a “compulsory exaction of money by a public authority for public
purposes, enforceable by law, and … not a payment for services
rendered.” In Commissioner, Hindu Religious Endowment, Madras
v. Sri Lakshmindra Thirta Swamiar of Sri Shirur Mutt,148 this Court
relied on the above elucidation to enumerate the following essential
characteristics of a tax:
“44. […] It is said that the essence of taxation is compulsion,
that is to say, it is imposed under statutory power without

142 17 U.S. 316 (1819)
143 Amrit Banaspati Co. Ltd. v. State of Punjab (1992) 2 SCC 411 [10]
144 Dena Bank v. Bhikabhai Prabhudas Parekh & Co. (2000) 5 SCC 694 [8]
145 Jindal Stainless Steel [112.2]
146 Rai Ramkrishna v. State of Bihar [1964] 1 SCR 897 [12]
147 60 CLR 263
148 [1954] 1 SCR 1005 : (1954) 1 SCC 412
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the taxpayer’s consent and the payment is enforced by law.
The second characteristic of tax is that it is an imposition
made for public purpose without reference to any special
benefit to be conferred on the payer of the tax. This is
expressed by saying that the levy of tax is for the purposes
of general revenue, which when collected forms part of the
public revenues of the State. As the object of a tax is not
to confer any special benefit upon any particular individual,
there is, as it is said, no element of quid pro quo between
the taxpayer and the public authority. Another feature of
taxation is that as it is a part of the common burden, the
quantum of imposition upon the taxpayer depends generally
upon his capacity to pay.”
104. A tax has the following essential characteristics: (i) it is a compulsory
exaction of money by a public authority; (ii) it is imposed under
statutory power without the consent of the tax payer; (iii) the demand
is enforceable by law; (iv) it is an imposition made for public purposes
to meet the general expenses of the state without reference to any
special benefit to be conferred on the payer of the tax; and (v) it is
part of the common burden.149
105. Article 366(28) defines “taxation” to include “the imposition of any
tax or impost, whether general 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

149 See Mahant Sri Jagannath Ramanuj Das v. State of Orissa (1954) 1 SCC 455 [11]
150 D G Gose and Co. (Agents) (P) Ltd. v. State of Kerala (1980) 2 SCC 410 [5]
151 Jindal Stainless Steel (supra) [730.1]
152 Thomas Cooley, The Law of Taxation (4th edn, 1924) 74
153 Sea Customs Act, S 20(2), In re, 1963 SCC OnLine SC 40 [37] (Held that customs duty or excise duty
was an impost within the meaning of Article 366(28));
154 CCE v. Chhata Sugar Co. Ltd. (2004) 3 SCC 466 [36] (It was observed that an impost can be either a tax
or fee.)
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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 two-Judge Bench was whether bottling fees chargeable from
the assessee amounted to a tax, duty, cess, or fee. The two-Judge
Bench formulated the characteristics of imposts thus:
“21. “Tax”, “duty”, “cess” or “fee” constituting a class
denotes various kinds of imposts by State in its sovereign
power of taxation to raise revenue for the State. Within
the expression of each specie each expression denotes
different kind of impost depending on the purpose for
which they are levied. The power can be exercised in
any of its manifestation only under any law authorising
levy and collection of tax as envisaged under Article 265
which uses only the expression that no “tax” shall be levied
and collected except authorized by law. In its elementary
meaning conveys that to support a tax legislation action is
essential, it cannot be levied and collected in the absence
of any legislative sanction by exercise of executive power
of State under Article 73 by the Union or Article 162 by
the State.
22. Under Article 366(28) “Taxation” has been defined
to include the imposition of any tax or impost whether
general or local or special and tax shall be construed
accordingly. “Impost” means compulsory levy. The well-
known and well-settled characteristic of “tax” in its wider
sense includes all imposts. Imposts in the context have
following characteristics:

155 Indian Banks’ Association v. Devkala Consultancy Service (2004) 11 SCC 1 [18]
156 [2009] 8 SCR 983 : (2009) 10 SCC 755 [22]
157 Reiterated in Jindal Stainless Steel (supra) [20], [395]
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(i) The power to tax is an incident of sovereignty.
(ii) “Law” in the context of Article 265 means an Act of
legislature and cannot comprise an executive order
or rule without express statutory authority.
(iii) The term “tax” under Article 265 read with Article
366(28) includes imposts of every kind viz. duty,
cess or fees.
(iv) As an incident of sovereignty and in the nature of
compulsory exaction, a liability founded on principle
of contract cannot be a “tax” in its technical sense
as an impost, general, local or special.”
107. The Court held in McDowell (supra) that bottling fees are a payment
made by the assessee to the State Government “as consideration
for acquiring the exclusive privilege”158 The payment was held to be
neither a fee nor a tax but consideration for the grant of approval by
the government to contract on the exclusive right to deal in bottling
liquor. Therefore, bottling fees were held not to fall within the purview
of Section 43-B(a).
108. The expression “tax” under Article 265 includes every kind of impost
in the form of a compulsory exaction. 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.

158 McDowell and Co. Ltd. (supra) [17]
159 Har Shankar v. Excise and Taxation Commissioner (1975) 1 SCC 737 [56]; State Bank of India v. Jage
Ram (1980) 3 SCC 599 [20]; Government of Andhra Pradesh v. Anabeshahi Wine and Distilleries Pvt
Ltd. (1988) 2 SCC 25 [6]
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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
Government has unfettered power to regulate the import of intoxicants
in exercise of its regulatory powers. The learned Judge held that
the levy was neither a tax nor a fee, but “simply a levy for the act
of granting permission or for the exercise of power to part with the
privilege.”161 The expression “impost” cannot hence be extrapolated
to mean a price levied by the State for granting permission to part
with its exclusive privilege. Imposts are such levies that are in the
nature of tax.
110. The basic issue for determination is whether royalty payable under
Section 9 of the MMDR Act is in the nature of a tax or impost. The
need to decide the issue of “whether royalty is tax” arises in the
backdrop of the divergence of opinion in the decisions in India
Cement (supra) and Kesoram (supra).
vi. Royalty is not in the nature of tax
a. Prelude to India Cement
111. Whether ‘royalty is a tax’ had been adjudicated upon by several
High Courts before the issue reached this Court for decision in India
Cement (supra). There was a divergence of view among the High
Courts. A few High Courts had held that royalty is not a tax but a
consideration for parting with the exclusive privilege over mineral
rights. Others had held that royalty was a compulsory exaction,
and hence a tax. In its decision in India Cement (supra) this Court
referred to them, without actually analyzing their rationale.
112. In Laddu Mal v. State of Bihar,162 the petitioners challenged the
notices issued to them by the Assistant Mining Officer, demanding
payment of royalty for a period from 1958 to 1964 under the Bihar
Minor Mineral Concession Rules 1964. The Division Bench of
the Patna High Court held that royalty is a levy in the nature of

160 [2003] Supp. 5 SCR 930 : (2004) 11 SCC 26
161 Devans Modern Breweries (supra) [113]
162 1965 SCC OnLine Pat 30
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tax because of its compulsory nature. Royalty was held to be a
compulsory exaction because it was imposed under a statute and
because in the event of non-payment, it was recoverable as arrears
of land revenue. However, it was held that the demand of royalty
prior to 1964 when the Bihar Minor Mineral Rules came into effect
was without the authority of law.
113. In Laxminarayana Mining Co. v. Taluk Development Board,163
licence fees levied on persons engaged in mining under the provisions
of the Mysore Village Panchayats and Local Board Act 1959 were
challenged before the Mysore High Court. Justice E S Venkataramiah
(as the learned Chief Justice then was) held that the State legislature
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 (footnoted below) was that
royalty is not a tax.165 We will not refer to all the decisions adopting

163 1972 SCC OnLine Kar 80
164 Laxminarayana Mining Co. (supra) [17]
165 Saurashtra Cement & Chemical Industries Ltd. v. Union of India, 1979 SCC OnLine Guj 23 (Gujarat High
Court held that royalty payable under Section 9 was not a tax. Therefore, Parliament had legislative
competence to prescribe royalty under the MMDR Act in pursuance of its regulatory powers under Entry
54 of List I); Laxmi Narayan Agarwalla v. State of Orissa, 1983 SCC OnLine Ori 16 (The Orissa High
Court disagreed with the decisions in Laddu Mal (supra) and Laxminarayana Mining Co. (supra). It
was held if royalty is held to be tax, Section 9 would have to be invalidated because Parliament has no
legislative power to impose tax under Entry 54 of List I.)
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that view, to avoid multiplicity, except for the decision of the Punjab
and Haryana High Court in Dr. Shanti Swaroop Sharma v. State
of Punjab.166 In that case, the petitioners challenged the demand
of royalty by the State Government under the Punjab Minor Mineral
Concession Rules 1964. The petitioners contended that royalty,
being a tax, cannot be levied under delegated legislation. The High
Court rejected the contention holding that: (i) royalty is a share of
produce or profit paid to the owner of land for granting the privilege
of producing minerals; (ii) mere occupation of land containing minor
minerals does not make the occupier liable to pay royalty; (iii) the
liability to pay royalty arises only when a lessee extracts minerals
in pursuance of a mining lease; (iv) royalty cannot be termed as a
compulsory exaction because the compulsion to pay royalty arises
out of the contractual conditions of the mining lease and not through
the force of law; (v) the fact that the State Government can recover
royalty as arrears of land revenue does not give it a character of tax
because other dues such as moneys due under contract and fees
can be recovered in the same manner. The High Court disagreed
with the decision of the Patna High Court in Laddu Mal (supra).
This judicial canvas was available before the seven-Judge Bench
in India Cement (supra).
b. Divergence between India Cement and Kesoram
115. In India Cement (supra), the seven Judge Bench was called upon to
determine the validity of the Madras Panchayat Act 1958. Section 115
of the Act levied a local cess on land revenue payable to government.
An explanation to the provision stated that land revenue included
royalty. Thus, the impugned provision considered royalty as part of
land revenue. The issue was whether the State legislature could levy
cess on royalty once Parliament had taken control of the regulation
of mines and development of minerals under the MMDR Act.
116. The State’s justification proceeded on the following entries: (i) Entry
45 of List II - land revenue; (ii) Entry 49 of List II - taxes on lands
and buildings; (iii) Entry 50 of List II - taxes on mineral rights; and
(iv) Entry 66 read with Entry 23 of List II - levy of fees. Justice
Sabyasachi Mukharji (as the learned Chief Justice then was) writing
for the majority, observed that the cess was levied essentially on

166 AIR 1969 Punj and Har 79
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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 legislature. Imposition of cess on royalties
was held to have the effect of amending the Second Schedule and
was held ultra vires Section 9(3). Section 9 was regarded to be a
limitation on the taxing power of the State legislature under Entry
50 of List II.168 Moreover, the Court held that the field is covered by
the MMDR Act and hence the legislative power of the state stands
denuded.169 Paragraph 34 of the judgment sets out the conclusions:
“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.”
(emphasis added)

167 India Cement (supra) [33]
168 India Cement (supra) [32]
169 India Cement (supra) [33]
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118. In a concurring opinion, Justice G L Oza held that royalty is not a
unit of charge merely on land, but on labour and capital as well.
Resultantly, imposition of cess on royalty was held not to be a levy
or tax on land in terms of Entry 49 of List II. Justice Oza suggested
that the cess could have been saved, if it was levied on surface
rent or dead rent. In his view, surface rent or dead rent is relatable
to land, hence a cess on surface rent or dead rent would fall within
the purview of Entry 49 of List II.
119. In Raojibhai Jivabhai Patel v. State of Gujarat,170 a three judge
Bench of this Court referred to India Cement (supra) to reiterate that
royalty levied on extracted mineral is in the nature of tax. In a series
of subsequent decisions, particularly in Orissa Cement Ltd v. State
of Orissa171 and Saurashtra Cement & Chemical Industries Ltd.
v. Union of India,172 this Court followed India Cement (supra). In
State of M P v. Mahalaxmi Fabric Mills Ltd,173 this Court rejected
the submission that paragraph 34 of India Cement (supra) contained
a “typographical error”. However, a divergence in opinion on whether
royalty is in the nature of tax emerged.
120. In Quarry Owners Association v. State of Bihar, this Court held that
royalty “does not constitute usual tax as commonly understood” but
includes return for the consideration for parting with the property.174 In
Kesoram (supra), 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 “duty-bound” 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:

170 [1989] Supp. 2 SCR 406 : (1989) Supp. 2 SCC 744
171 [1991] 2 SCR 105 : (1991) Supp. 1 SCC 430 [36]
172 [2000] Supp. 4 SCR 44 : (2001) 1 SCC 91
173 [1995] 1 SCR 756 : (1995) Supp. 1 SCC 642 [12]
174 Quarry Owners Association v. State of Bihar (2000) 8 SCC 655 [34]
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“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 the judgment
in its entirety. Vide paras 22 and 31, which precede para
34 abovesaid, Their Lordships have held that “royalty” is
not a tax. Even the last line of para 34 records “royalty on
mineral rights is not a tax on land but a payment for the
user of land”. The very first sentence of the para records
in quick succession “… as such a cess on royalty being
a tax on royalty, is beyond the competence of the State
Legislature….” What Their Lordships have intended to
record is “… that cess on royalty is a tax, and as such
a cess on royalty being a tax on royalty, is beyond the
competence of the State Legislature …”. That makes
correct and sensible reading. A doubtful expression
occurring in a judgment, apparently by mistake or
inadvertence, ought to be read by assuming that the Court
had intended to say only that which is correct according to
the settled position of law, and the apparent error should
be ignored, far from making any capital out of it, giving
way to the correct expression which ought to be implied
or necessarily read in the context, also having regard to
what has been said a little before and a little after. No
learned Judge would consciously author a judgment which
is self-inconsistent or incorporates passages repugnant
to each other. Vide para 22, Their Lordships have clearly
held that there is no entry in List II which enables the
State to impose a tax on royalty and, therefore, the State
was incompetent to impose such a tax (cess). The cess
which has an incidence of an additional charge on royalty
and not a tax on land, cannot apparently be justified as
falling under Entry 49 in List II.”
121. The decision in Kesoram (supra) analyzed the nature of royalty to
hold that royalty is not a tax, but a payment made to the owner of
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land who may be a person and may not necessarily be the state.175
It held that India Cement (supra) was caused by “an apparent
typographical error or inadvertent error” and should not be understood
as a correct declaration of law. Kesoram (supra) also expressed its
disagreement with Mahalaxmi Fabric Mills (supra) to the extent it
had held that there was no “typographical error” in India Cement
(supra). Importantly, Kesoram (supra) concurred with India Cement
(supra) on the aspect that cess on royalty is beyond the legislative
competence of the state legislatures.176
122. The divergence on the point of law between India Cement (supra)
and 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 minerals was to
ensure a certain level of uniformity in mineral prices in view of the
domestic and international market.
125. The fact that the rates of royalty are prescribed under Section 9 of
the MMDR Act does not make it a “compulsory exaction by public

175 Kesoram (supra) [71]
176 Kesoram (supra) [115]
177 See Rules 27 and 45, Mineral Concession Rules 1960
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authority for public purposes” because: (i) the compulsion stems
from the contractual conditions of the mining lease agreed between
the lessor and lessee; (ii) the demand is not made by a public
authority, but the lessor (which can either be the State Government
or a private party); and (iii) the payment is not for public purposes,
but a consideration paid to the lessor for parting with their exclusive
privileges in the minerals. Moreover, the fact that Section 25 allows
recovery of royalty due to the Government under the MMDR Act or
“under the terms of the contract” as arrears of land does not make
royalty “an impost enforceable by law.” Section 25 is a standard
recovery provision allowing the government to recover any dues
payable to it, flowing from statute or the terms of a contract.
Pertinently, contractual payments due to the government cannot be
deemed to be a tax merely because the statute provides for their
recovery as arrears.
126. There are major conceptual differences between royalty and a tax:
(i) the proprietor charges royalty as a consideration for parting with
the right to win minerals, while a tax is an imposition of a sovereign;
(ii) royalty is paid in consideration of doing a particular action, that
is, extracting minerals from the soil, while tax is generally levied
with respect to a taxable event determined by law;178 and (iii) royalty
generally flows from the lease deed as compared to tax which is
imposed by authority of law.
127. Under the MMDR Act, the Central Government fixes the rates of
royalty, but it is still paid to the proprietor by virtue of a mining lease.
In case the minerals vest in the government, the mining lease is
signed between the State Government (as lessor) and the lessee
in pursuance of Article 299 of the Constitution. Through the mining
lease, the government parts with its exclusive privilege over mineral
rights. A consideration paid under a contract to the State Government
for acquiring exclusive privileges cannot be termed as an impost.
Since royalty is a consideration paid by the lessee to the lessor under
a mining lease, it cannot be termed as an impost.
128. This Court 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

178 Goodyear India Ltd v. State of Haryana (1990) 2 SCC 71 [27]
179 [2005] Supp. 1 SCR 684 : (2005) 6 SCC 499
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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 of income to
the proprietor; (ii) the liability to pay dead rent flows from the terms
of the mining lease;181 (iii) dead rent is an alternate to royalty; if the
rates of royalty are higher than dead rent, the lessee is required to
pay the former and not the latter; and (iv) the Central Government
prescribes the dead rent not in the exercise of its sovereign right,
but as a regulatory measure to ensure uniformity of rates.
130. In view of the above discussion, we hold that both royalty and dead
rent do not fulfil the characteristics of tax or impost. Accordingly, we
conclude that the observation in India Cement (supra) to the effect
that royalty is a tax is incorrect.
G. Inter-relationship between Entry 23 of List II and Entry 54
of List I
131. The subject of regulating mines and mineral development is
enumerated in Entry 23 of List II. However, Parliament can under Entry
54 of List I bring the regulation of mines and mineral development

180 [2019] 10 SCR 647 : (2021) 10 SCC 165 [56]
181 Rules 27 and 45, Mineral Concession Rules 1960
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under its control to the extent that such control is declared by
Parliament by law to be expedient in the public interest. Entry 54
of List I has three pre-requisites: (i) Parliament must make a law;
(ii) the law must contain a legislative declaration that it is in the public
interest to bring the regulation of mines and mineral development
under its control; and (iii) the law must lay down the extent to which
Parliament desires to control the field relating to the regulation of
mines and mineral development. Entry 54 of List I exclude the
legislative power of the state legislature under Entry 23 of List II
to the extent to which the Parliamentary law covers the field. The
interrelationship between Entry 54 of Union List and Entry 23 of
State List has been dealt with by this Court in numerous decisions,
which will be discussed in the following segments.
i. Meaning of “regulation of mines” and “mineral development”
132. Entry 54 of List I and Entry 23 of List II are general or regulatory
entries dealing with the same subject matter, namely of “regulation of
mines and mineral development.” These entries deal with regulation
of two aspects: (i) regulation of mines; and (ii) mineral development.
By making Entry 23 of List II subordinate to Entry 54 of List I, the
Constitution tilts the balance of legislative powers with respect to the
regulation of mines and mineral development in favor of the Union.
133. Before delving further into the 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

182 Ramanatha Aiyar Advanced Law Lexicon (Volume 3) 4778.
183 [1985] 2 SCR 1028 : (1985) 2 SCC 116 [19]
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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 the power to check and may imply the
power to prohibit under certain circumstances, as where the
best or only efficacious regulation consists of suppression.
It would therefore appear that the word “regulation” cannot
have any inflexible meaning as to exclude “prohibition”. It
has different shades of meaning and must take its colour
from the context in which it is used having regard to the
purpose and object of the legislation, and the Court must
necessarily keep in view the mischief which the legislature
seeks to remedy.”
135. The word “regulate” is of wide import and the breadth of its meaning
depends on the context in which it is used. This Court has construed
the power to regulate to include the power to: (i) grant or revoke a
permission or licence including incidental or supplemental powers;184
(ii) prohibit depending upon the context and circumstance; 185
(iii) control or adjust by rule or to subject to governing principles;186 and
(iv) issue directions.187 Thus, the expression “regulation” appearing
in Entry 54 of List I and Entry 23 of List II must also receive a wide
meaning, in keeping with the principle that the words used in the
legislative entries must be interpreted broadly.
136. A “mine” is generally defined as an excavation in the earth for
the purpose of obtaining minerals.188 The expression was defined
under the Mines Act 1952 to primarily mean any excavation for the

184 State of Tamil Nadu v. Hindu 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
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purposes of searching for or obtaining minerals189 and to include
the place where such excavation is carried on.190 The Occupational
Safety, Health and Working Conditions Code 2020191 has adopted
a similar definition of mine under Section 2(1)(zl). The Working
Conditions Code also defines “minerals” to mean all substances
which can be obtained from the earth by mining, digging, drilling,
dredging, hydraulicing, quarrying or by any other operation and to
include mineral oils.192 These definitions are indicative of the fact
that: (i) the expression “mines” includes both the process by which
minerals are extracted from the earth as well as the place where
such extraction takes place; and (ii) minerals are obtained from the
mine by the process of mining.
137. The expression “regulation of mines” can be understood in the
backdrop of above discussion to mean the management of both
the process of extracting minerals as well the place where such
minerals will be extracted from sub-surface levels. The MMDR

189 Section 2(j) “mine” means any excavation where any operation for the purpose of searching for or
obtaining minerals has been or is being carried on and include –
(i) All borings, bore holes, oil wells and accessory crude conditions plants, including the pipe
conveying mineral oil within the oil fields;
(ii) All shafts, in or adjacent to and belonging to a mine, whether in the course of being sunk or not;
(iii) All levels and inclined planes in the course of being driven;
(iv) All open cast workings;
(v) All conveyers or aerial rope-ways provided for bringing into or removal from a mine of minerals or
other articles or for the removal of refuse therefrom;
(vi) All adits, levels, planes, machinery, works, railways, tramways and sidings in or adjacent to and
belonging to a mine;
(vii) All protective works being carried out in or adjacent to a mine;
(viii) All workshops and stores situated within the precincts of a mine and under the same management
and used primarily for the purposes connected with that mine or a number of mines under the
same management;
(ix) All power stations, transformer sub-substations, convertor stations, rectifier stations and
accumulator, storage stations for supplying electricity or mainly for the purpose of working the
mine or a number of mines under the same management;
(x) Any premises for the time being used for depositing sand or other material for use in a mine or
for depositing refuse from a mine or in which any operations in connection with such sand, refuse
or other material is being carried on, being premises exclusively occupied by the owner of mine;
(xi) Any premises in or adjacent to and belonging to a mine on which any process ancillary to the
getting dressing or preparation for the sale of minerals or of coke is being carried on.
190 Offshore Areas Mineral (Development and Regulation) Act 2002. Section 4(k) defines “mine” to mean
“any place in the offshore area wherein any exploration or production operation is carried on, together
with any vessel, erection, appliance, artificial island or platform and premises in the offshore area used
for the purposes of exploration, winning, treating or preparing minerals, obtaining or extracting any
mineral or metal by any mode or method, and includes any area covered by a composite licence, or
an exploration licence, or a production lease where exploration or production operation has been, or is
being, or may be, carried on under the provisions of this Act.
191 “Working Conditions Code 2020”
192 Section 2(1)(zm), Working Conditions Code 2020.
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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 licences for working mines and winning minerals, which
are integral to the concept of “regulation of mines”. The fixation of
rates of royalty under Section 9 read with the Second Schedule is
also covered within the scope of “regulation of mines and mineral
development.”
138. Entry 54 of List I and Entry 23 of List II do not use the expression
“minerals” simpliciter. The entries use the term “mineral development”.
In Premium Granites v. State of Tamil Nadu, a two judge Bench
observed that the MMDR Act and the rules framed thereunder
furnish the scope and purport of the word “mineral development.”199
In that case, it was held that the scientific exploitation of minerals
without waste is a part of “mineral development” as envisaged by the
MMDR Act and the rules. In Quarry Owners Association (supra)

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] 1 SCR 579 : (1994) 2 SCC 691 [48]
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a two-Judge Bench defined the ambit of the expression “regulation
of mines and mineral development”, observing:
“31. […] The word “regulation” may have a different meaning
in different context but considering it in relation to the
economic and social activities including the development
and excavation of mines, ecological and environmental
factors including States’ contribution in developing,
manning and controlling such activities, including parting
with its wealth, viz. the minerals, the fixation of the rate
of royalties would also be included within its meaning.”
139. In Tata Iron & Steel Co. Ltd. v. Union of India,200 it was held that
the concept of “mineral development” can include captive mining, an
assessment of its requirement by different industries and equitable
distribution of mining leases. Tata Iron & Steel (supra) was decided
in the context of the unamended Section 8(3) of the MMDR Act
which allowed the Central Government to renew mining leases “in
the interests of mineral development.”
140. As a concept, mineral development is a term of wide import. It
encompasses exploitation of minerals, reduction of wastage in the
beneficiation process, regulation of mining activities for ecological and
environmental factors and equitable distribution of mineral resources
and mining leases. Mineral development has been expressly
recognized in Chapter VI of the MMDR Act. Section 18(1) mandates
the Central Government to take all such steps as may be necessary
by making rules for the conservation and systematic development
of minerals in India and for the protection of the environment by
preventing 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

200 [1996] Supp. 3 SCR 808 : (1996) 9 SCC 709 [64]
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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-relationship between the two entries in greater detail.
ii. Analysis of Hingir-Rampur, M A Tulloch, and Baijnath Kedia
142. In Hingir-Rampur Coal Co. Ltd. v. State of Orissa,202 writ petitions
were filed before this Court challenging the Orissa Mining Areas
Development Fund Act 1952203 which levied cess on the petitioner’s
colliery. The petitioner argued that the cess levied under the Orissa
Act was beyond the legislative competence of the State legislature
because it was in reality a levy of excise duty on the coal produced.
In the alternative, it was argued that the cess was relatable to Entry
23 of List II which would be ultra vires having regard to the provisions
of Entry 54 of List I read with the MMRD Act 1948, which was the
applicable legislation at the time. The respondent state sought to
repel the petitioner’s contention by arguing that the cess was a fee
relatable to Entries 23 and 66 of List II whose validity is not affected
by Entry 54 of List I read with the MMRD Act. Thus, this Court was
called upon to decide two issues: (i) whether the impugned levy was
in the nature of a fee relatable to Entries 23 and 66 of List II; and
(ii) the legislative competence of the State legislature to impose the
levy in view of Entry 54 of List I read with the MMRD Act.
143. The Orissa Act provided that the rate of the levy shall not exceed
five percent of the valuation of minerals at the pit’s mouth. The
statute further provided that the proceeds of the cess recovered
shall be utilized to meet the expenditure for providing amenities
such as communications, water supply and electricity for the better
development of the mining areas and improve the welfare of labour

201 Mineral Conservation and Development Rules 2017
202 [1961] 2 SCR 537
203 “Orissa Act”
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and persons residing or working in the mining areas. This Court
analyzed the scheme of the Orissa Act to observe that it was enacted
for the purpose of the development of mining areas in the State.
It was held that the cess was in the nature of a fee because: (i) it
had an element of quid pro quo; (ii) it was collected into a specific
fund; (iii) its application was regulated by a statute and confined to
its purposes; and (iv) there was a definite co-relationship between
the impost and the purpose of the legislation which was to render
service to the notified area.204
144. Having established that the cess was in the nature of a fee, the next
issue before this Court was whether the State legislature had the
competence 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 that the test to determine the legislative competence
of the state legislature in respect of a particular subject-matter relating
to regulation of mines and mineral development is whether that matter
is covered by the legislative declaration in the MMRD Act 1948.

204 Hingir-Rampur (supra) [19]
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Mineral Area Development Authority & Anr. v.
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This Court examined the provisions of the MMRD Act 1948 which
contained a legislative declaration under Section 2.205 Section 6 of
the MMRD Act 1948 empowered the Central Government to make
rules for the conservation and development of minerals. Section 6(2)
empowered Parliament to make rules in respect of several subject
matters, including the levy and collection of royalties, fees or taxes
in respect of minerals mined, quarried, excavated or collected. In
this respect, the observations made by Justice Gajendragadkar are
relevant and extracted below:
“Section 6 of the Act, however, empowers the Central
Government to make rules by notification in the Official
Gazette for the conservation and development of minerals.
Section 6(2) lays down several matters in respect of which
rules can be framed by the Central Government. This
power is, however, without prejudice to the generality of
powers conferred on the Central Government by Section
6(1). Amongst the matters covered by Section 6(2) is the
levy and collection of royalties, fees or taxes in respect
of minerals mined, quarried, excavated or collected. It
is true that no rules have in fact been framed by the
Central Government in regard to the levy and collection
of any fees; but, in our opinion, that would not make
any difference. If it is held that this Act contains the
declaration referred to in Entry 23 there would be no
difficulty in holding that the declaration covers the field
of conservation and development of minerals, and the
said field is indistinguishable from the field covered by
the impugned Act. What Entry 23 provides is that the
legislative competence of the State Legislature is subject
to the provisions of List I with respect to regulation and
development under the control of the Union, and Entry 54
in List I requires a declaration by Parliament by law that
regulation and development of mines should be under
the control of the Union in public interest. Therefore,
if a Central Act has been passed for the purpose of

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.”]
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providing for the conservation and development of
minerals, and if it contains the requisite declaration,
then it would not 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 was whether the declaration
contained in the MMRD Act was constitutionally valid in view of Entry
54 of List I. The MMRD Act 1948 was a pre-constitutional legislation
enacted by the Dominion Legislature governed by the GOI Act 1935.
It was held that even though the state legislation covered the same
field as the MMRD Act, the legislative declaration made under the
MMRD Act did not constitutionally amount to the requisite declaration
by Parliament in terms of Entry 54 of List I.206 Therefore, this Court
concluded that the limitation imposed by Entry 54 of List I did not
impair the legislative competence of the State to enact the legislation
under Entry 23 read with Entry 66 of List II. In view of the conclusion

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.”]
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reached, the majority opined that it was unnecessary to consider the
validity of the Orissa Act in terms of Entry 50 of List II.207
148. Justice Wanchoo recorded his dissent from the opinion of the majority
by holding that the cess in question was a duty of excise falling
squarely within Entry 84 of List I,208 and consequently, beyond the
legislative competence of the State legislature. The learned Judge
held that the cess was levied at a rate not exceeding five percent of
the value of the minerals at the pit’s mouth on all extracted minerals.
Since all the extracted minerals were goods produced, a cess on
the value of such extracted minerals was held to constitute excise
duty.209 Unlike the majority opinion, Justice Wanchoo dealt with the
issue of the legislative competence of the State legislature to impose
the cess in view of Entry 50 of List II. The learned Judge held that
the cess was not a tax on mineral rights, but rather a tax on minerals
actually produced, and therefore not covered by Entry 50 of List II.
149. In State of Orissa v. M A Tulloch,210 a Constitution Bench was
concerned with the validity of the same Orissa Act which was under
consideration in Hingir-Rampur (supra). The respondents challenged
the demand for the payment of fees made by the State Government
for the period from July 1957 to March 1958 under the Orissa Act for
being ultra vires. It must be noted that the MMDR Act was brought
into force as and from 1 June 1958. The Constitution Bench analyzed
the relevant constitutional and statutory provisions, and precedent
to reiterate the following principles of law:
(i) The power of the State to enact legislation on the subject matter
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

207 Hingir-Rampur (supra) [37]
208 Entry 84, before the Constitution (One Hundred and First Amendment) Act 2016, read as follows:
“84. Duties of excise on tobacco and other goods manufactured or produced in India except –
(a) Alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet
preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.”
209 Hingir-Rampur (supra) [47]
210 [1964] 4 SCR 461
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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
development of minerals. Therefore, the fact that the Central
Government has not framed any regulation along the lines of
the Orissa Act was not relevant; and
(v) The declaration under Section 2 of MMDR Act has taken over
the entire field of conservation and development of minerals.
Resultantly, the particular subject matter would be subtracted
from the scope and ambit of Entry 23 of List II and the State
legislature would also lose the legislative competence to levy
a fee under Entry 66 of List II.213
150. In M A Tulloch (supra), the Constitution Bench held that the legislative
competence of the States to levy fees under Entry 66 of List II is also
affected to the extent to which the subject-matter of regulation of
mines and mineral development is taken over by the Parliamentary
declaration under Entry 54 of List I.
151. The third major decision dealing with the inter-relationship between
Entry 54 of List I and Entry 23 of List II is Baijnath Kedia v. State
of Bihar.214 In that case, an amendment to the Bihar Land Reforms

211 M A Tulloch (supra) [5]
212 M A Tulloch (supra) [14]
213 M A Tulloch (supra) [15]
214 [1970] 2 SCR 100 : (1969) 3 SCC 838
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Act 1950 and the rules pertaining to the modification of the terms
and conditions of leases of minor minerals were challenged. Having
held that it was bound by Hingir-Rampur (supra) and M A Tulloch
(supra), the issue before this Court was the extent to which the
declaration by Parliament left any scope for the state legislature. The
Court observed that by the legislative declaration under Section 2
read with Section 15, the whole of the field relating to minor minerals
came within the jurisdiction of Parliament and no scope was left
for the State legislature. Although Section 15 allowed the State
legislature to make rules, it did not create a scope for legislation at
the state level.215 Consequently, it was held that the amendment to
the Bihar Act was without jurisdiction. In Hingir-Rampur (supra) and
M A Tulloch (supra), it was held that the whole field of conservation
and development of minerals was covered by the MMDR Act. In
Baijnath Kedia (supra), it was held that the field of minor minerals
was covered by the central legislation, thereby depriving the state
legislation of its plenary legislative power under Entry 23 of List II
to that extent.
152. The Solicitor General has relied on the above decisions to submit that
the consequence of the whole of the legislative field being occupied
by Parliament under the MMDR Act is that the state legislatures
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.

215 Baijnath Kedia (supra) [21]
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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 legislation relating to leases of minor minerals, but
this Court held that such a limitation was implied. Similarly,
the Parliamentary law, the MMDR Act, impliedly excludes the
legislative competence of the state with respect to Entry 50 of
List II.
153. The above arguments will be dealt with in the ensuing segment
relating to the interpretation of Entry 50 of List II.
iii. Examination of the “extent” of the MMDR Act
154. The respondents submit that the MMDR Act is a complete code and
occupies the entire field relating to regulation of mines and mineral
development, leaving nothing for the state legislature under Entry 23
of List II. It was also submitted that the scope of the MMDR Act and
the rules made under it has to be given an exhaustive interpretation
because they were enacted in the “public interest.” The Solicitor
General recounted the following public interest considerations
underpinning the MMDR Act: (i) provision of national legal landscape
for protection, exploration, and extraction of minerals; (ii) ushering
a uniform structure of regulation and development of minerals; and
(iii) ensuring sustained development of the mineral sector at the
national level to ensure availability of domestic minerals to industries.
155. The MMDR Act and the Mineral Concession Rules 1960 comprise
of a complete code, containing exhaustive provisions in respect of
the grant and renewal of prospecting licenses and mining leases in
lands belonging to government as well as lands belonging to private
persons.216 Section 2 of the MMDR Act declares that the Union is
acting in public interest to take under its control the regulation of
mines and development of minerals to the extent provided. In State
of Tamil Nadu v. Hindu Stone,217 the Court observed that “[t]he
public interest which induced Parliament to make the declaration

216 State of Assam v. Om Prakash Mehta (1973) 1 SCC 584 [12];
217 [1981] 2 SCR 742 : (1981) 2 SCC 205 [6]
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contained in Section 2 of the Mines and Minerals (Regulation
and Development) Act, 1957, has naturally to be the paramount
consideration in all matters concerning the regulation of mines and
the development of minerals.”
156. In Bharat Coking Coal Ltd. v. State of Bihar,218 the issue before
a two judge Bench was whether the State Government had legal
authority to execute leases in favor of the respondents for collection of
slurry on payment of royalty. This Court held that the state legislature
lacked authority in law to regulate the disposal of slurry. Section 18
of 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 underpinning the MMDR Act synonymizes with the
collective welfare of the people and is informed by the dictates of

218 [1990] 3 SCR 744 : (1990) 4 SCC 557
219 Article 162, Constitution of India. [It reads:
162. Extent of executive power of State – Subject to the provision of this Constitution, the executive
power of a State shall extend to the matters with respect to which the Legislature of the State has power
to make laws:
Provided that in any matter with respect to which the Legislature of a State and Parliament have power
to make laws, the executive power of the State shall be subject to, and limited by, the executive power
expressly conferred by this Constitution or by any law made by Parliament upon the Union or authorities
thereof.”]
220 Sandur Manganese & Iron Ores Ltd v. State of Karnataka (2010) 13 SCC 1 [39]
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the public trust doctrine.221 At the same time, the underlying public
interest has to be construed in view of the entire legislative scheme,
purpose, and object of the enactment.222
158. The latter part of Entry 23 of List II makes the entry “subject to the
provisions of List I with respect to regulation and development under
the control of the Union.” Entry 54 of List I provide that Parliament
can regulate mines and mineral development “to the extent to which
such regulation and development under the control of the Union is
declared by Parliament by law to be expedient in the public interest.”
The text of Entry 54 of List I indicates that besides declaring that it is
taking under its control any subject relating to the regulation of mines
and mineral development, Parliament has to specify the extent to
which the Parliamentary regulation is deemed expedient in the public
interest. The legislative domain of the States under Entry 23 of List II
is excluded only to the extent of the field covered by the provisions
of the MMDR Act. The expression “to the extent provided” refers to
the subject matter or fields covered by the Parliamentary legislation.
159. During the proceedings of the Constituent Assembly pertaining to
present Entry 23 of List II, Mr Brajeshwar Prasad moved a motion to
move the entire field of “regulation of mines and mineral development”
under the Union List. He reasoned that mines constitute a vital subject
and should remain a subject under the Union List.223 Consequently,
a motion was moved to transfer Entry 23 of List II (which was draft
Entry 28 of List II then) to the Union List. However, the amendment
was negatived by the Assembly.224 This indicates that the Constituent
Assembly deemed it necessary that state legislatures must also have
necessary legislative powers with respect to the regulation of mines
and mineral development. The legislative field of the states would
stand abstracted once Parliament makes a declaration evincing an
intent to takeover the regulation and development of mines and

221 Sayyed Ratanbhai Sayeed v. Shirdi Nagar Panchayat (2016) 4 SCC 631
222 Meerut Development Authority v. Association of Management Studies (2009) 6 SCC 171 [67]
223 Constituent Assembly Debates, Volume IX, 898 (31st August 1949). [Mr. Brajeshwar Prasad explained
his aim in introducing the motion in the following words: “My whole aim in moving this amendment is to
make redundant entry 28, of List II. I am clear in my own mind that Mines constitute a vital subject as
important as Defence, Foreign Affairs and Communications. I am of opinion that if the system of defence
is going to be organized on sound line then Mines must remain a Central subject. I do not want to give
the Provinces the power even to “regulate mines and oil fields and mineral development subject to the
provisions of List I” as has been provided for in entry 28 of List II.”]
224 Constituent Assembly Debates, Volume IX, 898 (2nd September 1949)
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specifies the extent to which control of the field by the Union is
deemed to be in the public interest.
160. The requirement of a legal declaration under Entry 54 of List I
serves twofold purposes: first, it enables a clear demarcation of the
subject matter 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.225 As a consequence, the coverage
of the fields by Parliament has to be express. The ambit of the
MMDR Act has to be determined from the express words used in
the provisions and not by mere implications or inference. This legal
principle has already been accepted by this Court.226
162. In Ishwari Khetan Sugar Mills v. State of Uttar Pradesh,227 a
Constitution Bench was called upon to interpret the ambit of Entry
52 of List I and Entry 24 of List II. The Industries (Development
and Regulation) Act 1951228 was enacted by Parliament to assume

225 M A Tulloch (supra) [14]. [It reads: “14. […] In the present case, having 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] 3 SCR 331 : (1980) 4 SCC 136
228 “IDR Act”
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control over specified industries in pursuance of Entry 52 of List
I. Section 2 of the IDR Act contained the legislative declaration to
the effect that the Union shall take under its control the industries
specified in Schedule I. The majority, speaking through Justice D A
Desai, observed that the legislative declaration under the IDR Act has
the effect of denying the legislative powers to the state legislature
under Entry 24 of List II.229 Therefore, it was held that the legislative
declaration contained under Section 2 of the IDR Act has to be
construed strictly. The Court held that the legislative competence of
state legislature would be eroded only to the extent to which control
was assumed by the Union in terms of the legislative declaration
under the IDR Act. A legislative declaration which has the impact of
denuding or depriving the legislative power of the state legislature
has to be construed strictly.
163. The inter-relationship between Entry 54 of List I and Entry 23 of List
II can be formulated as follows:
(i) The state legislatures possess plenary legislative power in
respect of regulation of mines and mineral development under
Entry 23 of List II;
(ii) Entry 23 of List II is, however, subject to the operation of Entry
54 of List I;
(ii) The field under Entry 23 of List II is subordinated to the extent
to which Parliament has brought under its control the regulation
of mines and development of minerals under the MMDR Act;
(iii) The expression of the legislative intention to cover a particular
field relating to mines and mineral development excludes or
denudes the legislative powers of the State with respect to that
particular field; and
(iv) Parliamentary intention to cover a particular field relating to the
regulation of mines and mineral development and the extent
to which control of the Union is regarded to 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
inter-relationship between Entry 54 of List I and Entry 50 of List II.

229 Ishwari Khetan Sugar Mills (supra) [11]
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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 the states with respect to the taxation
of mineral rights.
165. To recap, Entry 50 of List II reads thus:
“Taxes on mineral rights subject to any limitations imposed
by Parliament by law relating to mineral development.”
Entry 50 of List II has two elements: (i) the legislative field governing
taxes on mineral rights is given exclusively to the states; (ii) the
field given to the states is subject to any limitations imposed by
Parliament by law relating to mineral development. Entry 50 of List
II is a taxing entry. The limitations on the field created by Entry 50 of
List II is however, contemplated to be created by a law which relates
to mineral development. The legislative competence of Parliament
to enact a “law relating to mineral development” can be traced to
Entry 54 of List I, which is a general entry. Therefore, the taxing
powers of the state with respect to mineral rights under Entry 50 of
List II can be restricted by Parliament by its regulatory power under
Entry 54 of List I.
166. To delve into the inter-relationship between Entry 54 of List I and Entry
50 of List II, we have to primarily address the following questions:
(i) what is a tax on mineral rights; (ii) whether Entry 50 of List II is
an exception to the general rule laid down in M P V Sundararamier
(supra); (iii) what is the nature of the limitations envisaged by the
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Constitution on the taxing powers of the state; and (iv) whether the
MMDR Act imposes limitations on the taxing powers of the state.
i. Taxes on mineral rights
a. Mineral rights duty
167. The expression “taxes on mineral rights” was originally used in the
GOI Act 1935. The Constitution uses a similar expression. Therefore,
it is important to understand the context in which the term “taxes on
mineral rights” (in its myriad forms) came to occupy the discourse.
168. Under the law in England, landlords would receive royalties for
exercising their mineral rights or assigning them to other persons
or lessees.230 However, in the latter part of the nineteenth century
and the early twentieth century, it was recognized that landlords
received the benefits of royalty often at the cost of the welfare of
the miners. The Royal Commission on Mining Royalties narrated in
its report of 1893 that:
“[W]itnesses examined on behalf of the working miners
expressed the opinion that royalties and wayleaves, where
fixed in amount, are often so high that in depressed 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

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
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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 the Exchequer, stated
while introducing the legislative proposal that the duty on mineral
rights imposed “tax upon royalties and way-leaves actually received
by the owners of those rights.”234 The Chancellor further clarified that
the mineral rights duty was introduced as part of taxes on land.235
It was in this context that the concept of taxes on mineral rights
was introduced in England and was later entrenched in the colonial
regime by the GOI Act 1935.
b. Meaning of the expression “mineral rights”
170. The Constitution does not define “mineral rights”. The expression
has not been defined in the MMDR Act or the rules framed under it.
Though the expression “mineral rights” is used in Entry 50 of List II,
it does not find mention in any of the other related legislative entries
– Entry 54 of List I and Entry 23 of List II. The expression has to be
given its ordinary and natural meaning by adopting an interpretative
approach which eschews rigidity. Mineral rights are inextricably
connected to property. Any understanding of “mineral rights” must
be prefaced on an understanding of the basics of property law.
171. In a regime of private property, the rules governing access to and
control of resources are organized around the idea that resources are
on the whole separate objects belonging to particular individuals.236
These resources can comprise of immovable and movable property,
both corporeal and incorporeal. In a social order based on private
property, an owner’s decision of the manner in which they put the
resource to use is generally upheld by society as final.237 A person who
owns a resource has the right to determine its use. The ownership of

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.
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a resource also precludes the claims of other persons or individuals
with respect to that particular resource.238
172. In the context of land, it is well-established that the ownership of
land includes the ownership of underlying minerals, unless the right
to minerals has been expressly reserved by law.239 Therefore, an
owner of land has rights to the surface of the land and to sub-soil
resources.240 Surface rights are rights to the surface of the land and
include the right to use land, construct buildings, install machinery
and equipment, and plant trees or dig wells. Surface rights can also
be sold or transferred to another person. The right to minerals entails
the right to monetize mineral resources by either consuming them
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

238 James Y Stern, ‘The Essential Structure of Property Law’ (2017) 115(7) Michigan Law Review 1167,
1176.
239 Thressiamma Jacob v. Geologist, Department of Mining & Geology (2013) 9 SCC 725
240 State of West Bengal v. Union of India [1964] 1 SCR 371 [18]
241 Black’s Law Dictionary (6th edn,1990) 995
242 Corpus Juris Secundum (Volume 58) 15
243 260 US 393 (1922)
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shoes of the owner/ lessor by acquiring his interest in the minerals,
according to the terms and conditions of the agreement. Usually,
the right to mine includes two related activities: (i) excavation of
minerals; and (ii) removal or consumption of the extracted minerals.
The process of excavating minerals generally entails the right to enter
upon and occupy the land for the purpose of working the mines to
extract minerals. The removal or consumption of minerals allows the
lessee to monetize the extracted minerals.
176. The meaning of the expression “mineral rights” has been discussed
in a few judicial decisions in India. In a decision of the Calcutta High
Court rendered in 1905, it was held that grant of mineral rights “must
be taken to carry as incident to it the power not only to go upon the
land and work the minerals known to be underground but to go to
the land and conduct the ordinary preliminary operations by boring
or otherwise to ascertain (when it is not known) if there are minerals
underground.”244 In Tata Chemicals Ltd. v. State of Gujarat,245 the
Gujarat Mineral Rights Tax Act 1985 imposed a tax on the mineral
rights of holders of mining leases in respect of minerals specified in
the Schedule.246 A Division Bench of the Gujarat High Court, speaking
through Justice A M Ahmadi (as the learned Chief Justice then was)
repelled the challenge to the validity of the legislation. The Court
drew a distinction between mining rights and mineral rights thus:
“51. [a] mining right is a right to enter upon and occupy
land for the purpose of working it with a view to obtaining
the minerals deposited therein whereas a mineral right is a
right or title to all or to certain specified minerals in a given
tract. It is, therefore, clear that a person having a mining
right is entitled to work the mine with a view to winning the
minerals deposited therein but unless he is given a right
to remove or consume the mineral, he cannot do so. It is
the latter right which is known as the mineral right which
the impugned legislation seeks to tax.”

244 Kumar Ramessur Malia v. Ram Nath Bhattacharjee, 1905 SCC OnLine Cal 55
245 1988 SCC OnLine Guj 13
246 Section 3, Gujarat Mineral Rights Tax Act 1985. Section 3 reads: “On and from the commencement
of this Act, there shall be levied and collected a tax on mineral rights at such rates not exceeding the
maximum specified in Column 2 of the Schedule against minerals specified in column 1 of that Schedule
as the State Government may, from time to time by notification in the Official gazette, fix.”
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The Gujarat High Court held that a mining right is a right to enter
upon and occupy land for the purpose of working. A mineral right is
a right or title to certain specified minerals in a given tract. Therefore,
the High Court followed the principle that a lessee acquires mineral
rights if the lessor grants them the permission to remove minerals
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 right to dispatch the extracted
minerals as well.
178. The Constitution is a living organic document and must be interpreted
in that spirit.248 Enumerated legislative powers ought to be interpreted
with a wide and liberal spirit to ensure that the legislatures have
the requisite authority to legislate and to allow the executive to
govern. The expression “mineral rights” must be construed in this
spirit to ensure that the taxing powers of the State under Entry
50 of List II are not unnecessarily curtailed. The natural meaning
of the expression “mineral rights” will include the entire bundle of
rights that follow ownership of minerals, including rights which can
be transferred to a lessee through a mining lease. These rights will

247 Kesoram (supra) [400]
248 Saurabh Chaudri v. Union of India (2003) 11 SCC 146 [71]; Navtej Singh Johar v. Union of India (2018)
10 SCC 1 [95].
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include the right to extract minerals by working the mines, winning
the minerals, and monetizing the minerals obtained by removing
or consuming them.
179. The breadth and scope of mineral rights has also been recognized
under the MMDR Act. In a situation where the minerals vest with the
State by operation of law, the right to those minerals also vests with
the State. However, the State can assign or transfer its mineral rights
by way of a mining lease to a lessee. This has been contemplated
by the Mineral Concession Rules read with Form K. In Part I of Form
K, the Government grants its mineral rights to the lessee, including
liberties, powers, and privileges. However, it is important to note that
the lessee is only granted rights in the minerals specified in Part I of
Form K. The Government can reserve to itself the right to work the
other minerals found in the same demised land or to grant a lease
to a separate person to work and remove these other minerals.249
Part II of Form K of the Mineral Concession Rules 1960 enumerates
the liberties, powers, and privileges of the lessee. It provides that
the lessee has the liberty and power at all times during the term of
demise to enter upon the land demised and search, mine, bore, dig,
drill, win, work, dress, process, convert, carry away, and dispose of the
minerals. Part II of Form K further provides that a lessee has liberty
and power to use the demised land to sink pits,250 use machinery
equipment251 construct buildings, roadways, and railways,252 to
beneficiate any ore produced from the lands and carry away such
beneficiated ore,253 and clear undergrowth and brushwood and utilize
any trees or timber standing or found on the demised lands.

249 Part IV, Form K, Mineral Concession Rules 1960. [“1. Liberty and power for the State Government,
or to any lessee or persons authorized by it in that behalf to enter into and upon the said lands and to
search for, win, work, dig, get, raise, dress, process, convert and carry away minerals other than the
said minerals and any other substances and for those purposes to sink, drive, make, erect, construct,
maintain and use such pits, shafts, inclines, drifts, levels and other lines, waterways, airways, water
courses, drains, reservoirs, engines, machinery, plant, buildings, canals, tramways, railways, roadways,
and other works and conveniences as may be deemed necessary or convenient.
Provided that in the exercise of such liberty and power no substantial hindrance or interference shall be
caused to or with the liberties, powers and privileges of the lessee/lessees under these presents and that
fair compensation (as may be mutually agreed upon or in the event of disagreement as may be decided
by the State Government) shall be made to the lessee/ lessees for all loss or damage sustained by the
lessee/ lessees by reason or in consequence of the exercise of such liberty and power.”]
250 Form K, Part II, Rule 2, Mineral Concession Rules 1960
251 Rule 3, Mineral Concession Rules 1960
252 Rule 4, Mineral Concession Rules 1960
253 Rule 8(a), Mineral Concession Rules 1960
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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 enunciated in the
Union and State Lists in the Seventh Schedule of the Constitution.255
The occurrence of the taxable event creates or attracts the liability
to tax.256 For example, In re Sea Customs Act, S.20(2),257 this
Court held that in the case of excise duties, the taxable event is
the manufacture of goods and the duty is not directly on the goods
but the manufacture thereof. Thus, the activity of the manufacture
of goods attracts the liability for the levy of excise duties.
184. The incidence of taxation pertains to the manner in which the burden
of tax would fall on a person.258 The incidence of tax was exemplified
by the decision of this Court in State of Karnataka v. Drive-In
Enterprise.259 While dealing with the validity of an entertainment

254 Govind Saran Ganga Saran v. CST (1985) Supp. SCC 205 [6]; Mathuram Agrawal v. State of M P (1999)
8 SCC 667 [12]; Union of India 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] 2 SCR 378 : (2001) 4 SCC 60 [13]
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tax imposed by the State of Karnataka, it was held that since an
entertainment necessarily requires a person who is entertained, the
incidence of the tax is on the persons entertained. The incidence
of tax is relatable to the person who bears the ultimate burden of
the tax.
185. The subject matter of Entry 50 of List II is “taxes on mineral rights.” As
discussed in the above segment, ‘mineral rights’ is a comprehensive
term to mean the bundle of rights with respect to minerals. The
taxable event under Entry 50 of List II would relate to the exercise
of mineral rights.
186. In his dissenting opinion in Hingir-Rampur (supra), Justice Wanchoo
observed that taxes on mineral rights would mean taxes on the right
to extract minerals and not taxes on the minerals actually extracted.
He opined that a tax on mineral rights would be confined, for example,
to taxes on leases of mineral rights and on premium or royalty for
that. In the process, Justice Wanchoo differentiated between taxes on
minerals produced and taxes on mineral rights. According to this view,
the process of working mines to extract minerals has to necessarily
precede the production of minerals. The process of working mines,
according to the learned Judge, attracts liability under “taxes on
mineral rights”, while taxes on minerals extracted form part of taxes
on goods produced, in the nature of duties of excise.
187. The working of a mine can be undertaken either by the owner or by
another to whom the right to work the mine has been granted by a
mining lease. In the latter case, the lessee has to pay royalty to the
lessor as a consideration for removing or consuming 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.
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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, a tax on mineral rights could be levied on any
person who has an interest in the minerals.
189. The measure of tax is a matter of legislative policy. The legislature
can select any measure of tax to compute liability, as long as it has
a reasonable nexus with the nature of the tax. Hence, it is for the
legislature to devise an appropriate measure of tax to compute the
tax liability, provided the measure has a nexus with the nature of
levy, that is a tax on mineral rights.
ii. The limitations on the taxing power of the State under
Entry 50 of List II
190. Entry 50 of List II is unique because though it is a taxing entry, it
is made subject to “any limitations imposed by Parliament by law
relating to mineral development.” Thus, the taxing power of the
state is capable of being controlled by a non-fiscal enactment by
Parliament relating to the development of minerals. This seems to
recognize that a fiscal imposition in the nature of a tax on mineral
rights by a state may impact on the development of minerals. That is
why the former has been made subject to a law relatable to mineral
development enacted by Parliament.
191. The common thread between Entry 54 of List I and Entries 23
and 50 of List II is the use of the phrase “mineral development”.
Entry 54 of List I and Entry 23 of List II deal with the same subject
matter namely, of the regulation of mines and mineral development,
where the latter is subordinated to the former to the extent to which
Parliament brings the field under its control. In the above segments,
we have analyzed the decisions of this Court in Hingir-Rampur
(supra), MA Tulloch (supra), and Baijnath Kedia (supra) where it
was held that Entry 23 of List II is pro tanto excluded to the extent
to which the Parliamentary legislation enacted in terms of Entry 54
of List I covers the field.

260 See Anant Mills Co. Ltd. v. State of Gujarat (1975) 2 SCC 175
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a. Entry 50 of List II does not constitute an exception to the
Sundararamier principle
192. The position which was enunciated in M P V Sundararamier (supra)
and accepted in Jindal Stainless Ltd (supra) is that the field of
taxation is distinct from the general subjects of legislation in the
Union and State lists of the Seventh Schedule. The issue which
needs to be addressed is whether Entry 50 of List II is an exception
to the position which has been laid down in M P V Sundararamier
(supra) in view of the fact that the ambit of a taxing entry is sought
to be restricted 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 under Entry 54 of List II could be encroached
upon by a law made by Parliament with respect to one of the matters
enumerated in List III.
194. This Court referred to M P V Sundararamier (supra) to reiterate
that: (i) taxation is considered to be a distinct matter for purposes

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; […]”]
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of legislative competence; (ii) the power to tax cannot be deduced
from a general legislative entry; (iii) the taxing powers of the Union
and the States are mutually exclusive without any overlap; and
(iv) this is also evident from the fact that there is no taxing entry
in List III. The Court held that a law made by Parliament under a
general entry, that is, Entry 33 of List III, cannot intrude into the
plenary power of the state legislature to levy taxes on the sale or
purchase of goods under Entry 54 of List II. Further, it was held that
the 1981 Act and the Control Order operated in separate and distinct
fields without inconsistency or overlap.
195. The decision in Hoechst Pharmaceuticals (supra) is an authority for
the following legal propositions: (i) the principle of federal supremacy
will not apply where there is no direct conflict between the legislative
powers of Union and States; (ii) Parliament cannot acquire legislative
competence with respect to subject matters of taxation enumerated
under List II under the guise of regulatory entries; and (iii) since taxing
entries are mutually exclusive, the principle of federal supremacy is not
generally applicable with respect to taxing entries under Lists I and II.
196. Entry 54 of List I is a regulatory entry dealing with the regulation of
mines and mineral development. The regulatory entries in Lists I and
II of the Seventh Schedule are distinct from taxing entries. Though
the power to levy taxes is an incident of sovereignty, it is subject
to constitutional limitations. Giving an extended interpretation to
general entries to include the power of taxation will grant arbitrary
and unconstitutional authority to the Union and States. Since Entry
54 of List I is a general entry, it will not include the power of taxation.
197. The subject of Entry 54 of List I is “regulation of mines and mineral
development”. In contrast, the subject of Entry 50 of List II is “taxes
on mineral rights”. Each of these terms has a specific connotation.
Whereas Entry 54 of List I encompass a broad subject matter covering
the regulation of mines and mineral development, 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
[2024] 7 S.C.R. 1683

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 to the State
legislatures in List II, it is subject to a law enacted by Parliament
on mineral development. While the imposition of taxes on mineral
rights is a field exclusively entrusted to the State legislatures (and
not to Parliament) in the State List, Parliament can while making
provisions in a law relating to mineral development make provisions
which ensure that the exercise of the taxing power by the states
does not adversely affect the development of minerals. This power
of Parliament to impose limitations or conditions which ensure that
that the exercise of the taxing power of the states does not impede
mineral development distinct from the power to tax mineral rights
which is entrusted to the state legislatures.
198. If Parliament has no legislative competence to tax mineral rights
under Entry 54 of List I, can it make use of its residuary powers
to gain legislative competence? The answer has to be in in the
negative. Article 246 exclusively empowers the state legislatures
to make laws with respect to entries in List II, which includes taxes
on mineral rights. Article 248 provides that the residuary powers of
Parliament shall include the power of making any law imposing a
tax not mentioned in either the State List or Concurrent List. Under
Entry 97 of List I Parliament can make a law with respect to any
other matter not enumerated in List II or List III including any tax not
mentioned in either of those Lists.
199. During the debates in the Constituent Assembly, Dr. B R Ambedkar
explained that the purpose of Entry 97 of List I is to include
“anything not included in List II or List III.”263 In International Tourist

263 Constituent Assembly Debates, Volume 9 (1 September 1949)
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Corporation v. State of Haryana,264 this Court held that it is necessary
to establish the legislative incompetence of the State legislature before
Parliament can claim exclusive legislative competence by resorting
to the residuary power. A matter can be brought under Entry 97 only
if it is not enumerated in List II or List III and in the case of a tax if it
is not mentioned in List II. Importantly, it was also observed that the
residuary powers of the Union cannot be interpreted so expansively
as to whittle down the power of the State legislatures. A subject can
be brought under Entry 97 of List I only if it is not enumerated in
either List II or List III.265
200. In Province of Madras v. Boddu Paidanna,266 Chief Justice Maurice
Gwyer speaking 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 Act. Against the decision of the High
Court, appeals were filed before this Court. The main contention
of the petitioners was that since royalty is a tax, as held in India
Cement (supra), Entry 54 of List I is a general entry and did not
empower Parliament to impose the tax.

264 [1981] 2 SCR 364 : (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 642
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Mineral Area Development Authority & Anr. v.
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202. This Court held that once Parliament enacts a law under Entry 54 of
List I and occupies the field in connection with the regulation of mines
and mineral development, the state legislature will lose legislative
competence with respect to both Entries 23 and 50 of List II. Further,
it was observed that since royalty is a tax, the legislative competence
of Parliament to enact Section 9 of the MMDR Act could be traced
to both Entries 54 and 97 of List I.268
203. The decision in Mahalaxmi Fabric Mills (supra) was followed by
a two judge Bench in Saurashtra Cement (supra).269 In State of
Orissa v. Mahanadi Coalfields Ltd.,270 a three judge Bench held
that the MMDR Act has made exhaustive provisions for “all kinds of
taxation on minerals and mineral rights – tax, royalty – fee – dead
rent, etc.” which denudes the state legislature of the power to enact
any law or to impose any tax or other levy with reference to Entry
23 or Entry 50 of List II.
204. As discussed in the above segments, the field of tax on mineral
rights vests with the state legislature. Parliament cannot impose
a tax on mineral rights under Entry 54 of List I. Parliament cannot
resort to its residuary powers to tax mineral rights when the subject
matter is specifically enumerated in Entry 50 of the State List. The
fixation of the rates of royalty under Section 9 can be validly traced
to Entry 54 of List I because royalty is not a tax. The fixation of the
rates of royalty falls with the regulatory powers of Parliament under
Entry 54 of List I. The decisions in Mahalaxmi Fabric Mills (supra),
Saurashtra Cement (supra), and Mahanadi Coalfields (supra) do
not reflect the correct position of law.
205. Entry 50 of List II is not an exception to the Sundararamier principle
which is that taxing entries are enumerated separately from the
general entries in Lists I and II of the Seventh Schedule. The field
of taxation cannot be derived from regulatory legislative entries and
has to be derived from a specified taxing entry. This principle has
now been well-entrenched in our constitutional jurisprudence.271

268 Mahalaxmi Fabric (supra) [14]
269 [2000] Supp. 4 SCR 44 : (2001) 1 SCC 91 [11]
270 (1995) Supp. 2 SCC 686
271 Federation of Hotel & Restaurant Association of India v. Union of India (1989) 3 SCC 634 [74]; State of
Karnataka v. State of Meghalaya (2023) 4 SCC 416 [66]
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A legislature has incidental and subsidiary 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 the next issue is to determine the nature of the limitations that
Parliament can constitutionally impose on the exercise of the taxing
powers of the states. To recap, the latter part of Entry 50 of List II
has three elements: (i) any limitations; (ii) imposed by Parliament
by law; and (iii) relating to mineral development. As held in above
segments, the element of “law relating to mineral development” can
be traced to Entry 54 of List I. Parliament has enacted the MMDR
Act in pursuance of Article 246 read with Entry 54 of List I.
209. In respect to the first element, the petitioners have argued that
Parliament has not expressly imposed any limitation under the MMDR
Act on the taxing powers of the state under Entry 50 of List II. On
the contrary, the respondents argue that the overall scheme of the
MMDR Act in itself constitutes a limitation on the taxing powers of
the state under Entry 50 of List II.

272 State of Mysore v. D Cawasji and Co (1970) 3 SCC 710 [8]
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Mineral Area Development Authority & Anr. v.
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210. There is a significant distinction as regard the nature of the restraints
imposable by Parliament on the legislative field of the states to
regulate mines and the development of minerals, as contrasted with
the Parliamentary restraints contemplated on the taxing power of the
states over mineral rights. In relation to the former, this distinction
emerges from the language of Entry 54 of List I and Entry 23 of List
II. As regards the latter, the language of Entry 50 of List II needs
analysis for this purpose. We will take up the regulatory power of the
states over mines and mineral development under Entry 23 of List
II. Entry 23 of List II is expressly subject to the provisions of List I
with respect to regulation and development under the control of the
Union. The expression “subject to” indicates that the Constitution
subordinates Entry 23 of List II to the entries in List I with respect
to regulation and development under the control of the Union. In
other words, where there is an entry in List I relating to regulation
and development under the control of the Union, Entry 23 of the
State list has to yield to it. Entry 54 of List I is one such entry, which
envisages the regulation of mines and mineral development. Entry
54 of List I is conditioned by three requirements – (i) a declaration
by Parliament by law; (ii) envisaging that control of the Union is
expedient in the public interest; and (iii) an indication by Parliament
in the law of the extent of the control 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
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List II, the Constitution envisages that the field of taxing mineral
rights which is given to the states will be subject to (i) limitations;
(ii) imposed by a law of Parliament relating to mineral development.
The expression “regulation of mines” does not find place in Entry
50 of List II (as it does in Entry 23 of List II). Moreover, the law by
Parliament relating to mineral development may impose limitations.
Entry 50 of List II does not result in the field of taxing mineral
rights being conferred on Parliament. This is clear also because
there is no specific entry in List I giving the field of taxing mineral
rights to the Union. The field of taxing mineral rights is exclusive
to the states and continues to remain with them but the field is
subject to the limitations imposed by Parliamentary law relating to
mineral development. Parliament can determine whether, and if so,
how the taxing power of the states over mineral rights should be
limited in order to ensure that it does not impede or retard mineral
development. If Parliament does so and indicates the nature of the
limitations, the states are bound to abide by them while exercising
the taxing power over mineral rights. The authority to impose a
tax on mineral rights remains with the states but is subject to the
limitations envisaged by a law enacted by Parliament in relation to
the development of minerals. Under Entry 23, the regulatory power
of the State is denuded by Parliament, while in case of Entry 50
the legislative field assigned to the states to tax mineral rights is
only limited.
212. The supremacy of Parliament is one of the fundamental features
of the English legal system. Our constitutional democracy
envisages the supremacy of the Constitution. The subjection of all
constitutional authorities to the mandate of a written Constitution
is the fundamental feature of our Constitution.273 This Court in
In re Powers, Privileges and Immunities of State legislature,
Special Reference No. 1 of 1964274 observed that the supremacy
of the Constitution is fundamental to the existence of the federal
unit and of the member States as a protection against destruction
or impairment of the delicate balance of power. The Constitution is
the source of the legislative powers of both Union and the states.

273 Kalpana Mehta v. Union of India (2018) 7 SCC 1 [218]
274 [1965] 1 SCR 413 [39]
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Mineral Area Development Authority & Anr. v.
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Any limitation on the exercise of plenary powers has to be situated
within the Constitution and not beyond.
213. In Umeg Singh v. State of Bombay,275 a Constitution Bench held
that any limitation on the legislative 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 provisions of the Constitution.
The Constitution itself laid down the fetters or limitations
on this power e.g. in Article 303 or Article 286(2). But
unless and until the court came to the conclusion that the
Constitution itself had expressly prohibited legislation on the
subject either absolutely or conditionally the power of the
State Legislature to enact legislation within its legislative
competence was plenary. Once the topic of legislation was
comprised within any of the entries in the Lists 2 and 3
of the Seventh Schedule to the Constitution the fetter or
limitation on such legislative power had to be found within

275 [1955] 2 SCR 164
1690 [2024] 7 S.C.R.

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the Constitution itself and if there was no such fetter or
limitation to be found there the State Legislature had full
competence to enact the impugned Act no matter whether
such enactment was contrary to the guarantee given, or
the obligation undertaken by the Dominion Government
or the Province of Bombay or even the State of Bombay.”
214. In Firm Bansidhar Premsukhdas v. State of Rajasthan,276 this
Court reiterated Umeg Singh (supra) by observing that the legislative
competence of Parliament or of the State legislature can only be
circumscribed by express prohibition contained in the Constitution. It
was further observed that unless there is a 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 legislature is endowed with for legislating on the topics
enumerated in the relevant Lists.
215. Any limitation on the plenary legislative powers of either the Union
or the States with respect to a subject in the relevant Lists must be
express and specified by the Constitution.
c. Scheme of the MMDR Act does not serve as “any limitation”
216. The Union has argued that (i) the MMDR Act occupies the entirety
of the subject matter pertaining to mineral development, leaving no
scope for the State legislatures to legislate under Entry 50 of List
II; (ii) the MMDR Act abstracts the legislative powers of the States
under Entry 50 of List II; (iii) the MMDR is a complete code with
respect to the regulation of mines and mineral development and no
part of the field is left for the States to legislate including on taxation
of mineral rights.
217. The respondents have drawn our attention to the following architecture
of the MMDR Act to press the point 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

276 [1966] Supp SCR 81 [7]
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Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 the Central Government
to fix the rate of royalties. Section 25 deals with the recovery
of unpaid rent, royalty and tax as arrears of land revenue; and
c. The MMDR Act governs all aspects relating to both major
minerals and minor minerals. Under Section 13, the Central
Government is empowered to make rules on all or any matter
relating to the grant of mineral concessions. Although Sections
14 and 15 allow the State Government to make rules in respect
of minor minerals, the field of minor minerals is covered by the
MMDR Act leaving no scope for the state legislature to legislate.
In case the Central Government undertakes prospecting or
mining operations, Section 17(3) specifies the levies it is bound
to pay. Further, the State Government cannot reserve any
area under Section 17A without the approval of the Central
Government. The Central Government is also empowered to
issue directions to the State Government for the conservation
of mineral resources or on any policy matter in the national
interest. Section 18 empowers only the Central Government to
take any measure necessary for mineral development.
218. Two issues have to be addressed: (i) whether the MMDR Act fulfils
the requirement of “any limitation” under Entry 50 of List II; and

277 Section 19, MMDR Act
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(ii) whether the MMDR Act contains any provision limiting the taxing
powers of the states under Entry 50 of List II.
219. The MMDR Act lays down the means and processes by which the
rights to mines and minerals may be exercised or granted by the
owner of mineral rights. It is true that the MMDR Act largely denudes
the states of their legislative powers with respect to regulation of
mines and mineral development under Entry 23 of List II. However,
the expression in Entry 50 of List II demonstrates that: (i) Parliament
can limit the legislative power of the States to tax minerals; and (ii) the
limitation has to be imposed “by law” relating to mineral development.
220. The MMDR Act has a centralizing tendency because the Central
Government is tasked with important responsibilities such as
setting out the terms and conditions of mining leases, fixing the
rates of royalty and issuing guidelines to State Governments in
respect of conservation of minerals. This drift towards the Central
Government stems from the fact that the principal aim of the MMDR
Act is development and conservation of minerals.278 Minerals being
a natural and scarce 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.

278 Hindu Stone (supra) [10]
279 See M C Mehta v. Kamal Nath (1997) 1 SCC 388
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222. Entry 50 of List II provides that the legislative power of States to tax
mineral rights is subject to any limitations imposed by Parliament
by law relating to mineral development. A plain reading of the
phrase makes it clear that the taxing power is subject to “any
limitations” and not a “law relating to mineral development.” If the
Constitution intended to restrict the taxing powers under Entry 50
of List II with respect to a parliamentary law, it would not have used
the expression “any limitations.” It could have used phraseology
such as for example, “Taxes on mineral rights subject to any law
relating to mineral development made by Parliament.” Parliament
has to ‘impose’ the limitations. That is, Parliament has to expressly
specify the limitations by the authority of law. Thus, under Entry
50 of List II the taxing power of the State is subject to the extent
that Parliament imposes any limitations “by law” relating to mineral
development.
223. The phrase “by law” is also important because it indicates the manner
in which Parliament can impose limitations. The expression “by law”
means that the legislative power should be effectuated through the
provisions of a statute. The purport of including the phrase “by law”
in Entry 50 of List II is to indicate that Parliament has to specify the
extent to which it is seeks to limit the taxing powers under Entry 50
of List II.
224. Parliament can impose limitations under Entry 50 of List II by means
of statutory provisions. There is no specific provision in the MMDR
Act which imposes limitations on the power of the States to tax
mineral rights. The scheme of the MMDR Act cannot by a process
of stretched construction be read to limit the taxing powers of States
under Entry 50 of List II.
225. The respondents have referred to Entry 54 of List I to contend that
once Parliament enacts a law relating to mineral development, its
consequences on the taxing powers of the state legislature under
Entry 50 of List II can be implied. In this connection, reference was
made to Kesavananda Bharati v. State of Kerala,280 where it was
held that powers and limitations could be implied from necessity or
from the scheme of the Constitution. Moreover, reference was made

280 [1973] Supp. 1 SCR 1 : (1973) 4 SCC 225 [210]
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to the decision in Kalpana Mehta v. Union of India,281 to contend
that the Constitution must be interpreted in a manner that leads to
the discovery of “constitutional silences or abeyances.” Therefore,
it was contended 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 of an express constitutional provision, there is no scope
for this Court to use this doctrine to limit the legislative powers of
the State.
228. In P Kannadasan v. State of Tamil Nadu,284 a two judge Bench
held that Parliament has denuded the States of their power to levy
taxes on minerals by making the declaration contained in Section
2 of the MMDR Act. It was further observed that State legislatures
cannot levy any tax or cess on minerals so long as the declaration
in Section 2 stands. The observations in P Kannadasan (supra) are
contrary to the legislative scheme discussed above.

281 [2018] 4 SCR 1 : (2018) 7 SCC 1
282 See I R Coelho v. State of Tamil Nadu (2007) 2 SCC 1
283 Vishaka v. State of Rajasthan (1997) 6 SCC 241; Anoop Baranwal v. Union of India (2023) 6 SCC 161
284 [1996] Supp. 4 SCR 92 : (1996) 5 SCC 670 [35]
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d. Section 9 does not serve as a limitation on the taxing
powers of State
229. Having noticed that the scheme of the MMDR Act does not in itself
serve as a limitation on the field of taxation under Entry 50 of List
II, we now proceed to examine whether the statute contains any
provision imposing “any limitations” on it. The respondents contend
that Sections 9, 9A, 9B, and 9C expressly impose limitations as
contemplated under Entry 50 of List II. We have held in the previous
segments of this judgment that royalty is not in the nature of tax but
a consideration which is paid to the proprietor for the extraction and
removal of mineral under the terms of the mining lease. The MMDR
Act empowers the Central Government to specify the rates of royalty
under Section 9 read with the Second Schedule. These powers could
be validly traced to Entry 54 of List I as they are comprehended
within the regulation of mines.
230. Since royalty payable under Section 9 is not a tax on mineral rights,
any limitation on the enhancement of the rates of royalty is not the
imposition of a tax under Entry 50 of List II. While royalty flows from
the exercise of proprietary rights, taxes flow from the sovereign’s
right to tax persons, objects and transactions. Section 9 does not
expressly impose any limitations on the powers of the State to tax
mineral rights. Section 9(3) limits the power of the Central Government
to enhance royalty more than once in three years. This limitation
does not govern taxes on mineral rights.
231. Dead rent under Section 9A is a price paid by the lessee to the
lessor for not working the mines and is paid in alternative to royalty.
The payments under Sections 9B and 9C are made as additional
royalties and are used for specific purposes. Payment under Section
9B is made to the District 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
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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 powers to entertain and hear appeals
from any judgment, final order or sentence in a criminal proceeding
of a High Court in the territory of India subject to such conditions
and limitations as may be specified in such law.
233. The use of the expression “any” before “limitations” under Entry
50 of List II indicates that the scope of the limitations is expansive
and includes “all”287 or “every”288 limitation that could be imposed by
Parliament by law relating to mineral development. The expression
“any” has to be construed in its context, taking into consideration
the scheme, purpose, and subject matter of the enactment,289 or in
this case, the scheme of distribution of legislative powers under the
Constitution. The expression “any limitations” is indicative of the fact
that Parliament has been provided with ample legislative freedom to
conceive limitations or restrictions on the legislative powers of the
State to tax minerals.
234. Apart from Entry 50 of List II, Entry 57 of List II is the other taxing
entry in List II which is subordinate to another entry. It provides for
taxes on vehicles, whether mechanically propelled or not, suitable
for use on roads, including tramcars and is “subject to the provisions
of Entry 35 of List III.” Entry 35 of List III deals with mechanically
propelled vehicles including the principles on which taxes on such
vehicles are to be levied.

285 Jindal Stainless Steel (supra) [626]
286 Ramanatha Aiyar, Advanced Law Lexicon (Volume 3) 3254
287 LDA v. M K Gupta (1994) 1 SCC 243 [4]
288 Raj Kumar Shivhare v. Directorate of Enforcement (2010) 4 SCC 772 [24]
289 Vivek Narayan Sharma v. Union of India (2023) 3 SCC 1 [132]
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235. In State of Assam v. Labanya Probha Devi,290 a Constitution Bench
of this Court explained the inter-relationship between Entry 57 of List
II and Entry 35 of List III in the following terms:
“11. […] The two entries deal with two different matters
though allied ones – one deals with taxes on vehicles and
the other with the principles on which such taxes are to
be levied. When two entries in the Constitution, whether
in the same List or different Lists, deal with two subjects,
if possible, an attempt shall be made to harmonize them
rather than to bring them into conflict. Taxes on vehicles
in their ordinary meaning connote the liability to pay taxes
at the rates at which the taxes are to be levied. On the
other hand, the expression “principles of taxation” denotes
rules of guidance in the matter of taxation. We, therefore,
hold that the amending Acts do not come into conflict with
the existing law in respect of any principles of taxation,
but only deal with a subject-matter which is exclusively
within the legislative 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

290 [1967] 3 SCR 611
291 [2001] Supp. 5 SCR 390 : (2002) 2 SCC 188
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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 a distinction: Entry 50 specifically uses the word “subject to
any limitations” while Entry 57 uses the expression “subject to the
provisions”. Under Entry 50, Parliament can impose “any limitations”
on the taxing powers of the State, while under Entry 57 read with
Entry 35 of List III, Parliament can only prescribe the principles on
the basis of which the State can levy taxes on mechanically propelled
vehicles. Therefore, Parliament cannot impose any limitation on the
field of taxation reserved to the States under Entry 57 of List II, but
can lay down guidelines. In contrast, Entry 50 allows Parliament
to impose any limitations on the field reserved to the State to tax
mineral rights.
238. In Jindal Stainless Steel (supra), one of us (Dr Justice D Y
Chandrachud) described the nature of the limitations which may be
imposed to contain the legislative powers vested in the State:
“626.3. The third source of constitutional containment on
the legislative power of a State is in the form of limitations
of which clause (3) of Article 286 provides an illustration.
Under clause (3), Parliament provides the restrictions and
conditions in regard to “the system of levy, rates and other
incidents of tax” upon which a law enacted by a State
providing for a tax on the nature specified in sub-clauses
(a) and (b) is subject. Sub-clause (a) deals with tax on
the sale or purchase of goods declared to be of special
importance in inter-State trade or commerce by a law
enacted by Parliament. Sub-clause (b) deals with a tax on
the sale or purchase of goods failing under sub-clauses
(b), (c) and (d) of Article 366(29-A). Among other things,
a tax on contract for hire purchase and involving transfer
of the right to use goods is subject to the restrictions
and conditions which are provided by a law enacted by
Parliament in regard to the system of levy, rates and other
incidents of tax.”
239. Before its omission, Article 286(3) empowered Parliament to specify
by law restrictions and conditions on any law of a State levying tax on
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the sale or purchase of goods.292 In Rajasthan Rollers Flour Mills
Association v. State of Rajasthan,293 a two-Judge Bench of this
Court held that a limitation imposed by a law enacted under Article
286(3) is a restriction upon the plenary power of the State to levy
tax on the sale/ purchase of goods and must be construed “strictly.”
It was further held that the restrictions 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 respect
to major minerals. Moreover, it was envisaged that the Central
Government could take effective steps to ensure uniform standards
of exploration and extraction of minerals with a view to ensuring their
sustainability and conservation. The phrase “through a law relating
to mineral development” appearing in Entry 50 of List II indicates
that Parliament can limit the field of taxation only in the interests of
mineral development. It was in this perspective that the Constitution

292 Article 286(3) before omission read:
“(3) Any law of a State shall, in so far as it imposes, or authorizes the imposition of, -
(a) A tax on the sale or purchase of goods declared by Parliament by law to be of special
importance in inter-State trade or commerce; or
(b) A tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b),
sub-clause (c) or sub-clause (d) of clause (29A) of article 366,
be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of
tax as Parliament may by law specify.”
293 [1993] Supp. 2 SCR 72 : (1994) Supp. 1 SCC 413 [14]
294 Rajasthan Rollers Flour Mills Association (supra) [21]
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empowered Parliament to impose “any limitations” on the legislative
field of States to tax mineral rights through a law relating to mineral
development.
242. The MMRD Act 1948 was in place when the Constituent Assembly
was debating the incorporation of Entry 50 in List II. The framers of
the Constitution were aware of the legislative history of the subject
of mines and minerals and were aware as to how the Dominion
Legislature had interpreted the legislative entries pertaining to
regulation of mines and minerals and taxation of mineral rights
under the GOI Act 1935.295 The Constituent Assembly negatived the
proposal to transfer the entirety of Entry 50 of List II to List I.296 The
Constitution did not or could not visualize the effect of taxes on mineral
rights on mineral development. Therefore, it left it to the legislative
wisdom of Parliament to identify the taxes on mineral rights levied
by States may impede mineral development. If Parliament considers
that taxes on mineral rights indeed impede mineral development, it
can adopt suitable legislative policies to impose limitations on the
field of taxation.
243. The legislative subject entrusted to the States to tax mineral rights
rests upon the necessity of raising revenues. As discussed in the
above segments, Parliament does not possess the legislative field
to tax mineral rights either under Entry 54 of List I, being a general
entry, or under the residuary powers. The legislative domain to tax
mineral rights vests with the State. The legislative power of Parliament
to impose “any limitations” is traced to Article 246(1) read with Entry
54 of List I. Parliament can impose limitations, and not levy taxes on
mineral rights itself. The subject of taxing mineral rights continues to
remain with the States. This understanding also ensures that there
is no overlap or conflict between the powers of Union and the taxing
field of the States.
244. As held in Jindal Stainless Steel (supra),297 the Constitution
understands the expression “limitations” as restrictions, conditions,298

295 D K Trivedi (supra) [31]
296 Constituent Assembly Debates (2nd September 1949)
297 Jindal Stainless Steel [626.3]
298 Article 286(3) (omitted by Constitution (One Hundred and First Amendment) 2016
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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 purport
of the expression “any limitations” is wide enough to include the
imposition of restrictions, conditions, principles, as well as prohibition.
Parliament has the constitutional power to determine whether and if
so the manner in which limitations may be imposed.
f. Impact of taxes on mineral rights on mineral development
246. The respondents have contended that any levy of taxes on mineral
rights by the States under Entry 50 of List II will be against mineral
development. Minerals are necessary for economic development.
Proper extraction and utilization of mineral resources fulfils the
needs of both the domestic industry as well as the demands of
the international market.301 The Constitution requires the State to
discharge an active role in promoting the development of minerals by
adopting a slew of regulatory measures both at the Union and State
levels. In other words, the constitutional endeavor of development
of minerals proceeds on the basis of co-operative federalism, where
both the Union and the States have certain duties and responsibilities.
These responsibilities take the form of development of infrastructure,
facilitation of exploration and mining activities, conservation of

299 Article 286(2), Constitution of India; Entry 35 of List II, Seventh Schedule, Constitution of India
300 Supreme Court of India, Record of Proceedings, Civil Appeal No. 4056-4064/1999 (14 March 2023) 54.
301 National Mineral Policy 2019, 4
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minerals, and collection of taxes and fees.302 The National Mineral
Policy 2019 recommends greater thrust on conservation of minerals,
development of scientific methods of mining, human resource
development, and protection of environment to meet the requirements
of environmentally sustainable mining operations.
247. In India, mining activities are carried out by both the public and
private sectors. The Government is required to raise revenues not
only to meet the above-mentioned objectives, but also to fund public
sector undertakings, such as Mineral Exploration Corporation of
India. Additionally, mining activities cannot be carried out without the
existence of public order or the lack of a functioning legal system
to ensure adherence to contractual obligations. In Jindal Stainless
Steel (supra), one of us (Dr Justice D Y Chandrachud) observed that
every law which imposes a tax cannot be regarded as a hindrance
to trade, commerce, and intercourse. It was observed:
“631. […] Neither trade nor commerce can flourish amidst
violence, unrest and social disorder. Taxes provide revenue
for the State to sustain manifold activities which are geared
to providing conditions of social order. 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.”

302 ibid
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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 well-established principle that an increase in the rate of
tax on a particular commodity cannot per se be said to impede free
trade and commerce in that commodity.303 In his dissenting opinion
in Kesoram (supra), Justice Sinha observed that a tax on minerals
rights, which is over and beyond what is provided under the MMDR
Act, will lead to an increase in the price of the mineral commodity
making it unremunerative. The learned Judge observed that this
defeats the purpose of the MMDR Act. The Union of India in its
affidavit submitted:
“A non-harmonized fiscal regime, with varied levies across
States, would result in a scenario where industries located
in States with lesser mineral deposits would be forced to
procure mineral raw materials at higher prices from States
endowed with rich mineral deposits, placing the latter
category of States at a significant economic advantage that
would come at the cost of the national interest in maximizing
economic development from the nation’s mineral wealth
[…] Therefore a uniform levy of royalty prescribed by the
Govt. of India under the MMDRA levels the playing field,
thereby promoting the domestic industry across the nation
in a manner which is equitable, while at the same time
ensuring revenue generation for the States.”
It is true that uniformity of prices of mineral commodities ensures the
objective of mineral development as envisaged under the MMDR Act.
Levy of a tax on mineral rights by the State legislatures may lead to
an increase in the prices of the mineral commodity in India. There
may arise a situation where a state having the highest reserves of a
particular mineral decides to levy a high rate of tax on mineral rights.
This may not only distort the market for that particular mineral, but
have a cascading effect on allied industries. It is exactly to counteract
any adverse impact on the development of minerals in India that
the Constitution has empowered Parliament under Entry 50 of List
II to impose limitations on the basis of which the State legislature

303 Vrajilal Manilal & Co. v. State of M P (1986) Supp SCC 201 [20]; State of Kerala v. A B Abdul Kadir (1969)
2 SCC 363 [9]; Jindal Stainless Steel (supra) [634]
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can tax mineral rights. If this is the constitutional intendment, it is
Parliament which has the responsibility to ensure that there is no
adverse effect on development of mineral rights. The legislative
powers granted to the State legislatures cannot be whittled down
impliedly based on the presumption that all taxes on mineral rights
imposed by the State will have adverse economic consequences on
mineral development. The Constitution 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 competent to levy
a tax on mineral-bearing land as a unit under Entry 49 of List II.
A connected issue is whether mineral produce or royalty can be
used as the measure to tax mineral-bearing lands.
251. The general rule in England was that the rights of an owner of land
extended to everything in, on, or over land. The position has been
explained in Megarry & Wade on The Law of Real Property304:
“There is an ancient maxim: cujus est solum, ejus est
usque ad coelum et ad inferos, meaning that the owner

304 Megarry and Wade, The Law of Real Property (9th edn, Sweet and Maxwell)
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of the soil is presumed to own everything “up to the sky
and down to the centre of the earth.” It has been criticized,
but it is a presumption that remains firmly part of English
law “encapsulating, in simple language, a proposition of
law which has commanded general acceptance.” Above
the surface, the development of powered flight has made
it impossible to apply the presumption literally. An owner’s
rights in the airspace above the land extend only to such
height as is necessary for the ordinary use and enjoyment
of the land and structures upon it. As regards right beneath
the surface, the maxim applies and the owner is presumed
to own the minerals beneath. For practical purposes the
rights downwards are unlimited.”
“An owner can divide the land horizontally or in any other
way. He or she can dispose of minerals under the surface,
or top floor of a building, so as to make them separate
properties. But unless some contrary intention is shown
a grant will normally pass the owner’s whole interest in
space above and below the land, so that, for example, a
lease will give the tenant the right to the airspace above
the land let.”
The position under the common law in England is that the owner of
land is entitled to all mines and minerals underlying the land which
they own, subject to certain exceptions.305
252. The colonial regime in India followed a pattern at variance to that
prevailing under English law on land ownership and mineral rights.
Initially, the colonial state asserted that the soil belonged to the
sovereign.306 Acting on the view that it was the proprietor of the
soil, the colonial state, under Lord Cornwallis as Governor-General,

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
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confirmed proprietary rights to soil, including mineral rights, to
the zamindars by way of a permanent settlement in territories
under British control in India. For instance, the Madras Permanent
Settlement Regulation XXV of 1802 vested “the 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

307 Section 2, Regulation XXV of 1802. [It read: 2. Assessment on all lands liable to revenue. Proprietary
right vested in zamindars – In conformity to these principles, an assessment shall be fixed on all lands
liable to pay revenue to the Government; and, in consequence of such assessment, the proprietary right
of the soil shall become vested in the zamindars or other proprietors of land, and in their heirs and lawful
successors for ever.”]
308 Section 8, Regulation XXV of 1802. [It read: 8. Proprietors of land may transfer proprietary right in
whole or part of their zamindaries. Restrictions under which such transfer is to be made – Proprietors of
land shall be at free liberty to transfer without the previous consent of the Government, or of any other
authority, to whomever they may think proper, by sale, gift or otherwise, their proprietary right in the
whole of in any part of their zamindaris; such transfers of land shall be valid and shall be respected by
the Courts of Judicature and by the officers of the Government; provided they shall not be repugnant
to the Muhammadan or to the Hindu laws, or to the regulations of the Government. But unless such
sale, gift, or transfer shall have been regularly registered at the office of the Collector, and unless the
public assessment shall have been previously determined and fixed on such separated portion of land
by the Collector, such sale, gift, or transfer shall be of no legal force or effect, nor shall such transaction
exempt a zamindar from the payment of any part of the public land-tax assessed on the entire zamindari
previously to such transfer, but the whole zamindari shall continue to be answerable for the total land-tax,
in the same manner as if no such transaction had occurred.”]
309 See Durga Prasad Singh v. Braja Nath Bose, 1912 SCC Online PC 9.
310 Secretary of State for India in Council v. Srinivasa Chariar, 1920 SCC OnLine PC 89; State of A P v.
Duvvuru Balarami Reddy, 1962 SCC OnLine SC 182 [9]
311 S Sundararaja Iyengar, Land Tenures in the Madras Presidency (1921) 120, 151
312 Gopalan v. State of Madras, (1958) 2 MLJ 117; S Sundararaja Iyengar (supra) 153. [“The distinguishing
feature of this system is that the state is brought into direct contact with the owner of the land and
collects its revenues through its own servants without the intervention of an intermediate agent such
the zemindar or farmer, and its object is the creation of peasant proprietors. All the income derived from
extended cultivation goes to the state.”]
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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 his treatise on Land Tenures in the Madras
Presidency noted that in 1882 the Government declared that it had
no proprietary right in the soil.313 The conclusions drawn by the
revenue after full enquiry are instructive and are reproduced below:
“(1) that the State cannot, without violating the rule and
practice dating from time immemorial, assert in this
Presidency an exclusive right to minerals in unoccupied
lands, but that it is fully entitled to a share in such products
as in any other produce of the land; (2) that subject to the
payment of a stated proportion of the produce to meet the
necessities of the administration, the proprietary right of
the ryot in the soil of his holding is absolute and complete;
(3) that he is able to able to mortgage, sell, devise or
otherwise alienate the land; (4) that, on these principles,
property has been changing hands from time immemorial,
and for the Government to put forward a claim now, which
has never been asserted and which does not rest in law,
practice or precedent, would undoubtedly raise a feeling or
distrust and discontent which would take long to allay; (5)
that it would be straining the State’s privileges to attach the
condition of recognition of any exclusive right to minerals
on the terms on which lands may be newly occupied,
although in the interests of the general public, it may in
particular instances be justifiable to do so, in view to the
development of the ascertained mineral resources; and
(6) that as regards the vast bulks of the land occupied or
likely to be occupied for cultivation, such reservation would
be absolutely objectless and would only have the effect of
creating widespread distrust in the minds of the people.”314
255. The Board of Revenue recognized the rights of zamindars to the
minerals, through Standing Orders. The Standing Orders also

313 S Sundararaja Iyengar (supra) 28.
314 ibid.
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governed the rights of the ryotwari pattadars with respect to minerals.
For example, Resolution No. 277 of 1888315 declared that the State
“lays no claim to minerals” in estates held on sanads of permanent
settlement, enfranchised inam lands, etc. Moreover, for ryotwari lands
it was declared that the right of the State in minerals is limited “to
share in the produce of the minerals worked, commuted in a money
payment, if thought necessary, by Government, in like manner with
and in addition to the land assessment.” Thus, the colonial state did
not claim subsoil 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 held on title-deeds issued under the Waste Land Rules
before 7th October 1879 in which no reservation was made of the
right of the State to minerals; and (c) lands held on inam tenure.

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.”]
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Group B – Lands in which the State claimed a share in minerals
which included: (a) lands occupied for agricultural purposes under
the ryotwari grants; (b) private janmam lands in Malabar and the
Nilgiri; and (c) certain lands held under inam tenure.
Group C – Lands in which the State claimed full rights in minerals
which included unreserved lands and forest lands reserved under
the Madras Forest Act 1882.
257. The Dominion Legislature was aware of the above classification of
land, which it loosely incorporated under the Mineral Concession
Rules 1949 enacted under Section 5 of the MMRD Act. Chapter III
and VI of the Mineral Concession Rules 1949 provided for the grant of
prospecting licences and mining leases respectively in land in which
the minerals belonged to Government. Chapter V dealt with the grant
of mineral concessions by private persons. The Concession Rules of
1949 did not contain any provisions dealing with minerals, in respect
of lands where the minerals were shared by both the Government
and private persons by. The Mineral Concession Rules of 1949 left
out lands occupied under ryotwari tenure from their purview.
258. The Mineral Concession Rules 1960 adopted the categorization of
land as in the Madras Mining Manual, namely, lands in which minerals
vested in government; lands in which minerals vested in a person
other than government; and lands in which minerals vested partly in
government and partly in private persons. The first category mostly
pertained to situations where the land vested with the state by virtue
of it being unoccupied or land legislation vesting title to minerals with
the State Government. The second category pertained to situations
where the State Government had not divested the landowner of
their rights in the sub-soil minerals. The third category applied to
intermediary tenures such as ryotwari lands where the minerals were
shared by both the government and private persons.
259. In Raja Anand Brahma Shah v. State of U P,319 a Constitution Bench
accepted that the English system of ownership of lands applied in
India, observing that the owner of the surface of land is entitled ex
jure to everything beneath the land. It was further observed that a
transfer of the right to the surface conveys the right to the minerals

319 [1967] 1 SCR 373 : 1966 SCC OnLine SC 89 [13]
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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 that the right to all minerals found
either on the surface or underground vest in the State Government
which shall have all powers necessary for the proper enjoyment of
such rights.321
262. Many states also enacted laws divesting zamindars and inamdars
of their proprietary rights. For example, the Uttar Pradesh Zamindari
Abolition and Land Reforms Act 1950 vested all the rights of the
proprietors in the sub-soil including mines and minerals with the State
Government.322 The Maharashtra Personal Inams Abolition Act 1953
abolished inam rights, but saved the rights of the inamdars and jagirdars
to mines and minerals. In 1985, the State legislature enacted a law323
vesting all the rights of inamdars and jagirdars to mines and minerals in
the State Government. The law sets out the following reasons behind
divesting the inamdars and jagirdars of their mineral rights:
“Whereas, pursuant to the national policy of bringing the
actual cultivator into direct relation with the Government,

320 [2013] 7 SCR 863 : (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.
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series of land tenure abolition laws for abolition of the
intermediary rights, Jagirs and inam tenures have had been
enacted, the rights of Inamdars and Jagirdars to mines
and minerals have had been specifically saved, thereby
allowing such existing rights to survive particularly where
the inams are grants of soil;
And Whereas, the mines and minerals available in these
inam lands are being exploited in the State by such
Inamdars for individual gains without being liable to pay
any royalty to the State Government and in a manner
highly detrimental and prejudicial to public interest;
And Whereas, with a view to prevent such exploitation of
mines and minerals for individual gains by a few Inamdars
and also to prevent the huge loss of royalty by the State
Government and to give effect to the policy of the State
Government towards securing that the ownership and
control of the material resources of the community are
so distributed as best to subserve the common good and
that the operation of the economic system does not result
in the concentration of wealth and means of production to
the common detriment;”
The above extract from the Preamble to the statute indicates that
the inamdars and jagirdars had title to the minerals granted to them
under inam tenure until the State enacted a law to divest them of
their mineral rights. Since the inamdars and jagirdars owned the
minerals till 1985, they 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

324 Thressiamma Jacob (supra) [55]
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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 and resources of the exclusive economic zone to
vest in the Union –
(1) All lands, minerals and other things of value
underlying the ocean within the territorial waters, or
the continental shelf, or the exclusive economic zone,
of India shall vest in the Union and be held for the
purpose of the Union.
(2) All other resources of the exclusive economic zone
of India shall also vest in the Union and be held for
the purposes of the Union.
(3) The limits of the territorial waters, the continental shelf,
the exclusive economic zone, and other maritime
zones, of India shall be such as may be specified,
from time to time, by or under any law made by
Parliament.”
265. Parliament has enacted the Offshore Areas Mineral (Development
and Regulation) Act 2002 326 to provide for development and
regulation of mineral resources in the territorial waters, continental
shelf, exclusive economic zone, and other maritime zones of India.
Section 2 contains a legislative declaration to the effect that the
Union is taking under its control the regulation of mines and mineral
development in offshore areas to the extent provided under the
statute. Similar to the MMDR Act, Chapter II of the OAMDR Act
lays down general provisions for acquisition of operating rights in
offshore areas. However, unlike the MMDR Act which empowers the

325 Section 16, MMDR Act.
326 “OAMDR Act”
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State Government to grant mineral concessions,327 the OAMDR Act
mandates the Central Government to grant the operating rights.328
This difference is a result of the fact that the subsoil minerals are
statutorily vested in the States, while the Constitution mandates the
vesting of offshore minerals in the Union. Section 16 of the OAMDR
Act deals with payment of royalty to the Central Government. The
provision reads as follows:
“16. Royalty – (1) A lessee shall pay royalty to the
Central Government in respect of any mineral removed
or consumed from the area covered under his production
lease, at the rate for the time being specified in the First
Schedule in respect of that mineral.
(2) The Central Government may, by notification in the
Official Gazette, amend the First Schedule so as to enhance
or reduce the rate at which royalty shall be payable in
respect of any mineral with effect from such date as may
be specified in the notification:
Provided that the Central Government shall not enhance
the rate of royalty in respect of any mineral more than
once during any period 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

327 Section 5, MMDR Act
328 Section 6, OAMDR Act
329 [1976] 3 SCR 688 : (1977) 1 SCC 340
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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 the MMDR Act deals with the regulation of rights to
mining without intending to “trench upon powers of State legislatures
under Entry 18 of List II read with Entry 42 of List III.”330 Chanan
Mal (supra) lays down the principle that the decision of the States to
acquire title to minerals does not fall foul of the MMDR Act because
the latter does not control the ownership of minerals.
268. The above discussion leads to two conclusions. First, the owner of
a land can be divested of sub-soil rights in minerals only through a
valid process of law, which has generally taken the shape of land
reform legislation enacted by State legislatures. Second, the MMDR
Act does not vest the ownership of minerals or mineral rights in
the State. It regulates the exercise of rights to minerals which may
be owned either by Government, private persons, or by both the
Government and private persons.
II. Tax on land and buildings
269. Entry 42 of the Provincial Legislative List in the Government of India
Act 1935, read as follows:
“42. Taxes on lands and buildings, hearths and windows”
The Draft Constitution prepared by Shri B N Rau, the Constitutional
Adviser adopted the above provision in draft Entry 43 of the Provincial
Legislative List.331 The Expert Committee on Financial Provisions
suggested the deletion of the words “hearths and windows” from
draft Entry 43 of the Provincial Legislative List on the ground that
such taxes were not likely to be levied. The Committee observed
that they would anyway be covered by the word “buildings.”332 The
recommendation of the Expert Committee was accepted by the
Drafting Committee.333

330 Chanan Mal (supra) [38]
331 B Shiva Rao, ‘The Framing of India’s Constitution: A Study’ (1966, Volume 3) 181
332 B Shiva Rao (Volume 3) 269
333 B Shiva Rao (Volume 3) 502
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a. Principles governing ‘taxes on lands and buildings’
270. The interpretation of the word “lands” has been considered by this
Court in several decisions. In Raja Jagannath Baksh Singh v. State
of Uttar Pradesh,334 the provisions of the UP Large Land Holdings
Tax Act 1957 were challenged for falling beyond the legislative
competence of the State legislature. It was contended that the
expression “lands” under Entry 49 of List II does not include agricultural
land. Rejecting this contention, Justice P B Gajendragadkar (as
the learned Chief Justice then was) speaking for the Constitution
Bench held that the word “lands” is wide enough to include all
lands, agricultural or otherwise. In Anant Mills Co. Ltd. v. State of
Gujarat,335 this Court held that the word “lands” includes not 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 the State legislature can tax buildings as a unit under
Entry 49 of List II, but not the machinery and furniture contained

334 [1963] 1 SCR 220
335 [1975] 3 SCR 220 : (1975) 2 SCC 175
336 [1965] 3 SCR 47
337 Ajoy Kumar Mukherjee (supra) [4]; See Jalkal Vibhag Nagar Nigam v. Pradeshiya Industrial & Investment
Corp (2021) 20 SCC 657 [46]
338 [1975] Supp. 1 SCR 394 : (1975) 2 SCC 274 [17]
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in the building. In Ahmedabad Municipal Corporation v. GTL
Infrastructure Ltd.,339 this Court held that the word “buildings” has
to be interpreted dynamically to extend to all ancillary and subsidiary
matters. Consequently, it was held that the State legislature has the
legislative power to tax mobile towers under Entry 49 of List II. The
principle which emanates from the above decisions is that a tax
levied on the activity or service rendered on or in connection with
lands and buildings does not fall within the description of taxes on
lands and buildings under Entry 49 of List II. However, the legislature
may take into account the use of land or buildings for determining
the incidence or measure of tax levied under Entry 49 of List II.
272. Further, it is now well-established that a levy of tax on lands and
buildings is not concerned with the division of interest or ownership
in the units of lands and buildings.340 In Sudhir Chandra Nawn v.
WTO,341 a Constitution Bench which dealt with the constitutional
validity of Wealth Tax Act 1957, explained the scope of Entry 49 of
List II by observing that the tax on lands and buildings is directly
imposed on lands and buildings or both as units, and bears a definite
relation to it. The decision holds that the State legislature may adopt
the annual or capital value of lands and buildings for determining
the incidence of tax levied under Entry 49 of List II.
273. In Second Gift Tax Officer, Mangalore v. D H Nazareth,342 this
Court dealt with whether Parliament was competent to enact the
Gift Tax Act under its residuary powers. In that case, the owner
of a coffee plantation had made a gift of coffee plantations by a
registered gift deed to his sons. The government demanded gift tax
on the transfer of land title. It was contended that taxes on lands
and buildings under Entry 49 of List II also cover taxes in respect
of gift on lands and buildings. It was further submitted that since the
legislative power of taxing gift of land is traceable to Entry 49 of List
II, Parliament could not have taken recourse to its residuary powers.
Chief Justice M Hidayatullah, speaking for the Constitution Bench,
held that the impugned levy was not a tax directly imposed upon

339 [2016] 11 SCR 172 : (2017) 3 SCC 545 [29]
340 Assistant Commissioner of Urban Land Tax v. Buckingham and Carnatic Co. Ltd. (1969) 2 SCC 55;
Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969) 2 SCC 283 [5]
341 (1968) 69 ITR 897
342 [1971] 1 SCR 195 : (1970) 1 SCC 749 [10]
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lands and buildings, but a tax upon the transmission 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 composite taxes which involve imposition of tax
cumulatively on all assets such as under Entry 86 of List I;
(v) The tax is not a tax on totality, that is, it is not a composite tax
on the value of all lands and buildings;
(vi) The tax is not concerned with the division of interest in the
building or land;
(vii) A tax levied on the activity or service rendered on or in connection
with lands and buildings does not fall within the description of
taxes on lands and buildings under Entry 49 of List II;
(viii) The use to which the land is put does not affect the competence
of the State legislature to tax it; and

343 [1980] 1 SCR 804 : (1980) 2 SCC 410
344 See Union of India v. H S Dhillon (1971) 2 SCC 779 [74]
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(ix) The legislature may take into account the use of land for
determining the measure of taxation under Entry 49 of List II.
a. States can impose tax on mineral bearing land
276. A state does not have to tax everything in order to tax something. The
legislature has a wide discretion is selecting the persons or objects
it wants to tax depending upon social, economic, and administrative
considerations.345 This discretion flows from the fact that a legislature
which is competent to levy a tax must inevitably be given full freedom
to determine “which articles should be taxed in what manner and at
what rate.”346 The power to levy a tax includes ancillary powers such
as the power to fix the rate, prescribe machinery for the recovery
of tax, prevent tax evasion, appoint authorities for collecting taxes,
and prescribe the procedure for determining the amount of taxes
payable by any individual.347 This Court has generally adopted the
approach of giving wide latitude to the legislature in matters of tax
and economic regulations,348 provided the law is reasonable349 and
avoids clear and hostile discrimination against particular persons
or classes.350
277. The power to levy a tax on lands necessarily entails the power
to classify lands sought to be taxed depending upon their use
and productivity. A flat tax on all lands, irrespective of their use or
productivity, may place an unequal burden on owners and occupiers
of land. The need to provide a reasonable classification of lands for
the purposes of the levy of taxes under Entry 49 of List II emanates
from Article 265 of the Constitution which provides that the States
shall not levy taxes except by “authority of law”. The expression “law”
appearing in Article 265 has been interpreted to mean a valid law
which conforms to the other provisions of the Constitution, including
Article 14.351 Consequently, the legislature is competent to classify
properties into categories and tax them differently. In adjudicating

345 East India Tobacco Company v. State of Andhra Pradesh, 1962 SCC OnLine SC 145; Hiralal Rattanlal v.
State of U P (1973) 1 SCC 216 [20]
346 Khyerbari Tea Co. Ltd. v. State of Assam [1964] 5 SCR 975 [44]
347 Khyerbari Tea Co. Ltd. (supra) [19]; Union of India v. A Sanyasi Rao (1996) 3 SCC 465 [16]
348 R K Garg v. Union of India (1981) 4 SCC 675 [8]
349 Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536 [343]
350 Federation of Hotel & Restaurant Association of India v. Union of India (1989) 3 SCC 634 [46]
351 K T Moopil Nair v. State of Kerala, 1960 SCC OnLine SC 7 [7]
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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. This was challenged. Although land appurtenant to a building
such as gardens or grounds were treated as part of the building,
any such land which exceeded thrice the area of the building was
treated as a separate class. Chief Justice S M Sikri, speaking for
the Constitution Bench, held that the State legislature has the right
to classify lands for the purpose of levying taxes:
“13. […] It seems to us that in cities like Bangalore, where
land is scarce, excessive use of land as gardens and
grounds is not in the public interest and the Legislature
can validly tax the excess land on a different and higher
basis. It may in a particular case cause hardship but the
Legislature cannot be denied the right to classify the lands
in such a manner. Three times the area occupied by a
building is not a small area and we are unable to hold that
his figure is not reasonable.”
280. In their natural state, minerals or ores are part of the earth and
remain embedded there unless extracted. It is also established that
“lands” include everything over and below the surface. Therefore,
constitutionally speaking sub-soil minerals also form part of land.

352 Khandige Sham Bhat v. Agricultural Income Tax Officer Kasargod, 1962 SCC OnLine SC 15 [7]
353 [1971] Supp. 1 SCR 502 : (1971) 2 SCC 217
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The subject of taxation in Entry 49 of List II is land as a unit. The
subject of tax in Entry 50 of List II is the mineral rights. Hence, there
is a distinction between the legislative field in in the two entries.
Ultimately, however it must be borne in mind that both Entries 49
and 50 fall within List II and are hence within the domain of the
State legislatures. If the tax is relatable to Entry 50 of List II, the
tax on mineral rights must be consistent with any limitations which
Parliament imposes in a law relating to mineral development. The
interrelationship between Entry 50 of List II with List I, particularly
Entry 54 of that list has been examined in an earlier segment.
281. The legislative competence of the States to tax lands under Entry
49 of List II will not be affected by the MMDR Act. In Western
Coalfields Ltd. v. Special Area Development Authority,354 the
vires of a provision conferring powers on the Municipal Councils
and Municipal Corporations to levy tax on lands and buildings
was challenged. The provision was argued to be invalid because
it allowed the municipalities to tax lands covered by coal mines,
which were the subject of legislation by Parliament under the MMDR
Act and the Coal Mines (Nationalisation) Act 1973355. 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

354 [1982] 2 SCR 1 : (1982) 1 SCC 125
355 “Coal Mines Act”
356 Western Coalfields Ltd (supra) [28]
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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 the State with respect to other subjects
under List II, including taxes on lands and buildings, will not be
affected or controlled by the MMDR Act. Therefore, the legislative
powers of the States to levy a tax falling under Entry 49 of List II
remains unaffected.
iii. Measure of tax
283. Among its elements a tax has to provide for the charge of tax, the
incidence of tax, the measure of the tax and will contain provisions
in the nature of the machinery for assessment and recovery. In Rai
Ramkrishna v. State of Bihar,357 a Constitution Bench of this Court
observed as follows:
“12. […] The objects to be taxed so long as they happen to
be within the legislative competence of the legislature can
be taxed by the legislature according to the exigencies of
its needs, because there can be no doubt that the State
is entitled to raise revenue by taxation. The quantum of
tax levied by the taxing statute, the conditions subject to
which it is levied, the manner in which it is sought to be
recovered, are all matters within the competence of the
legislature, […]”
284. It now a well-settled principle that the determination of the principles
for assessing the amount of tax is within the legislative domain.358 The
quantification or measurement of liability is done on the basis of the
procedures laid down by the competent legislature.359 In situations
where the legislature selects one method out of the many available
for assessing tax, the courts should not strike down the levy on the
ground that the legislature should have adopted another method
unless the method is capricious, fanciful, arbitrary or clearly unjust.360
Although the liability may be quantified or measured in many ways,
there is a clear distinction between the subject matter of a tax and
the standard by which the amount of tax is measured.

357 [1964] 1 SCR 897 : (1963) SCC OnLine SC 31
358 S Kodar v. State of Kerala (1974) 4 SCC 422 [10]
359 Shaktikumar M Sancheti v. State of Maharashtra (1995) 1 SCC 351 [3]
360 Khandige Sham Bhat v. Agricultural Income Tax Officer, Kasargod, 1962 SCC OnLine SC 15 [10]
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285. The pith and substance or true nature and character of the legislation
must be determined with reference to the legislative subject matter
and the charging section.361 The charging section levying a tax and
defining the persons who are liable to pay the tax constitute the core
of a taxing statute.362 The distinction between the nature of tax and
measure of tax can be gathered from the decision of this Court in
Sainik Motors, Jodhpur v. State of Rajasthan.363 In that case, the
petitioners challenged the levy of taxes on passengers and goods
by the State legislature. The charging 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 the adoption of the annual letting value as
the standard for fixing the tax rate did not necessarily make it a tax
on income. The learned Judge further observed that the standard
on which the tax is levied does not determine the nature of the tax.
287. In Ralla Ram v. The Province of East Punjab,366 the issue that fell
for consideration of the Federal Court was whether the provisions

361 Federation of Hotel & Restaurant Association of India v. Union of India (1989) 3 SCC 634 [37]
362 B Shama Rao v. Union Territory of Pondicherry, 1967 SCC OnLine SC 29
363 [1962] 1 SCR 517
364 R R Engineering Co. v. Zilla Parishad, Bareilly (1980) 3 SCC 380 [16]
365 1942 SCC OnLine Bom 30
366 1948 SCC OnLine FC 9
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Mineral Area Development Authority & Anr. v.
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of the Punjab Urban Immoveable Property Tax Act 1940 were ultra
vires the legislative powers of the Provincial Legislature. Section 3
of the legislation levied a tax on lands and buildings at a rate not
exceeding twenty percent of the annual value. It was contended
that the levy was in substance a tax on income since the measure
adopted, that is the annual value of lands and buildings, was also
used to calculate income from property. Justice Fazl Ali observed that
annual value is not necessarily actual income, but only a standard
by which income may be measured. The learned Judge analyzed
the substance of the impugned levy to observe that the legislation
used annual value merely for the purpose of determining the value
of the property to be taxed. The Court observed that if a tax is levied
on property, it would not be irrational to correlate it to the value of
the property and to make some kind of annual value the basis of
the tax without intending to tax income. The levy was held to be
in pith and substance a tax on land and buildings even though the
basis of the tax was similar to the one adopted to measure income.
288. From the above discussion, we can derive the following principles:
(i) the incidence of a tax on lands and buildings will likely be on the
owner or occupier, as the case may be; (ii) the legislature may adopt
a suitable measure for levying the tax on lands and buildings under
Entry 49 of List II; and (iii) the measure adopted by legislature does
not determine the nature of the tax.
289. In recent decades, this Court has held that there ought to be a
“nexus” between the nature of tax and the measure of tax. In Union
of India v. Bombay Tyre International Ltd.,367 the issue before a
three-Judge Bench of this Court was whether the value of an article
for the purposes of excise duty must be determined exclusively
with reference to the manufacturing cost and manufacturing profit
of the manufacturer or the entire wholesale price368 charged by the
manufacturer. The assesses 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

367 [1984] 1 SCR 347 : (1984) 1 SCC 467 [14]
368 The wholesale price actually charged by the manufacturer consisted of not merely the manufacturing
costs and manufacturing profit but included, in addition, a whole range of expenses and an element
of profit (conveniently referred to as “post-manufacturing expenses” and “post-manufacturing profit”)
arising between the completion of the manufacturing process and the point of sale by the manufacturer.
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urged that the post-manufacturing 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
nature of the tax and the means available with the legislature to
design the measure of the tax. Since the measure of the levy is a
matter of legislative policy and convenience,370 the reasonability of
the nexus between the measure and tax has to be determined by
the courts on a case-to-case basis. While doing so, the Court will
bear in mind the fundamental principle that the legislature possesses
a broad discretion in matters of fiscal levies.
a. Taxing mineral-bearing land
291. The tax on lands and buildings under Entry 49 of List II is often
measured with respect to the income derived from the land or building
sought to be taxed. The income derived from land or building is
normally measured in terms of the annual value. Section 23 of the
Income Tax Act provides that the annual value of property shall be
deemed to be the sum for which the property might reasonably be
expected to let from year to year.371 Thus, where a land or building
is let, the valuation is based on the rent at which it is let.372

369 [2018] 6 SCR 1099 : (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]
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Mineral Area Development Authority & Anr. v.
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292. In K T Moopil Nair v. State of Kerala,373 Chief Justice B P Sinha
observed that a tax on land or land revenue is assessed on the
actual or potential productivity of the land sought to be taxed. The
decision noted that a tax has reference to the income actually made
or which could have been made. Thus, the principle emanating from
this decision is that a tax under Entry 49 of List II may be levied on
the actual or potential productivity of the land. In State of Kerala v.
Haji K Kutty Naha,374 there was a challenge to the Kerala Buildings
Act 1961 which levied tax on buildings in the state based on the
floor area. This Court observed that the legislature did not take
into consideration factors such as the class to which the building
belonged, the nature of construction, the purpose for which it was
used, its situation and capacity for profitable user and other relevant
circumstances which had a bearing on matters of taxation. It was held
that the statute was unconstitutional for treating dissimilar objects
similarly. Haji K Kutty Naha (supra) recognized that a tax on lands
and buildings must be measured by taking into consideration relevant
factors related to the use of the lands or buildings.375
293. In Spencer & Co. (supra), the validity of a property tax assessed at
0.4 percent of the market value was challenged before this Court.
It was urged that the levy of 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

373 [1961] 3 SCR 77 : 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]
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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 was
measured on the basis of “two annas in the rupee of the annual
rent value of all such lands in the district.” In case of lands held
directly from the Government, the annual rent value was defined
as the assessment, lease amount, royalty or other sum payable
to Government. Justice N Rajagopala Ayyangar, speaking for the
Constitution Bench distinguished the decisions in Hingir-Rampur
(supra) and M A Tulloch (supra) on the ground that the land cess:
(i) was not concerned with the development of mines and minerals;
(ii) was not collected for development of mining areas, but for the
safety, health, convenience, and education of the inhabitants in
the local area; and (iii) there was nothing in common between the
impugned levy and the MMDR Act. Therefore, it was held that the
operation of MMDR Act did not exclude the legislative competence
of the State to levy the cess.
296. The petitioners argued in H R S Murthy (supra) that (i) the cess
was payable only when the mining lessee paid royalty to the lessor;
(ii) when no minerals were extracted, no royalty was payable; and
(iii) the cess in effect was a tax on mineral rights. These contentions
were rejected because: (i) the levy was in nature and substance
a tax on land; (ii) the levy had a remote relationship to mining
and to the mineral won from the mine under a contract by which
royalty was payable on the quantity of mineral extracted, which
did not make it a tax on either the extraction of mineral or on the
mineral rights; and (iii) the rent value of a land held under lease is
calculated on the basis of the lease amount. In case of a land held
under a mining lease, the rent value will include the surface rent,
dead rent as well as the royalty payable by the lessee or occupier
for the use of the property. The decision in H R S Murthy (supra)
supports the position that royalty can be used as a measure to tax
mineral bearing land.

376 Ahmedabad Municipal Corporation v. GTL Infrastructure Limited (2017) 3 SCC 545 [19]
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Mineral Area Development Authority & Anr. v.
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297. The issue of taxing mineral bearing land under Entry 49 of List
II also came up before this Court in India Cement (supra). To
recap, in India Cement (supra) local cess levied by the State
legislature was measured with respect to the land revenue payable
to the Government. The definition of land revenue included royalty.
Therefore, the issue before the seven-Judge Bench was whether the
levy of cess on royalty was valid. Speaking for the majority, Justice
Sabyasachi Mukharji observed that 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 7. And sub-section 3
provided that in case of lands held for carrying on mining operations,
annual value shall be the royalty or as the case may be, the
dead rent payable by the person carrying on mining operations
to the government, or the Pit’s mouth value wherever it has been
determined.
299. Speaking for the three-Judge Bench, Justice S Ranganathan observed
that there is a difference in principle between a tax on royalties
derived from land and a tax on land measured by reference to the
income derived from land. The Court observed that the levy was not
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measured by income derived by the assessee from land, as was
the case with lands other than mineral lands, but by royalty paid in
respect of the land by the assessee to the lessor. The Court relied
on India Cement (supra) to hold that royalty cannot be used as a
measure to tax mineral-bearing land:
“33. […] But the question, what is it that is really being
taxed by the legislature? So far as mineral-bearing lands
are concerned, is the impact of the tax on the land or on
royalties? The change in the scheme of taxation under
Section 7 in 1976; the important and magnitude of the
revenue by way of royalties received by the State; the
charge of the cess as a percentage and, indeed, as
multiples of the amount of royalty; and the mode and
collection of the cess amount along with the royalties
and as part thereof are circumstances which go to show
that the legislation in this regard is with respect to royalty
rather than with respect to land.”
300. In Federation of Mining Associations of Rajasthan v. State of
Rajasthan,377 a three-Judge Bench relied on India Cement (supra)
and Orissa Cement (supra) to declare that the State legislature did
not have competence to a levy tax on mineral bearing land on the
basis of the royalty derived from the land.
301. In the aftermath of the decision in Orissa Cement (supra), the State
legislature of Orissa enacted the Orissa Rural Employment, Education
and Production Act 1992 to increase the income of the State and
compensate the loss faced by the exchequer. The legislation levied
a cess on “all lands”. Land was defined to mean “land of whatever
description […] and includes all benefits to arise out of lands.” In
Mahanadi Coalfields (supra) this Court held that since ‘minerals’ are
benefits arising out of land, the charging section imposed a tax on
minerals.378 The levy was held in substance 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.

377 (1992) Supp. 2 SCC 239 [5]
378 Mahanadi Coalfield Ltd. (supra) [19]
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Mineral Area Development Authority & Anr. v.
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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 assumption is also wrong for the reasons we will discuss in
the ensuing segments.
b. Goodricke
303. Apart from income, the quantum of yield or produce of the lands may
also be used to measure the amount of tax. In Buxa Dooars Tea
Co. Ltd. v. State of West Bengal,379 the levy of ‘rural employment
cess’ on tea estates under the West Bengal Rural Employment and
Production Act 1976 was challenged.380 The measure of tax of the
levy was based on the quantity of tea dispatched from the estate.
The issue before a two-Judge Bench was whether the levy was
in respect of tea estates or on the dispatch of tea. The Court held
that the measure of the levy defined in terms of the weight of the
tea dispatched from the estate had no nexus with the nature of the
tax, that is, a tax on land estates. Therefore, it was held that what
the legislation really contemplated was a levy on dispatches of tea.
304. In view of Buxa Dooars Tea (supra), the State legislature enacted the
West Bengal Taxation Laws (Second Amendment) Act 1989 to amend
the Act of 1976. The amendment provided that the rural employment
cess would be levied annually on a tea estate at a rate of twelve
paise for each kilogram of green tea leaves produced at the estate.
In comparison with the previous provision which measured the tax

379 [1989] 3 SCR 293 : (1989) 3 SCC 211
380 “1976 Act”
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on the basis of the quantity of tea dispatched, the measure of the
cess in the amended provision was the production of green leaves.
305. The amended provision was challenged before this Court in Goodricke
Group Ltd v. State of West Bengal.381 The primary issue before this
Court was whether the impugned levy was a levy on lands within the
meaning of Entry 49 of List II of the Seventh Schedule. Justice B P
Jeevan Reddy, speaking for the three-Judge Bench, observed that the
income or yield of a land or building can be taken as a measure of
the tax on land and buildings. Hence, the measure of the tax based
on the yield from the land was held to be valid:
“20. […] In the case before us, the cess is no doubt
calculated on the basis of the yield – for every kilogram
of tea leaves produced in a tea estate, a particular cess
is levied. But that is a well-accepted mode of levy of tax
on land. The tax is upon the land – upon the “tea estate”
which is classified as a separate category, as a separate
unit, for the purpose of levy and assessment of the said
cess quantified on the basis of the quantum of produce
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.”

381 [1994] Supp. 6 SCR 120 : (1995) Supp. 1 SCC 707
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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, does this preclude the State legislature from using
royalty as a measure of taxes on mineral-bearing land? We will deal
with this issue in greater detail in a later part of the judgment.
308. Another argument which was addressed in Goodricke (supra) was
that no land cess can be levied if there is no yield from the tea
estate. Justice Jeevan Reddy negatived this contention by observing
that a tea estate will not yield produce if it is not properly tended
and nurtured. However, an ordinary prudent owner or occupier of a
tea estate would take care to properly nurture of the estate. When
tax is measured on the basis of the quantum of production, there
is a probability that the tax collected would vary depending upon
the amount produced. However, the learned Judge observed that
uniformity of taxation is not an essential condition. Goodricke (supra)
adopted the standard of an ordinary prudent person to infer that the
tea estate will generally be properly nurtured. When the yield from
land is used as a measure of the tax on land, the tax is essentially
assessed on the actual or potential productivity of the land. The
majority in Kesoram (supra) approved Goodricke (supra). We will
deal with the relevance of the reasoning in Goodricke (supra) in the
context of mineral-bearing land in the following segment.
309. The other issue in Goodricke (supra) was the effect of the declaration
in Section 2 of the Tea Act 1953 on the competence of the State
legislature to levy the land cess. Parliament had enacted the Tea Act
in pursuance of Entry 52 of List I of the Seventh Schedule. Section
2 declares that the Union is taking under its control the tea industry
in the public interest. Section 25 imposes a duty of excise on all tea
produced in India at a rate not exceeding fifty paise per kilogram as
the Central Government may notify.382 The proviso to Section 25(1)

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 producing such varieties
or grades of tea and any other circumstances applicable to such production.
(2) The duty of excise levied under sub-section (1) shall be in addition to the duty of excise leviable on
tea under the Central Excises and Salt Act, 1944 (1 of 1944), or any other law for the time being in force.
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empowers the Central Government to prescribe different rates of
cess for different varieties or grades of tea. The issue was whether
the levy under Section 25 (which is measured on the basis of the
quantum of tea produced) denuded the State legislature of the
competence to impose a cess on land adopting the same measure.
310. The Court observed that both the levies are different – while excise
duty is on the produce of the land, land cess is a tax on land. Section
25 of the Tea Act enacted by Parliament was held not to deprive 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 of tax on land because minerals are effectively
decoupled from mineral-bearing lands by land reform legislation
enacted by the States. It was submitted that the decoupling occurred
when the minerals were legally vested in the State. Consequently, it
was submitted that since the right to minerals vests with the State,
the value of minerals cannot be used as a measure to tax land.
Another interesting point of submission on behalf of the respondents

(3) The provisions of the Central Excises and Salt Act, 1944 (1 of 1944), and the rules made thereunder,
including those relating to refund and exemption from duty, shall, so far so may be, apply in relation to
the levy and collection of the duty of excise under this section as they apply in relation to the levy and
collection of the duty of excise on tea under the said Act.”]
[2024] 7 S.C.R. 1733

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

was that when the State transfers the mineral rights to the lessee
under a mining lease, the lessee acquires the right to the minerals
only upon their extraction and payment of royalty.
313. The petitioners rebut the above submissions of the respondents by
arguing that there is no provision under the MMDR Act providing for
notional segregation of minerals from land. It was contended that the
land and minerals remain legally and naturally intertwined until the
minerals are extracted from the land in exercise of mineral rights.
The decoupling occurs only when a lessee exercises their mining
rights to work the mines and win the sub-soil minerals. Moreover,
it was submitted that under a mining lease, the lessee is granted a
lease of the demised area along with the mineral rights. The logical
corollary to the petitioners’ argument is that the lessee acquires the
rights to the minerals at the signing of the mining lease and therefore,
the value of minerals can be validly used as a measure for taxing
mineral bearing land.
314. In view of the above submissions, the first issue that we need to
address is whether a mining lease also comprises a lease of land
along with the mineral rights. Section 3(ac) of the MMDR Act defines
“leased area” to mean the area specified in the mining lease within
which the mining operations can be undertaken and includes the
non-mineralised area required and approved for activities falling under
the definition of “mine”. There are other provisions under the MMDR
Act which also deal with mineral bearing land. Section 6 prescribes
the maximum area with respect to which a mineral concession
may be granted. Thus, determination and ascertainment of land
area is the first step towards the grant of a mineral concession.383
Section 9 fixes the rate of royalty in respect of any mineral removed
or consumed by the lessee or their agent from the leased area.
Section 9-A envisages the payment of dead rent “for all 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

383 See Kaviraj Basudevanand v. Mahant Harihar Gir, (1974) 2 SCC 514 [9]. [This Court held that the mining
lease will have to conform to the provisions of Section 6 of the MMDR Act regarding the maximum area
for which the mining leave will have effect.]
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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 the State. To remedy such situations, Rule 72 of the
Mineral Concession Rules mandates the holder of a mining lease
to pay annual compensation to the occupier of the surface rights.
The provision states that in case of agricultural land, the amount
of annual compensation shall be worked out on the basis of the
average annual net income from the cultivation of similar land for the
previous three years. In case of non-agricultural land, the amount
of annual compensation shall be worked out on the basis of the
average annual letting value.
316. Under the scheme of the MMDR Act, the mining lease holder is
required to obtain the surface rights where the land is not owned by
them. For instance, Rule 22 of the Mineral Concession Rules deals
with the applications for grant of mining leases. Rule 22(3)(h) requires
the applicant for grant of mineral rights to submit a statement in writing
stating that they have obtained surface rights over the area or have
obtained the consent of the owner for starting mining operations in
case the lessee is not the owner.384 A similar pre-condition has been
laid down with respect to the grant of a prospecting licence.385 Further,

384 Rule 22(3)(h), Mineral Concession Rules 1960. It reads: “(h) a statement in writing that the applicant has,
where the land is not owned by him, obtained surface rights over the area or has obtained the consent
of the owner for starting mining operation.
Provided further that the consent of the owner for starting mining operations in the area or part thereof
may be furnished after the execution of the lease deed but before entry into the said area;
Provided also that no further consent would be required in the case of renewal where consent has
already been obtained during grant of the lease.”
385 Rule 9(2)(g), Mineral Concession Rules 1960.
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Rule 27(1)(t) requires the mining lessee to pay to the occupier of the
surface of the land such compensation as may become payable under
the Mineral Concession Rules. Importantly, Rule 36 states that the
boundaries of the area covered by a mining lease shall run vertically
downwards below the surface towards the centre of the earth. Thus,
the sub-soil activities are spatially restricted by the surface area.
317. The government can acquire surface rights for public purposes,
including mining, and lease it to the lessee. The acquisition of
surface rights by the Government takes place in accordance with
the land acquisition legislations. For example, the Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation
and Resettlement Act 2013 empowers the Government to acquire
land in any area for any public purpose.386 In case the owner is a
private person, the surface right could be granted to the mining
lessee by virtue of a separate lease deed. The rights to the surface
will generally be concomitant with the rights to the minerals.
318. The issue of severance between surface rights and mineral rights
came up before a Constitution Bench of this Court in Burrakur Coal
Co. Ltd. v. Union of India387 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

386 See Sections 11 and 12, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation
and Resettlement Act 2013.
387 [1962] 1 SCR 44 : AIR 1961 SC 954
388 “Coal Bearing Areas Act”
389 Section 10, Coal Bearing Areas (Acquisition and Development) Act 1957
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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 Government
acquires the surface rights to the coal bearing lands.
319. In Burrakur Coal (supra), the petitioners challenged a notification
issued by the Central Government under Section 4 of the Coal
Bearing Area Act for violation of fundamental rights. The main thrust
of the petitioner’s submissions was that a notification under Section
4 cannot be issued with respect to mines which have been ‘worked’
by the lessees. The petitioners also contended that since Section 13
does not provide for compensation for minerals lying underground,
Parliament could not have enacted the law for acquiring the mines
which are being worked or already worked in the past. Speaking
for the Bench, Justice J R Mudholkar addressed the petitioner’s
contentions as follows:
“17. […] According to Mr. Das if we have understood him
right, when a person has acquired land either as an owner
or as a lessee carrying with it the right to win minerals
and has opened in that land mines which he worked for
sometime, there takes place a severance between the
right to the surface and right to the minerals and that
consequently such person will thereafter be holding the
minerals as a separate tenement, that is, something apart
from the land demised and this separate tenement cannot
be acquired under the terms of the present Act or, if it
can be so acquired, it has to be specifically compensated
for. Reference to the several provisions of the Act and in
particular to those of Section 13 indicates, according to the
learned counsel, the limited scope of the Act. It is difficult
to appreciate the contention that merely because the
owner or lessee of a land had opened mines on that
land, a severance is effected between the surface and
the underground minerals. It may be that a trespasser
by adverse possession for the statutory period can
acquire rights to underground minerals. It may also be
that if that happens the surface rights would become
severed from the mineral rights as a result of which
the minerals underground would form a separate
tenements. It is, however, difficult to see how the owner
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or the lessee of land who has right to win minerals can
effect such severance between the mineral rights and
surface rights by opening and operating the mines
of that land. For, even while he is carrying on mining
operations he continues to enjoy the surface rights
also. We cannot, therefore, accept the contention 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 of a mining lease,
the State Government transfers its rights in the sub-soil minerals to
the lessee for the period of the lease. The nature of the leasehold
rights accruing to the lessee can be determined on the basis of the
Transfer of Property Act. A right to carry on mining operations in land
to extract a specified mineral and to remove and appropriate that
mineral is a “right to enjoy immoveable property” within the meaning
of Section 105 of the Transfer of Property Act.391 In case of a mining

390 Gujarat Land Revenue Code 1879, Section 69A; Madhya Pradesh Land Revenue Code 1959, Section
247; Chhattisgarh Land Revenue Code 1959, Section 247, Goa, Daman and Diu Land Revenue Code
1968, Section 36.
391 Sri Tarkeshwar Sio Thakur Jiu (supra) [37]
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lease, the property can be enjoyed by working the mine as indicated
in Section 108 of the Transfer of Property Act.
322. Section 110 of the Transfer of Property of Act deals with the exclusion
of the day on which the term of the lease commences. It provides
that where the time limited by a lease of immoveable property is
expressed as commencing from a particular day, in computing that
time such day shall be excluded. It further provides that in situations
where the lease does not mention the day of commencement, the
time limited by the lease commences from the day of the making
of the lease. The model mining lease under Form K specifies the
day from which the mineral rights are granted and demised unto
the lessee. Thus, the transfer of right to enjoy the property under a
mining lease commences from the specified day of commencement.
Resultantly, the rights and interests in the minerals specified in the
mining lease are transferred from the State Government to the lessee
on the specified day of the commencement of the lease deed.
323. Once the interest in the minerals is transferred under a mining
lease, the lessee acquires the right to work the mine and win the
minerals. It is through this process of working the mine and winning
of minerals that minerals are extracted or obtained from the earth
irrespective of whether such activity is carried out on the surface
or in the bowels of the earth.392 Although the title to minerals vests
in the State Government, the mining lease transfers the interest in
the mineral from the State Government to the mining lessee. During
the whole process, the minerals continue to remain embedded
in the earth, either over or above. Thus, there is no decoupling
of minerals from land. It is well established that tax on land can
also be imposed on an occupier. When a mining lease is granted,
the lease holder necessarily has to occupy the surface 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

392 Sri Tarkeshwar Sio Thakur Jiu (supra) [15]
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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 comprehensive term which includes
mineral bearing land. If the State can tax mineral bearing land, the
concomitant issue pertains to the measure of the tax. One of the
arguments which directly or indirectly flows from the respondents
is that since royalty is measured on the basis of the quantity of
minerals produced or mineral value, the State cannot be allowed to
use minerals produced as the measure to tax mineral-bearing land.
326. To understand the practice of valuation of mineral-bearing land,
a reference to the English law is useful. In England, a rate has
been historically assessed on the occupier of lands for beneficial
occupation. Rating is a tax on the occupation of lands and is levied
on the basis of the value of the occupation of the hereditament (the
single unit of rateable property).393 The standard or the measure is
the means of finding out the value of the occupation for the purposes
of assessment.394 The rateable value of hereditaments is statutorily
determined as the amount equal to the rent at which it is estimated
that the hereditament might reasonably be expected to let from year
to year. The object is to ascertain the rent which might reasonably
be expected for the hereditament on a statutory basis.395 In case
of mineral hereditaments, royalty payment constitutes evidence of
rental value for rating purposes.396 Mineral royalties are regarded as
rents for the purpose of assessing mineral hereditaments.

393 Peter Brown and Patrick Bond, ‘Rating Valuation: Principles and Practice) (3rd edn, Elsevier) 13.
394 Assessment Committee of the Metropolitan Borough of Poplar v. Roberts [1922] 2 AC 93
395 Peter Brown and Patrick Bond (supra n 393) 284.
396 Section 5, Non-Domestic Rating (Miscellaneous Provisions) Regulations 1989.
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327. Royalty is not a tax but a statutory consideration payable by the lessee
to the lessor for the exercise of mineral rights. The specification of rates
of royalty with respect to major minerals under the MMDR Act limits
the powers of the State Government in terms of Entry 54 of List I read
with Entry 23 of List II. However, Entry 49 of List II is not restricted or
subjected in its operation by any other entry – the State legislature can
tax any lands including mineral bearing lands. If the Constitution does
not impose any express limitations on the taxing powers of the State to
tax mineral bearing lands, it would not be constitutionally permissible
for the Court to read in an implied restriction. The power of taxation
is plenary and exclusive. The division of legislative powers between
the Union and States represents the essence of fiscal federalism.
Reading any implied limitation or restriction on the legislative power
of the State legislature 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 mineral-bearing 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 formula –

Royalty = quantity of mineral removed or dispatched * specified
rate of royalty in rupees

397 Union of India v. Pramod Gupta (2005) 12 SCC 1 [75]. [In this case, Justice S B Sinha, writing for a two-
Judge Bench, observed that “[m]ineral bearing land, thus, contain mineral as the product of nature.”]
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Mineral Area Development Authority & Anr. v.
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The formula for calculation of royalty on minerals on ad valorem
basis is as follows:

Royalty = sale price of mineral (grade wise and State-wise)
published by the Indian Bureau of Mines * Rate of royalty
(in percentage) * total quantity of mineral grade produced or
dispatched

330. The above formula shows that royalty is calculated on the basis
of the quantity of minerals extracted or removed.398 The yield from
mineral bearing land is nothing but the quantity of mineral produced.
Royalty is per se not the yield from a mineral bearing land, but the
yield (mineral produced) is the important factor in determination of
the rate of royalty. Moreover, royalty can be considered as an income
if it is paid to a private landowner.399 In case the minerals are vested
in the State, the royalty is paid to the State Government, and hence
assumes the form of non-tax revenues. Therefore, royalty is relatable
to the yield of the mineral-bearing land as well as the income in case
the minerals vest in a private person. To this extent, we clarify the
reasoning of this Court in Goodricke (supra).
331. In India Cement (supra), it was held that royalty cannot be a measure
for tax on land because it is indirectly connected with land.400 In our
opinion, this holding is not correct in view of the fact that royalty is
directly relatable to the yield of the mineral bearing land. Royalty is
calculated on the basis of the output of the mineral produced. Since
the yield of the land is directly connected to the land, a rate fixed on
the basis of the yield cannot be said to be indirectly connected to
the land. Similarly, Orissa Cement (supra) held that since royalty is
not an income derived from land, it cannot be used to measure the
tax on land.401 Royalty may not be an income in all aspects, but it is
directly relatable to the yield of the land. The yield can be adopted
as the basis for levy of tax on land. The decision in Orissa Cement
(supra) has followed a narrow approach to the concept of royalty.
Therefore, we hold that the yield of a mineral bearing land, either in
terms of the quantity of mineral produced, or in terms of the rates of

398 Indian Bureau of Mines, ‘Mineral Royalties’ (2011) 4.
399 H M Seervai, Constitutional Law of India, Volume 3 (4th edn.) 2468.
400 India Cement (supra) [23]
401 Orissa Cement (supra) [30]
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royalty, can be used as a measure to tax the mineral bearing land
under Entry 49 of List II.
332. The next submission of the respondents is that a tax measured on
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 prohibit
the State legislature from taxing capital value of lands and buildings
under Entry 49 of List II. It was further held that: (i) the tax under
Entry 86 of List I proceeds on the principle of aggregation of assets
and is imposed on the totality of the value of all assets bearing no
definable relationship to lands and buildings which may or may not
form a component of the total assets of the assessee; and (ii) Entry
49 of List II contemplates a levy which is a tax directly on lands and
buildings as units. The Court held:
“4. […] For the purpose of levying tax under Entry 49,
List II the State Legislature may adopt for determining
the incidence of tax the annual or the capital value of the
lands and buildings. But the adoption of the annual or
capital value of lands and buildings for determining tax
liability will not make the fields of legislation under two

402 Goodricke Group Ltd. (supra) [32]
403 [1970] 1 SCR 268 : (1969) 2 SCC 55
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entries overlapping. The two taxes are entirely different in
their basic concept and fall on different subject-matters.”
Thus, a measure which is relatable to another taxing entry in List I
or List II can also be used as a measure to tax lands under Entry 49
of List II, provided there is a reasonable nexus between the measure
and the levy. The mere fact that the legislature uses mineral rights
or mineral produced as a measure of taxation under Entry 49 of
List II does not give such tax the color of taxes on mineral rights
or mineral produced. It still continues to remain a tax on mineral-
bearing land as a unit.
334. It is true that the rate of royalties will vary with the output of minerals.
In such a situation, it might be argued, there is a possibility that
if royalty is a measure of tax on land, no tax can be levied if no
mining activities is carried on. As discussed in the above segments,
royalty is directly related to the mineral output and is an indicator
of the actual productivity of a mineral bearing land. It is ordinarily
expected that a prudent holder of a mining lease will exercise their
mineral rights to the fullest extend in accordance with the terms
and conditions of the mining lease. The machinery selected by the
legislature to assess the tax cannot determine the true nature of
the tax. The issue of selecting the appropriate measure of tax is a
matter of fiscal policy.404 Sometimes, the method selected by the
legislature to measure a tax may be imperfect, but that does not
imply unconstitutionality.
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

404 P M Ashwathanarayana Setty v. State of Karnataka (1989) Supp. 1 SCC 696 [84]
405 [1997] Supp. 4 SCR 222 : (1997) 8 SCC 360
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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
non-forest purpose, transported or dumped at a place other than the
place from where the same was taken. This Court relied on Orissa
Cement (supra) and Mahanadi Coalfields (supra) to hold that the
tax was outside the ambit of Entry 49 of List II. It was held:
“15. Applying the ratio of the aforesaid decisions to the
facts of the present case we find that the position is no
different. Entry 49 of List II has been interpreted to mean
the levy of tax directly on land as a unit. The land has been
regarded as meaning the land on surface and also below
the surface. Therefore, in order that a tax can be levied
under Entry 49 of List II it is essential that ‘land’ as
a unit must exist on which the tax is imposed. In the
instant case the tax is, in effect, being levied not on
land but on the absence of land. The levy is on the void
which has been created. The forest land which is being
used is not subjected to tax. The Schedule to the Act itself
shows that the assessment of tax is on excavation and
use of forest land for non-forest purpose. The Schedule
further says that the rate of tax to be levied, in the case
of mining or excavation varies with the extent of the land
voided. In case the land has been rehabilitated no tax is to
be levied. The tax is levied in effect on the activity of the
removal or excavation of land. In other words the tax is
squarely on the activity of mining because it is under
the mining lease that mechanized and non-mechanized
excavation as well as underground excavation takes
place and this is what is referred to in column 1 of
the Schedule to the Act while determining the amount
of tax leviable. Levy in other words is on the activity
of removal of earth and not on the land itself and is,
therefore, outside the ambit of Entry 49 of List II.”
(emphasis added)
337. The tax in Indian Aluminium Company (supra), was held not to
be a tax on land, but a tax on the absence of land. It was further
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observed that since the levy was not a tax on land, Goodricke
(supra) had no application because in that case the levy was on
tea estates as a unit.
338. The true nature of a tax has to be gathered from the charging
section. In Indian Aluminium Company (supra), the charging section
provided that the tax was levied “for mechanical and biological
reclamation of forest land and for rehabilitation so that the land
is reclaimed as far as possible.” Importantly, the provision further
provided that “every occupier responsible for creating void/ voids by
indulging 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 no application
in the instant case because Entries 49 and 50 of List II operate in
different fields. Though Parliament can limit the taxing field entrusted
to the State under Entry 50 of List II through a law relating to mineral
development, the limitation operates on the field of taxing mineral
rights. Such a limitation cannot operate on Entry 49 of List II because
there is no specific stipulation under the Constitution to that effect.
The nature of taxes under both the entries, that is Entries 49 and 50
of List II, are distinct. The Constitution envisages the imposition of
limitations by Parliament on the legislative field of the state of taxes
on mineral rights, and not taxes on lands.
340. There may arise situations where two taxes levied under different
legislative entries may be based on the same measure. In Federation
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of Hotel & Restaurant Association of India v. Union of India,406 it
was held that the fact that two different taxes use the same measure
does not make them identical.
341. In view of the above discussion, we conclude that mineral value or
mineral produce could be used as a measure of the tax on land under
Entry 49 of List II. The fact that Entry 50 of List II pertains to taxes
on mineral rights would not preclude the State legislature to use the
measure of mineral value or mineral produce under Entry 49 of List
II. The State legislature has legislative discretion to determine the
appropriate measure for the purposes of quantifying taxes, so long as
there is a reasonable nexus between the measure and the nature of
the tax. The measure does not determine the nature of the tax. The
words “lands” under Entry 49 of List II includes mineral bearing land.
The mineral produce is the yield from a mineral bearing land. Since
royalty is determined on the basis of the mineral produce, royalty
can also be used as a measure to determine the tax on royalty. The
fact that the State legislature uses mineral produce or royalty as a
measure does not overlap with Entry 50 of List II.
J. Conclusions
342. In view of the above discussion, we answer the questions formulated
in the reference in terms of the following conclusions:
a. 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;
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;

406 [1989] 2 SCR 918 : (1989) 3 SCC 634
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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. Mineral-bearing land falls within the
description of “lands” under Entry 49 of List II;
f. The yield of mineral bearing land, in terms of the quantity of
mineral produced or the royalty, can be used as a measure to
tax the land under Entry 49 of List II. The decision in Goodricke
(supra) is clarified to this extent;
g. Entries 49 and 50 of List II deal with distinct subject matters
and operate in different fields. Mineral value or mineral produce
can be used as a measure to impose a tax on lands under
Entry 49 of List II;
h. The “limitations” imposed by Parliament in a law relating to
mineral development with respect to Entry 50 of List II do not
operate on Entry 49 of List II because there is no specific
stipulation under the Constitution to that effect; and
i. The decisions in India Cement (supra), Orissa Cement (supra),
Federation of Mining Associations of Rajasthan (supra),
Mahalaxmi Fabric Mills (supra), Saurashtra Cement (supra),
Mahanadi Coalfields (supra), and P Kannadasan (supra)
are overruled to the extent of the observations made in the
present case.
343. The Registry is directed to take administrative directions from Hon’ble
Chief Justice of India for placing the matters before an appropriate
Bench.
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Nagarathna, J.
Table of Contents*

01. Constitutional Framework ................................................. 14
02. Interpretation of Legislative Entries ................................... 19
03. Scheme of The MMDR Act, 1957 ...................................... 29
04. Hingir-Rampur .................................................................. 53
05. M.A. Tulloch ...................................................................... 59
06. Baijnath Kedia .................................................................. 63
07. HRS Murthy ...................................................................... 66
08. India Cement .................................................................... 69
09. Laddu Mal ......................................................................... 83
10. Laxminarayana Mining Co. ............................................... 88
11. Orissa Cement .................................................................. 95
12. Mahalaxmi Fabric 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 crystallised to the short point for consideration,

* Ed. Note: Pagination as per the original Judgment.
[2024] 7 S.C.R. 1749

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

namely, whether royalty as envisaged under Section 9 of the
Mines and Minerals (Development and Regulation) Act, 1957 (for
short “MMDR Act, 1957”) is a tax or an exaction. At this stage
itself, it must be made clear that the concept of royalty is being
considered from the perspective of Section 9 of the MMDR Act,
1957 and not from any other context. My short answer is that
viewed from the statutory framework of the MMDR Act, 1957
passed by the Parliament on the strength of Entry 54 – List I of
the Seventh Schedule of the Constitution of India and having
regard to Section 2 of the said Act, royalty is in the nature of
a “tax” or an “exaction”. Further, Section 9 of the MMDR Act,
1957 is a limitation within the meaning of Entry 50 – List II of
the Seventh Schedule of the Constitution and the States have
no legislative competence to levy any other tax, impost or fee
on the exercise of mineral rights. Entry 49 – List II is also not
applicable to mineral bearing lands. Therefore, India Cement
Limited vs. State of Tamil Nadu, (1990) 1 SCC 12 : AIR
1990 SC 85, (“India Cement”), has been correctly decided
by a seven-judge Bench of this Court and that the majority
judgment in State of West Bengal vs. Kesoram Industries
Limited, (2004) 10 SCC 201 (“Kesoram”), is incorrect and
therefore, ought to be overruled. I propose to discuss in detail
the reasons for the aforesaid view.
2. The genesis of this controversy insofar as the reference to the
nine-judge Bench is concerned, emanates from the judgment of
the seven-judge Bench of this Court in India Cement. The said
judgment authored by Sabyasachi Mukharji, J. (as His Lordship
then was) held that royalty is a tax and therefore, any levy of a
tax/cess on royalty is impermissible in law, having regard to the
constitutional framework, particularly the relevant Entries of List I
and II of the Seventh Schedule to the Constitution of India. The
said dictum of the seven-judge Bench was doubted in Kesoram,
by a majority of the five-judge Bench (Sinha, J. dissenting). The
majority judgment was penned by Lahoti, J. (as His Lordship then
was). Consequently, the judgment of a two-judge Bench in State of
Madhya Pradesh vs. Mahalaxmi Fabric Mills Ltd., 1995 Supp (1)
SCC 642 (“Mahalaxmi Fabric Mills”) following India Cement was
overruled and it was observed that the matter required consideration
by a larger Bench.
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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
contain any provision which operates as a limitation
on the field of legislation prescribed in List II Entry 50
of the Seventh Schedule of the Constitution of India?
In particular, whether Section 9 of the aforementioned
Act denudes or limits the scope of List II Entry 50?
4. What is the true nature of royalty/dead rent payable
on minerals produced/mined/extracted from mines?
5. Whether the majority decision in State of W.B. v.
Kesoram Industries Ltd. [(2004) 10 SCC 201] could
be read as departing from the law laid down in the
seven-Judge Bench decision in India Cement Ltd. v.
State of T.N. [(1990) 1 SCC 12]?
6. Whether “taxes on lands and buildings” in List II
Entry 49 of the Seventh Schedule to the Constitution
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contemplate a tax levied directly on the land as a unit
having definite relationship with the land?
7. What is the scope of the expression “taxes on mineral
rights” in List II Entry 50 of the Seventh Schedule to
the Constitution?
8. Whether the expression “subject to any limitations
imposed by Parliament by law relating to mineral
development” in List II Entry 50 refers to the subject-
matter in List I Entry 54 of the Seventh Schedule to
the Constitution?
9. Whether List II Entry 50 read with List I Entry 54 of
the Seventh Schedule to the Constitution constitute
an exception to the general scheme of entries relating
to taxation being distinct from other entries in all the
three Lists of the Seventh Schedule to the Constitution
as enunciated in M.P.V. Sundararamier & Co. v.
State of A.P. [AIR 1958 SC 468 : 1958 SCR 1422]
[AIR p. 494 : SCR at p. 1481 (bottom)]?
10. Whether in view of the declaration under Section
2 of the Mines and Minerals (Development and
Regulation) Act, 1957 made in terms of List I Entry
54 of the Seventh Schedule to the Constitution and
the provisions of the said Act, the State Legislature
is denuded of its power under List II Entry 23 and/
or List II Entry 50?
11. What is the effect of the expression “… subject to
any limitations imposed by Parliament by law relating
to mineral development” on the taxing power of the
State Legislature in List II Entry 50, particularly in
view of its uniqueness in the sense that it is the
only entry in all the entries in the three Lists (Lists
I, II and III) where the taxing power of the State
Legislature has been subjected to “any limitations
imposed by Parliament by law relating to mineral
development”?.”
That is how the questions have been placed for consideration of
this nine-judge Bench.
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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-judge Bench,
five issues have been encapsulated in paragraph 5 of the judgment
of the learned Chief Justice of India which read as under:
"5. During the course of the hearing, counsel for the
petitioners and respondents agreed that the main
questions that fall for determination by this Court
could be reframed in the following terms:
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.
b. What is the scope of Entry 50 of 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 of List I? Does Section 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 List I, which is a non-taxing general
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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?”
7. As the learned Chief Justice has recorded the submissions of
the respective parties in detail, I need not be repetitive except
highlighting the fact that the learned senior counsel and counsel for
the appellants have contended that “royalty is not a tax” while the
learned senior counsel and counsel for the respondents including the
Attorney General and Solicitor General for the Union of India have
submitted that “royalty is a tax or an exaction” and therefore, the
States are denuded of their power to levy any other levy, impost, tax
or cess on royalty. Therefore, the question which arises is, whether,
payment made for exercise of mineral rights being royalty, is a tax
or an exaction.
Constitutional Framework:
8. Article 265 of the Constitution mandates that no tax shall be levied 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
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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 enumerated in List 1 in
the Seventh Schedule (in this Constitution referred
to as the “Union List”).
(2) Notwithstanding anything in clause (3), Parliament
and subject to clause (1), the Legislature of any State
also, have power to make laws with respect to any
of the matters enumerated in List III in the Seventh
Schedule (in this Constitution referred to as the
“Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of
any State has exclusive power to make laws for such
State or any part thereof with respect to any of the
matters enumerated in List II in the Seventh Schedule
(in this Constitution referred to as the ‘State List’).
(4) Parliament has power to make laws with respect
to any matter for any part of the territory of India not
included in a State notwithstanding that such matter
is a matter enumerated in the State List.”
With regard to the allocation of subjects under the three Lists,
it may be useful to refer to the Devolution rules drawn under
the Government of India Act, 1919 and thereafter, to the
Government of India Act, 1935 which are the precursors to the
distribution of legislative powers between the Union and the
States as per the three Lists of the Seventh Schedule. Some of
the salient aspects concerning the distribution of the legislative
powers between Parliament and State Legislature as per the
three Lists in the backdrop of provisions could be alluded to.
Article 246 of the Constitution deals with the distribution of
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legislative powers between the Union and the States. The said
Article has to be read along with the three Lists, namely, the
Union List, the State List and the Concurrent List. The taxing
powers of the Union as well as the States are also demarcated
as separate Entries in the Union List as well as the State List
i.e. List I and List II respectively. The Entries in the Lists are
fields of legislative powers conferred under Article 246 of the
Constitution. In other words, the Entries define the areas of
legislative competence of the Union and the State Legislature.
(vide: State of Karnataka vs. State of Meghalaya, (2023) 4
SCC 416 para 56), (“State of Karnataka”).
8.2 The legislative power to impose a tax or impost can be
traced to either List I - Union List or List II - State List. List
III - Concurrent List which gives powers to both Union as well
as the States to legislate does not contain any taxation 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-à-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 : Regulation of mines and mineral
development to the extent to which such
regulation and development under the control
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of the Union is declared by Parliament by law
to be expedient in the public interest.
List II – State List
Entry 23 : 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.
xxx xxx xxx
Entry 49 : Taxes on lands and buildings.
Entry 50 : Taxes on mineral rights subject to
any limitation imposed by Parliament by law
relating to mineral development.”
Interpretation of Legislative Entries:
8.4 On the aspect of interpretation of legislative Entries in the
three Lists, the following principles are apposite as discussed
in State of Karnataka.
8.4.1 The power to legislate which is dealt with under Article
246 has to be read in conjunction with the Entries in the three
Lists which define the respective areas of legislative competence
of the Union and State Legislatures. While interpreting these
Entries, they should not be viewed in a narrow or myopic manner
but by giving the widest scope to their meaning, particularly,
when the vires of a provision of a statue is assailed. In such
circumstances, a liberal construction must be given to the
Entry by looking at the substance of the legislation and not
its mere form. However, while interpreting the Entries in the
case of an apparent conflict, every attempt must be made
by the Court to harmonise or reconcile them. Where there is
an apparent overlapping between two Entries, the doctrine of
pith and substance is applied to find out the true character of
the enactment and the Entry within which it would fall. The
doctrine of pith and substance, in short, means, if an enactment
substantially falls within the powers expressly conferred by the
Constitution upon the legislature which enacted it, the same
cannot be held to be invalid merely because it incidentally
encroaches on matters assigned to another legislature. Also,
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in a situation where there is overlapping, the doctrine has to
be applied to determine to which Entry, a piece of legislation
could be related. In order to examine the true character of
enactment or a provision thereof, due regard must be had to
the enactment as a whole and to its scope and objects. It is
said that the question of invasion into another legislative territory
has to be determined by substance 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
category of legislation (vide United Provinces vs. Atiqa Begum,
AIR 1941 FC 16 (“Atiqa Begum”)).
8.4.4 Another important aspect while construing the Entries in
the respective Lists is that every attempt should be made to
harmonise the contents of the Entries so that interpretation of
one Entry should not render the entire content of another Entry
nugatory (vide Calcutta Gas Company vs. State of West
Bengal, AIR 1962 SC 1044 (“Calcutta Gas Company”)). This
is especially so when some of the Entries in a different List or
in the same List may overlap or may appear to be in direct
conflict with each other. In such a situation, a duty is cast on
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the Court to reconcile the Entries and bring about a harmonious
construction. Thus, an effort must be made to give effect to both
Entries and thereby arrive at a reconciliation or harmonious
construction of the same. In other words, a construction which
would reduce one of the Entries nugatory or a dead letter, is
not to be followed.
8.4.5 The sequitur to the aforesaid discussion is that if the
Legislature passes a law which is beyond its legislative
competence, it is a nullity ab-initio. The Legislation is rendered
null and void for want of jurisdiction or legislative competence
vide RMDC vs Union of India, AIR 1957 SC 628 (“RMDC”).
8.4.6 In short, the Entries in the different Lists should be read
together without giving a narrow meaning to any of them. The
powers of the Union and the State Legislatures are expressed
in precise and definite terms. Hence, there can be no broader
interpretation given to one Entry than to the other. Even where
an Entry is worded in wide terms, it cannot be so interpreted
as to negate or override another Entry or make another Entry
meaningless. In case of an apparent conflict between different
Entries, it is the duty of the Court to reconcile them in the first
instance. In case of an apparent overlapping between two
Entries, the doctrine of pith and substance has to be applied
to find out the true nature of a legislation and the Entry within
which it would fall. Where one Entry is made “subject to” another
Entry, all that it means is that out of the scope of the former
Entry, a field of legislation covered by the latter Entry has been
reserved to be specially dealt with by the appropriate legislature.
When one item is general and another specific, the latter will
exclude the former on a subject 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.
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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 and development
under the control of the Union (i.e. Entry 54 - List I).
8.6 However, what is pertinent to be considered in this case is,
Entry 50 - List II in juxtaposition with Entry 54 - List I. As
already noted, Entry 50 - List II is a taxation Entry which
empowers a State Legislature to impose tax on mineral
rights. However, this power of the State Government is
not an absolute power inasmuch as Entry 50 - List II itself
states that the power of the State Legislature to impose tax
on mineral right is “subject to any limitations imposed by
Parliament by law relating to mineral development”. In other
words, if there is any limitation imposed by the Parliament by
law relating to mineral development then that would have an
impact on the legislative competence of the State Legislature
to impose a tax on mineral rights. The key expressions of
Entry 50 - List II are “taxes on mineral rights” and “subject
to any limitations imposed by the Parliament by any law on
mineral development”. Thus, the Parliament can impose any
limitation on the State’s right to impose a tax on mineral rights
by way of a law relating to mineral development. Thus, while
Entry 50 - List II speaks of taxes on mineral rights and is a
taxation Entry empowering States to impose taxes on mineral
rights, the same is not unbridled or absolute but is subject to
any limitation to be imposed by Parliament by law relating to
mineral development. In other words, if Parliament intends
to regulate mineral development in the country, it can do so
by a law made as per Entry 54 - List I and to that extent
the taxation Entry in Entry 50 - List II could be limited and
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the State’s right to impose a tax on mineral rights by a law
would be affected. Thus, a taxation Entry in Entry 50 - List II
can be affected by Entry 54 - List I in the interest of mineral
development by Parliament imposing a limitation on the State’s
right to tax mineral rights. In other words, if the Union has by
a law taken control of, inter alia, mineral development with the
Parliament passing a law, then the State’s power to impose
any tax on mineral rights would, to that extent, be denuded,
if the Parliamentary or Central law creates a limitation to
impose such a tax, if it relates to mineral development. It is in
the above backdrop that the controversy must be considered.
8.7 Exercise of mineral rights have to be consistent with mineral
development 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, therefore, not an absolute one but is subject to
a Parliamentary law enacted as per Entry 54 - List I dealing
with mineral development.
9. The precise question before this Court being, whether, imposition
of royalty envisaged under Section 9 of the MMDR Act 1957, which
is a parliamentary legislation passed by virtue of Entry 54 - List I,
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acts as a limitation imposed by Parliament by law relating to mineral
development and therefore, the State Legislature is denuded of its
powers to impose any other tax or impost on mineral rights. Whether
royalty, which is paid by a lessee to a lessor i.e. the State while
exercising mineral rights is a limitation imposed on State’s power to
impose any other impost, cess or tax on exercise of mineral rights
while undertaking a mining operation and extracting minerals by a
lessee, is the precise question to be answered in the context of the
constitutional framework, the parliamentary law, namely, the MMDR
Act, 1957 and the judgments of this Court.
Scheme of the MMDR Act, 1957:
10. Having analysed the relevant constitutional Entries which have a
bearing on the controversy, it is necessary to refer to the scheme
of and salient provisions of the MMDR Act, 1957 which has been
enacted by Parliament pursuant to Entry 54 - List I. This is apparent
on a reading of Section 2 of the said Act which reads as under:
“2. Declaration as to the expediency of Union control,—
It is hereby declared that it is expedient in the public interest
that the Union should take under its control the regulation
of mines and the development of minerals to the extent
hereinafter provided.”
The expression in Entry 54 - List I “to the extent to which” is also
significant inasmuch as Section 2 of the MMDR Act, 1957 also uses the
expression “to the extent hereinafter provided”. The two expressions
have the same content and are consistent with each other.
10.1 The MMDR Act, 1957 which is a successor to MMRD Act, 1948,
can be briefly considered by referring to various provisions of
the Act. The Preamble of the MMDR Act, 1957 states that the
Act is to provide “for the development and regulation of mines
and minerals under the control of the Union”. Earlier, it read
as “for regulation of mines and the development of minerals”
but by Section 2 (Act 38 of 1999), the above amendment
was made.
10.2 The relevant provisions of the MMDR Act, 1957 could be
adverted to at this stage. The expression ‘minerals’ in Section
3(a)(d) includes all minerals except mineral oils. Section 3(e)
defines ‘minor minerals’ to mean building stones, gravel,
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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) defines “reconnaissance operations” to mean
any operation undertaken for preliminary prospecting of a
mineral through regional, aerial, geophysical or geochemical
surveys and geological mapping, but does not include pitting,
trenching, drilling (except drilling of boreholes on a grid
specified from time to time by the Central Government) or
sub-surface excavation.
10.3 It is observed that the MMDR Act, 1957 specifies the twin
purposes of the Act, namely, (1) the regulation of mines, and
(2) the development of minerals, both under the control of the
Union. Sections 4 to 10 of the Central Act form a group headed
‘General Restrictions on Undertaking Prospecting and Mining
Operations’ and relate to the rules and regulations under which
prospecting licences and mining leases might be granted; the
period for which they may be granted or renewed; the royalties
and fees that would be payable on them etc. The next group
of Sections, namely, Sections 10 to 12 deal with the procedure
for obtaining prospecting licences or mining leases in respect
of land in which minerals vest in the Government. Sections 13
to 17 are grouped under a caption which reads - “Rules for
regulating the grant of Prospecting Licences and Mining Leases”.
Section 13 empowers the Central Government, by notification,
[2024] 7 S.C.R. 1763

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

to make rules for regulating the grant of prospecting licences
and mining leases in respect of minerals and for purposes
connected therewith. Sub-section (2) specifies in particular the
matters for which such rules may provide and among them
is (i) the fixing and collection of fees for mineral concession,
surface rent, security deposit, fines, other fees or charges and
(ii) the time within which and the manner in which the dead
rent or royalty shall be payable, and rules regarding prospecting
licences and mining leases.
10.4 Section 18 deals with the mineral development. Section 18(1)
states that it shall be the duty of the Central Government to
take all such steps as may be necessary for the conservation
and development of minerals in India and for that purpose the
Central Government may, by notification in the Official Gazette,
make such rules as it thinks fit. Section 18(2) talks of rules
providing for the development of mineral resources in any area.
Section 25 provides for the recovery of any rent, royalty, tax or
other sum due to the Government under this Act or the rules
made thereunder 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
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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 Minerals
(Regulation and Development) Amendment Act, 1972
shall not be liable to pay any royalty in respect of any coal
consumed by a workman engaged in a colliery provided
that such consumption by the workman does not exceed
one-third of a tonne per month.
(3) The Central Government may, by notification in the
Official Gazette, amend the Second Schedule so as to
enhance or reduce the rate at which royalty shall be
payable in respect of any mineral with effect from such
date as may be specified in the notification:
Provided that the Central Government shall not enhance
the rate of royalty in respect of any mineral more than
once during any period of three years.
9A. Dead rent to be paid by the lessee.―(1) The holder
of a mining lease, whether granted before or after the
commencement of the Mines and Minerals (Regulation and
Development) Amendment Act, 1972, shall notwithstanding
anything contained in the instrument of lease or in any
other law for the lime being in force, pay to the State
Government, every year, dead rent at such rate, as may
be specified, for the time being, in the Third Schedule, for
all the areas included in the instrument of lease:
Provided that where the holder of such mining lease
becomes liable, under section 9, to pay royalty for any
mineral removed or consumed by him or by his agent,
manager, employee, contractor or sub-lessee from the
leased area, he shall be liable to pay either such royalty, or
the dead rent in respect of that area, whichever is greater.
(2) The Central Government may, by notification in the
Official Gazette, amend the Third Schedule so as to
enhance or reduce the rate at which the dead rent shall
be payable in respect of any area covered by a mining
[2024] 7 S.C.R. 1765

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

lease and such enhancement or reduction shall take effect
from such date as may be specified in the notification:
Provided that the Central Government shall not enhance
the rate of the dead rent in respect of any such area more
than once during any period of three years.”
Section 9 speaks of royalty to be paid by a holder of a
mining lease while Section 9A deals with dead rent to be
paid by a lessee. Dead rent is payable by a lessee, when
the lessee - a holder of a mining lease, becomes liable
to pay under Section 9 royalty of any mineral removed or
consumed by him. The holder of a mining lease conducts
mining operations for the purpose of winning any mineral.
Thus, 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
sum due to the Government under the Act or the Rules
made thereunder or under the terms and conditions of
any mineral concession shall be recovered in the same
manner as arrears of land revenue.
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10.6 By way of abundant caution, Section 25 of the said Act uses
the expression “rent, royalty, tax, fee or other sum” due to the
Government under the provisions of the said Act.
Section 25 of the said Act reads as under:
“25. Recovery of certain sums as arrears of land
revenue.― (1) Any rent, royally, tax, fee or other sum
due to the Government under this Act or the rules made
thereunder or under the terms and conditions of any mineral
concession may, on a certificate of such officer as may
be specified by the State Government in this behalf by
general or special order, be recovered in the same manner
as an arrear of land revenue.
(2) Any rent, royalty, tax, fee or other sum due to the
Government either under this Act or any rule made
thereunder or under the terms and conditions of any
mineral concession may, on a certificate of such officer as
may be specified by the State Government in this behalf
by general or special order, be recovered in the same
manner as if it were an arrear of land revenue and every
such sum which becomes due to the Government after
the commencement of the Mines and Minerals (Regulation
and Development) Amendment Act, 1972, together with
the interest due thereon shall be a first charge on the
assets of the holder of the mineral concession, as the
case may be.”
10.7 Under the scheme of the Act, royalty shall be payable in respect
of mining leases. The statutory basis for the same may be found
in Section 9 of the Act, which prescribes that royalty shall be
payable by holders of mining lease, whether such lease be
granted before or after commencement of the Act. The event that
triggers payment of royalty is the removal and/or consumption
of mineral. The rates of royalty are prescribed under the
second schedule to the Act and are generally expressed as a
percentage of the average sale price of the respective mineral,
and the same is to be paid on ad valorem basis. It is clarified
at this juncture that the payment of royalty in respect of mining
leases, shall be notwithstanding any stipulation contained under
[2024] 7 S.C.R. 1767

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

the instrument of lease or any other law in force at the time of
execution of the lease.
10.8 Section 9A of the Act provides that the holder 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
payable, may be recovered. Section 25 of the Act provides that
any sum due to the Government under the provisions of the Act,
including rent and royalty, may, on a certificate of such officer
as may be specified by the State Government in this behalf by
general or special order, be recovered in the same manner as
arrears of land revenue.
10.8.1 Section 13(1) of the Act enables the Central Government
to make rules for regulating the grant of mineral concession
in respect of minerals and for purposes connected therewith.
Without prejudice to the generality of the power prescribed under
Section 13(1), Section 13(2) lists the specific subjects that may
be regulated by framing Rules. Section 13(2)(e) enables the
Central Government to make rules to prescribe the authority
by which mineral concession in respect of land in which the
minerals vest in the Government may be granted. Section
13(2)(f) on the other hand, relates to the rule making power to
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prescribe the procedure for obtaining a mineral concession in
respect of any land in which the minerals vest in a person other
than the Government, and the terms on which and conditions
subject to which such a permit, license or lease may be granted
or renewed.
10.8.2 In exercise of the rule-making power under Section
13 of the Act, the Central Government has enacted the
Mineral Concession Rules, 1960, to provide, inter-alia, for
the procedure for obtaining mineral concessions in respect of
various categories of lands, the terms on which and conditions
subject to which such a permit, license or lease may be granted
or renewed.
10.8.3 Chapter IV of the Rules governs all matters connected
with grant of mining leases in respect of land in which minerals
vest in the Government. Applications for mining lease is to be
made to the State Government in the manner prescribed under
Rule 22. Rule 22(4) prescribes the manner in which the State
Government is to act upon receipt of an application for grant
of mining license. First, the State Government is required to
take a decision as to the precise area for the said purpose
and communicate such decision to the applicant. On receipt
of communication from the State Government of the precise
area to be granted, the applicant shall submit a mining plan
within a period of six months or such other period as may be
allowed by the State Government, to the Central Government
for its approval. Thereafter, 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
[2024] 7 S.C.R. 1769

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 :-
xxx xxx xxx
(c) the lessee shall pay, for every year, except the first year
of the lease, such yearly dead rent at the rates specified
in the Third Schedule of the Act and if the lease permits
the working of more than one mineral in the same area
the State Government shall not charge separate dead rent
in respect of each mineral:
Provided that the lessee shall be liable to pay the dead
rent or royalty in respect of each mineral whichever be
higher in amount but not both;
(d) the lessee shall also pay, for the surface area used
by him for the purposes of mining operations, surface
rent and water rate at such rate, not exceeding the land
revenue, water and cesses assessable on the land, as
may be specified by the state Government in the lease;
xxx xxx xxx
(t) the lessee shall pay to the occupier of the surface of
the land such compensation as may become payable
under these rules;
(u) the lessee shall comply with the Mineral Conservation
and Development Rules framed under section 18;”
10.8.6 While the aforesaid provisions contained in Chapter
IV relate to mining leases in respect of land in which
minerals vest in the Government, Chapter V prescribes the
procedure for obtaining a mining lease in respect of land in
which minerals vest exclusively in a person other than the
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Government. Rule 45 pronounces the conditions of a mining
lease. It is pertinent to note that the said provision adopts
the conditions prescribed under clauses (b) to (l) and (p) to
(u) of sub-rule (1) of Rule 27 which relate to mining leases
in respect of land in which minerals vest in the Government,
and makes the said conditions applicable to mining leases
in respect of land in which minerals vest exclusively in a
person other than the Government, with the modification
that in clauses (c) and (d) for the words “State Government”
the word “lessor” shall be substituted. Further, in addition to
the aforesaid conditions that are statutorily prescribed, Rule
45 (iii) permits the parties to set down and mutually agree
upon such other conditions in the instrument of lease, so
long as such additional conditions are not inconsistent with
the provisions of the Act and the Rules. Rule 45 (iv) enjoins
upon the lessor, the duty to give notice to the lessee requiring
him to pay royalty due under Section 9 of the Act, on failure
of the lessee to remit the same as required. Should the
lessee not act upon such notice 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:
[2024] 7 S.C.R. 1771

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Sl. No. Category of Procedure for Liability to pay
land over grant of lease Royalty and Dead
which mining and Conditions Rent prescribed
lease is of mining lease under:
granted: prescribed
under:
1. Mining lease Chapter IV of the Royalty:
in respect of Rules:
Section 9 of the Act,
land in which
Rule 27 - r/w Second Schedule
minerals vest in
Conditions to the Act which
the Government
prescribes the rate of
royalty;
Rule 27 (1) (c) and
the proviso thereto;
Part V of Form K of
the Rules;
Dead Rent:
Section 9A of the
Act, r/w Third
Schedule to the Act
which prescribes the
amount of dead rent
payable per hectare
of land;
Rule 27 (1) (c) and
the proviso thereto;
Part V of Form K of
the Rules.
Surface rent:
Payable in terms of
Rule 27(1)(d), at the
rate specified by the
State Government in
the lease.
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Sl. No. Category of Procedure for Liability to pay
land over grant of lease Royalty and Dead
which mining and Conditions Rent prescribed
lease is of mining lease under:
granted: prescribed
under:
2. Mining lease Chapter V of the Royalty and Dead
in respect of Rules: rent:
land in which Rule Royalty and dead
minerals vest 45-Conditions rent are payable in
exclusively of mining lease terms of Section 9
in a person [Conditions and 9A of the Act,
other than the stipulated respectively, read with
Government under Rule Rule 27 (1) (c) of the
27 have been Rules.
adopted with
Surface rent:
modification to
substitute ‘State Payable in terms of
Government’ as Rule 27(1)(d), as
appearing under substituted in terms
Rule 27(1)(c) of Rule 45, at the
and (d) with the rate specified by the
word ‘lessor’.] lessor in the lease.
In addition to
the conditions
statutorily
prescribed,
Rule 45 (iii)
permits the
parties to set
down and
mutually agree
upon such other
conditions in the
instrument of
lease, so long as
such additional
conditions are not
inconsistent with
the provisions of
the Act and the
Rules.
[2024] 7 S.C.R. 1773

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Sl. No. Category of Procedure for Liability to pay
land over grant of lease Royalty and Dead
which mining and Conditions Rent prescribed
lease is of mining lease under:
granted: prescribed
under:
3. Mining leases Chapter VI of the Royalty and Dead
in respect of Rules: rent:
land in which
The procedure Royalty and dead
the minerals
and conditions rent are payable in
vest partly in the
prescribed under terms of Section 9
Government and
Chapter IV to and 9A of the Act,
partly in private
apply mutatis respectively, read
persons
mutandis with Rule 27 (1) (c) of
the Rules.

10.9 Section 9 of the MMDR Act, 1957 categorically deals with royalty.
It has to be read with the Second Schedule which deals with
rates of royalty in respect of minerals listed therein. Therefore,
there can be no cavil that royalty is an aspect within the scope
and ambit of the Parliamentary law which is intended to take
under the control of the Union by a declaration (vide Section
2 of the said Act) vis-à-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
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mineral right. Royalty and dead rent as envisaged under the
scheme of Sections 9 and 9A of the MMDR Act, 1957 have
been imposed by the Parliament in the interest of mineral
development in the country. The fact that under Sections 9 as
well as 9A, payment of royalty and dead rent as respectively
envisaged as per the conditions stated in the said Sections,
would clearly indicate that having regard to development of any
particular mineral, the rate of royalty has been fixed under the
Second Schedule to the MMDR Act, 1957. Therefore, it is in
the interest of mineral development that a lessor is bound to
collect royalty and dead rent from a lessee in terms of what is
envisaged in Sections 9 and 9A read with Second Schedule
to the Act. The payment of royalty is to the lessor which is the
State which executes the lease deed in terms of the Form K
of Mineral Concession Rules, 1960. Thus, having regard to the
statutory scheme envisaged under Sections 9 and 9A of the Act
read with the Second Schedule to the MMDR Act, 1957, any
exercise of mineral right by a lessee is subject to the payment
of royalty to the State Government. The exaction of royalty is,
therefore, statutory in nature.
10.10 In Govind Saran Ganga Saran vs. Commissioner of Sales
Tax, (1985) Supp SCC 205 (“Govind Saran Ganga Saran”),
the components which enter into the concept of tax were
discussed by this Court in paragraph 6 which reads as under:
“6. The components which enter into the concept of
a tax are well known. The first is the character of
the imposition known by its nature which prescribes
the taxable event attracting the levy, the second is
a clear indication of the person on whom the levy
is imposed and who is obliged to pay the tax, the
third is the rate at which the tax is imposed, and
the fourth is the measure or value to which the
rate will be applied for computing the tax liability.
If those components are not clearly and definitely
ascertainable, it is difficult to say that the levy
exists in point of law. Any uncertainty or vagueness
in the legislative scheme defining any of those
components of the levy will be fatal to its validity.”
[2024] 7 S.C.R. 1775

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

The four components could be understood as:
(i) the character of the tax which is determined by its nature which
prescribes the taxable event attracting the levy;
(ii) a clear indication of the person on whom the levy is imposed
and who is obliged to pay the tax;
(iii) rate at which the tax is imposed; and
(iv) the measure or value to which the tax will be 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 Bench of this Court presided over
by P.B. Gajendragadkar, J. was considering the validity of the Orissa
Mining Areas Development Fund Act, 1952 (hereinafter referred to
as, “Act of 1952”). In December, 1952, the State of Orissa passed
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the Act of 1952. In pursuance of the rule-making power conferred
on it by the impugned Act, respondent No.1 purported to make
the rules called the Orissa Mining Areas Development Act Rules,
1955 (hereinafter referred to as, “1955 Rules”). The liability for the
payment of cess under the impugned Act was notified against the
first petitioner’s Rampur colliery therein. Since a demand was made
for the payment of cess, there was a challenge made to the same by
filing the writ petition under Article 32 of the Constitution before this
Court. According to the petitioners, cess levied under the impugned
Act was not a fee but in substance a levy in the nature of a duty of
excise on the coal produced at the first petitioner’s Rampur Colliery,
and as such was beyond the legislative competence of the Orissa
legislature. Alternatively, it was urged that even if the levy imposed
by the impugned Act is a fee relative to Entries 23 and 66 - List II,
it would nevertheless be ultra vires having regard to the provisions
of Entry 54 - List I read with Central Act 53 of 1948 (MMRD Act,
1948). According to the respondent-the State of Orissa, the levy
imposed by the impugned Act was a fee relatable to Entries 23 and
66 - List II and its validity was not affected either by Entry 54 read
with Act 53 of 1948 or by Entry 52 read with Act 65 of 1951. In the
alternative, it was contended that if the said levy is held to be a tax
and not a fee, it would be a tax relatable to Entry 50 - List II and as
such the legislative competence of the State legislature to impose
the same cannot be successfully challenged.
11.1 The scheme of the impugned Act was considered in paragraph
15 of the judgment and it was observed by this Court that the
object of the Act was for the purpose of development of mining
areas in the State. That the method in which the fee is recovered
is a matter of convenience that by itself cannot fix upon the levy
the character of duty of excise though the method in which an
impost is levied may be relevant in determining its character, its
significance and effect. Therefore, it was observed that under
the impugned Act, the mere fact that the levy imposed 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
[2024] 7 S.C.R. 1777

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 jurisdiction of the State legislature under Entry 23 - List
II 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 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 - List I, 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 Entry 23 - List II is a
limitation on the legislative competence of the State legislature
itself and this position was not in dispute. It was urged that the
field covered by the impugned Act was already covered by the
Mines and Minerals (Regulation and Development) Act, 1948,
(53 of 1948) and in view of the declaration made by Section
2 of the Act, the impugned Act was ultra vires. Section 2 of
the said Act contained a declaration as to the expediency and
control by the Central Government. This Court opined that if it
was held that this Act contained the declaration referred to in
Entry 23 - List II, there would be no difficulty in holding that the
declaration covered the field of conservation and development
of minerals and the said field is indistinguishable from the field
covered by the impugned Act. What Entry 23 - List II, provides
is that the legislative competence of the State Legislature is
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subject to the provisions of List I with respect to regulation and
development under the control of the Union, and Entry 54 - List
I requires a declaration by Parliament by law that regulation
and development of mines should be under the control of the
Union in public interest, then it would not be competent of the
State legislature to pass an Act in respect of the subject-matter
covered by the said declaration. In such a case, the test must
be whether the legislative declaration covers the field or not.
It was observed that field covered by the impugned Act was
covered by the Central Act 53 of 1948.
11.4 Wanchoo, J. (as His Lordship then was) gave a separate
opinion in the said case by stating that cess levied on all
extracted 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 High Court had
allowed the petition of the respondents therein by observing that the
Orissa Act had been rendered ineffective or suppressed by a Central
Act, namely, MMDR Act, 1957, w.e.f. 01.06.1958. Considering Entry
23 - List II and Entry 54 - List I, the High Court held that the Orissa
Act ceased to be operative by reason of the withdrawal of legislative
[2024] 7 S.C.R. 1779

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

competence by force of the Entry in the State List being subject to
the Parliamentary declaration and the law enacted by Parliament.
Therefore, w.e.f. 01.06.1958 the Orissa Act was deemed to be
non-existent as there was lack of power to enforce and realise the
demands for the payment of the fee at the time when the demands
were issued and were sought to be enforced. The correctness of
this judgment was considered by a Constitution Bench of this Court.
12.1 It was observed that to the extent to which the Union Government
had taken under “its control” “the regulation and development of
minerals” so much was withdrawn from the ambit of the power of
the State legislature under Entry 23 - List II and the legislation of
the State which had rested on the existence of power under that
Entry would, to the extent of that “control”, be superseded or be
rendered ineffective. This was because there was a denudation
of State legislative power by the declaration which Parliament
was empowered to make and had made (vide Section 2 of
MMDR Act, 1957). It was observed that the States would lose
legislative competence only to the “extent to which regulation and
development under the control of the Union had been declared
by Parliament to be expedient in the public interest”. The crucial
enquiry had therefore to be directed to ascertain this “extent” for,
beyond it, the legislative power of the State remained unimpaired.
12.2 Thus, the scheme of Orissa Act, which was a 1952 Act, was
considered in juxtaposition of the MMDR Act, 1957, also called
as ‘Central Act’. The question considered was “whether the
extent of control and regulation” provided by the Central Act
took within its fold the area or the subject covered by the Orissa
Act. The test was if the entire field of mineral development was
taken over by the Central Act that would include the provision
of amenities to workmen employed in the mines which was
necessary in order to stimulate or maintain the working of mines.
The test was, therefore, if under power confirmed by Section
18(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.
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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 53 of 1948 and that of the
Act of 1957, the matter was concluded. Consequently, the writ
petition was dismissed.
Baijnath Kedia:
13. A Constitution Bench of this Court had the occasion to consider
the provisions of the MMDR Act, 1957 in light of the Bihar Land
Reforms Act and the amendment thereto. In Baijnath Kedia, it was
the contention that amendment of Section 10 of the Bihar Land
Reforms Act was ultra vires the Constitution and that Rule 20(2)
did not legally entitle recovery of the dead rent, royalty, etc. as
mentioned in the Schedules to the Bihar Minor Mineral Concession
Rules, 1964. The dispute arose on account of the appellants therein
receiving letters to the effect that in view of the amendment to Section
10 of the Bihar Land Reforms Act, 1950 and all leases for minor
minerals having stood statutorily substituted by the corresponding
terms and conditions by the Bihar Minor Mineral Concession Rules,
1964, the rent and royalty etc. in respect of minor minerals in the
State (irrespective of the date on which the lease was granted) were
to be paid as per the aforesaid Rules with effect from 27.10.1964.
The appellant therein denied their liability to pay. The State of Bihar
submitted that the terms of the original lease having being validly
altered by the operation of the second proviso to Section 10(2) of
the Bihar Land Reforms Act, 1950 in addition to Section 10A of the
said Act, the State Government was entitled to collect dead rent,
royalty etc. from the lessees who had been granted lease so long
as there was a lease subsisting on the date of the commencement
of the amendment.
[2024] 7 S.C.R. 1781

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

13.1 M. Hidayatullah, C.J. speaking for the Bench traced the history of
the legislation on the subject of mines and minerals by referring
to Entry 36 of the Federal Legislative - List I and Entry 23 of the
Provincial Legislative - List II of the Seventh Schedule of the
Government of India Act, 1935 and also made reference to Entry
54 - List I - Union List, Entry 23 – List II - State List. That the
Mines and Minerals (Regulation and Development) Act, 1948,
(“MMRD Act, 1948”) had a declaration under Section 2 to the
same effect as the declaration under Section 2 of the MMDR
Act, 1957. This Court held that once the MMDR Act, 1957 was
enacted by the Parliament, the Union had taken all the powers
to itself and had authorised the State Government to make
Rules for the regulation of 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 of land in
a village in Chittoor district. On separation of State of Andhra
from State of Madras a demand was made upon the father of
the appellant therein for the payment of land cess calculated
in accordance with the provisions of Sections 78 and 79 of
the aforesaid Act. The notices issued were questioned before
the Madras High Court and thereafter by way of a Special
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Leave Petition the matter was heard by this Court along with
a Writ Petition also filed by the very same appellant. One of
the contentions raised was with regard to the meaning of the
expression royalty under Section 79(1) of the Madras Act. Did
it include the royalty payable under a mining lease on the ore
won by the lessee? On the meaning of the word, royalty, it was
contended that the said expression under Section 79(1) of the
Madras Act was something other than the return to the lessor
or licensor and it connotes the payment made for the materials
or minerals won from the land. The expression royalty under
Section 79(1) of the said Act did not signify royalty as commonly
understood but was confined to the rent payable for beneficial
use of the surface of the land. This contention was rejected
and it was observed that royalty which follows the expression
lease-amount is something other than the return to the lessor
or licensor for the use of the land surface and represents, as
it normally connotes, the payment made for the materials or
minerals won from the land.
14.2 The judgments in Hingir-Rampur and M.A. Tulloch were
considered. It was observed that the power to impose the cess
was not available after the Central Acts of 1948 and 1957 came
into force. It was contended that since the cess was payable
only in the event of the mining lessee winning the mineral
and no royalty was paid when no minerals were extracted,
it was in effect a tax on the minerals won and, therefore, on
mineral rights. However, this argument was not accepted. It
was observed that when a question arises as to the precise
head of legislative power under which a taxing statute has been
passed, the subject for enquiry is, what in truth and substance,
is the nature of the tax. It was observed that, no doubt, cess
has a remote connection to the mineral won but that does not
stamp it as a tax on either the extraction of minerals or on the
mineral rights. The Court found it unnecessary for the purpose
of this case to examine 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
[2024] 7 S.C.R. 1783

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 for consideration. The
demand of a local cess on royalty on exercise of a mineral right was
questioned. The appellant therein was engaged in mining operations
and on execution of the lease deed had paid royalties, dead rents
and other amounts payable on the said deed. The imposition of
the local cess was with retrospective effect along with local cess
surcharge under Section 116 of the aforesaid Act. The contention
of the appellant therein was that the cess on royalty could not be
levied. According to the seven-judge Bench, the question which fell
for consideration and determination was whether cess on royalty
could be a valid levy imposed by the State of Tamil Nadu.
15.1 Under Section 115(1) of the amended Act a local cess at the
rate of 45 paisa on every rupee of land revenue payable to
the Government in respect of any land for every fasli was
envisaged. An Explanation to the said Section was added and
was deemed always to have been incorporated by the Tamil
Nadu Panchayats (Amendment and Miscellaneous Provisions)
Act, 1964 (Amending Act) which provided as under:
“Explanation- In this section and in Section 116,
“land revenue” means public revenue due on land
and includes water cess payable to the Government
for water supplied or used for the irrigation of land,
royalty, lease amount or other sum payable to the
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Government in respect of land held direct from the
government on lease or licence, but does not include
any other cess or the surcharge payable under
Section 116, provided that land revenue remitted
shall not be deemed to be land revenue payable for
the purpose of this section.”
(emphasis by me)
Sub-section 2 of Section 115 of the amended Act provided that
the local cess shall be deemed to be a public revenue due on
all the lands in respect of which a person is liable to pay local
cess and all the buildings upon the said land and their products
shall be regarded as security for the local cess. Section 116 of
the amended Act reads as follows:
“116. Every panchayat union council may levy on every
person liable to pay land revenue to the government in
respect of any land in the panchayat union a local cess
surcharge at such rate as may be considered suitable
as an addition to the local cess levied in the panchayat
development block under Section 115 provided that
the rate of local cess surcharge so levied shall not
exceed two rupees and fifty paise on every 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
[2024] 7 S.C.R. 1785

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 possible to
accept the contention of the appellant therein that Section 115
of the said Act read with the Explanation contravened in any
manner Section 9 of the MMDR Act, 1957.
15.3 In the said case, this Court at the outset observed that under
the Second Schedule of the MMDR Act, 1957 rates have
been provided with regard to the payments of royalty to the
Government under the lease deed. Thus, there was an obligation
on the lessee to pay rent and other charges mentioned under
the clauses of the lease deed and all other Central and State
Government dues “except demands for land revenue”. The
question which was framed by the seven-judge Bench of this
Court was whether cess on royalty was a demand of land
revenue or additional royalty.
15.4 As already noted, the aforesaid Explanation added to Section
115 of the said Act by virtue of the Amended Act was to
include “royalty, lease amount and other sums payable to the
government” in the definition of “land revenue” and also to
validate the levy and collection of the cess and surcharge by
giving the Explanation a retrospective effect. As a result, the
said amendment was intended to bring royalty payable on a
mining lease as per Section 9 of the MMDR Act, 1957 within
the Explanation which was the definition of “land revenue”
applicable to Section 115 as well as Section 116 of the said Act.
15.5 This Court noted that the appellant, India Cement Limited, was
paying royalty which was prescribed under the lease deed
as fixed under MMDR Act, 1957 and as per the Rules made
thereunder, the same being a Parliamentary Act by which the
control of mines and minerals has been taken over by the
Union. That the MMDR Act, 1957 is an Act for the regulation
of mines and development of the minerals under the control
of the Union of India. It was noted that Section 2 of the Act
declares that it is expedient in the public interest that the Union
of India should take under its control the regulation of mines
and the development of the minerals to the extent provided in
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the Act. Section 9 of the MMDR Act, 1957 deals with payment
of royalty in respect of mining leases. This Court observed that
the MMDR Act, 1957 was passed by virtue of the power of the
Parliament under Entry 54 - List I. Since the control of mines
and the development of minerals were taken over by Parliament,
the question whether the impugned levy or the impost by the
State Legislature, 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 payable
under Section 9 of the said Act so as to in effect amend the
Second Schedule of the said Act. Therefore, it was held that tax
on royalty can be a tax on land or called land revenue. Even if
it is a tax, which falls within Entry 50 - List II it will be ultra vires
the State legislative power in view of Section 9(3) read with
Section 2 of MMDR Act, 1957, which is a Parliamentary law. In
the above legislative background, this Court held that royalty was
a tax or “land revenue” under the Explanation clause referred
to above, which could not be the basis for levy of cess as, by
that, cess on royalty payable would not be in consonance with
what is stipulated under Section 9(3) of the MMDR Act, 1957
but would exceed the amount so stipulated which would not
be within the legislative competence to levy in view of Section
2 of MMDR Act, 1957 read with Entry 50 - List I.
[2024] 7 S.C.R. 1787

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

15.7 This Court further referred to the judgments of Rajasthan,
Punjab, Gujarat and Orissa High Courts, which had held that
royalty is not a tax, namely, Bherulal vs. State of Rajasthan,
AIR 1956 Rajasthan 161, (“Bherulal”); Dr. Shanti Saroop vs.
State of Punjab, AIR 1969 P & H 79, (“Dr. Shanti Saroop”);
Saurashtra Cement and Chemical Industries Ltd. Ranavav
vs. Union of India, AIR 1979 Guj 180 (“Saurashtra Cement
and Chemical Industries”); and Laxmi Narayan Agarwalla
vs. State of Orissa, AIR 1983 Ori 210, (“Laxmi Narayan
Agarwalla”) but did not find it necessary to discuss the same
in the view it was taking and having regard to there being no
discussion of the constitutional provisions in the aforesaid cases.
15.8 The contention of the State of Tamil Nadu in India Cement
was that the State has a right to tax minerals and that in Entry
50 - List II, there was no limitation to the taxing power of the
State. This was not accepted and it was held that in view of
Section 9(2) of the MMDR Act, 1957 the field was fully covered
by the said Act which is a Central legislation. In paragraph 33,
it was further observed that royalty is directly relatable only to
the minerals extracted and on the principle that the general
provision is excluded by the special one, royalty would be
relatable to Entry 50 - List II and not Entry 49 - List II. That as
the field is covered by the Central legislation i.e. the MMDR Act,
1957, the impugned provisions of the State legislation cannot
be upheld. Ultimately in paragraph 34 of 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.”
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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 Tamil Nadu legislation, royalty paid
under the provisions of MMDR Act, 1957 was construed
to be “land revenue” on which cess was levied, which
was beyond the competence of the State Government
as royalty is paid by a holder of a mining lease under the
MMDR Act, 1957, a Central Act as a tax.
(vi) Thus, royalty is a tax.
15.9 The aforesaid conclusion was so arrived, inter alia, because
the Explanation to Section 115 of the aforesaid amended Tamil
Nadu Act defined ‘land revenue’ to include royalty, lease amount
or any other sum payable to the Government in respect of land
held direct from the Government on lease or licence. Local
cess on every rupee of “land revenue” was payable as per
the above definition which meant royalty. This meant that on
royalty payable on mining leases in respect of mineral bearing
lands in the State of Tamil Nadu, which was included in the
definition of land revenue, a further local cess was payable.
Therefore, payment of royalty on a mining activity in exercise
of a mineral right was construed to be “land revenue” and the
basis for imposing a local cess. The payment of cess was in
addition to payment of royalty under the provisions of the MMDR
Act, 1957, which is a Central enactment. Thereby the payment
to be made by a holder of a mining lease was a local cess to
be paid under the Tamil Nadu Act in addition to royalty being
[2024] 7 S.C.R. 1789

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

paid under the MMDR Act, 1957. Moreover, under Section
116 of the Tamil Nadu Act, a Panchayat Union Council could
also levy a local cess surcharge on every person liable to pay
land revenue to the State Government in respect of any land
in the Panchayat Union. The levy of local cess and local cess
surcharge on the payment of royalty by a holder of a mining
lease would inevitably increase the price of minerals extracted
in the State of Tamil Nadu over and above what is otherwise
the price that could be fixed which would include, inter alia,
only the royalty charges. Therefore, the increase in the price
of a particular mineral extracted in the Tamil Nadu by virtue
of the local cess and surcharge on local cess would not be in
the interest of mineral development as it would lead to price
escalation in the State of Tamil Nadu. This is not in the interest
of mineral development as this would lead to every State
imposing local cesses/imposts/tax on the minerals extracted
in the respective States over and above royalty payable under
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 this Court held that royalty
is a tax and therefore cess on royalty being a tax on royalty
was beyond the competence of the State legislature. This
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was having regard to the scheme of MMDR Act, 1957 and the
Rules made thereunder as discussed above. Further, Entry
49 - List II could not be relied upon by the State Government
to impose a cess on royalty by treating it as a land revenue
and as a tax on land. This was because payment of royalty
was under Section 9 of the MMDR Act, 1957 as a tax on
exercise of mineral rights. Hence, it was observed in paragraph
34 itself that “Royalty on mineral rights is not a tax on land
but a payment for the use of land.” It is in the above legal
framework of the Tamil Nadu Act and the Entries in List I and
List II and having regard to the object and scheme of MMDR
Act, 1957 and the Rules made thereunder that the conclusion
in paragraph 34 was arrived at. Ultimately, it was held that the
levy of cess and surcharge on cess on the royalty payable was
ultra vires the power of the State Legislature. As a result, the
appeals filed by the appellant in India Cement, were allowed.
As already noted, reference was made in detail to two decisions of
the Patna and Mysore High Courts in arriving at the above conclusion
by this Court which could be discussed at this stage.
Laddu Mal:
16. In Laddu Mal, notices issued to the brick-layers by the Assistant
Mining Officer, Purnea, Bihar calling upon them to pay royalty were
assailed. The petitions challenged the notices mainly on the ground
that what were being used by them for manufacture of bricks, which
were minor minerals and therefore, the Bihar State Government
had no authority in law to impose any royalty in respect of minor
minerals. In the said case, the High Court considered the definition
of “taxation” under Article 366(28) of the Constitution of India to
include the imposition of any tax or impost and observed that the
expression royalty is used in a secondary sense to signify that part
of the reddendum which is variable and depends upon the quantity
of minerals taken out. It is a payment made to the land owner by
the lessee of the mine, in return of the privilege of working which
is different from rent. Royalty is a levy in proportion to the minerals
worked. Royalty is an impost by the Government and was in the
nature of tax because it was a compulsory exaction recoverable, in
the event of 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
[2024] 7 S.C.R. 1791

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 2 of the said Act declared that it was expedient in
public interest that the Union should take under its control the
regulation of mines and the development of minerals to the extent
provided. Further, on a reading of Sections 4 to 13 of the said
Act, it was clear that the Parliament gave control of all mines and
minerals except mineral oil, to the Union Government. However,
in Sections 14 and 15, an exception was carved with regard to
minor minerals. Therefore, Entry 54 - List I gave the power to
the Union Government to regulate all mines and development
in minerals except oils thereby leaving no area for legislation
in that respect to the State Legislature. That, insofar as ‘minor
minerals’ are concerned, the State Governments were authorised
to make rules for regulation of grant of prospective licenses and
mining leases and for purposes connected therewith and it is
also a delegated authority given to the State Government and
not the State Legislature.
16.2 Taking into consideration Entry 50 - List II, which deals with
taxes on mineral rights subject to any limitation imposed by
the Parliament by law relating to mineral development, it was
observed that in view of the limitation imposed by the Parliament
under the MMDR Act, 1957, it was doubtful if any legislative
competency has been left for the State Legislature to impose
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any tax on mineral rights. Discussing Section 9 of the MMDR
Act, 1957, it was observed that the same mandates payment
of royalty by the holder of a mining lease in respect of any
mineral removed by him after the commencement of the Act
at a rate specified in the Second Schedule thereof. The Union
Government had been empowered to enhance or reduce such
rate, subject to certain conditions. That the Parliament had given
power to the Union Government to modify the rates of royalty
for all minerals except for minor minerals in respect of which
the matter was left to the States. Insofar as minor minerals are
concerned, imposition of royalty was within the power of the
State Government by way of rules. Also, rules made by the
State Government prior to the enforcement of the MMDR Act,
1957 continued to be operative till fresh rules were enforced,
being the Bihar Minor Mineral Concession Rules, 1984. It was
reasoned that, Entry 54 - List I uses the expression “mines and
minerals” which includes (i) regulation of mines and (ii) mineral
development. 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 and the powers of the State Legislature under Entries
23 and 50 - List II are denuded.
[2024] 7 S.C.R. 1793

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

17.1 In this case, the Mysore Village Panchayats and Local Boards
Act, 1959, (‘State Act’, for short) by enacting Sections 143
and 144 intended to confer power on the Taluk Board to levy
a licence fee on the mining of manganese ore, iron ore etc
carried on by persons holding mineral concessions i.e. on the
activity of mining.
17.2 By Notification issued under the aforesaid provisions, persons
engaged in mining of manganese iron ore, etc. with the help of
machinery or without the help of machinery, as the case may
have been, under Entries 62 and 63 of the Schedule to the
aforesaid State Act had to pay a licence fee. Aggrieved by the
notices of demand and the Notification issued under Sections
143 and 144 of the aforesaid State Act, the petitioners therein
had filed the writ petition seeking quashing of the notices of
demand and the Notification in so far as they levied licence fee
under the aforesaid provisions. Further, Sections 143 and 144
of the State Act provided for regulation of certain trades and
the relevant part of Schedule II of the State Act, on the basis
of which the impugned Notification was issued which provided
for the levy of a licence fee on any purpose or the doing in
the course of any industrial process, which, in the opinion of
the Taluk Board, was likely to be dangerous to human life, or
health or property or was likely to create or cause a nuisance.
The following three main contentions were urged by the
petitioners therein: -
(i) that the State Legislature could not have made a law
authorising the imposition of the impugned levy after the
Mines and Minerals (Regulations and Development) Act,
1957 (Central Act LXVII of 1957) came into force;
(ii) that the Notification in so far as it levied licence fee on
the mining activities carried on by the petitioners therein
was outside the scope of Sections 143 and 144 of the
State Act; and
(iii) that the licence fee in question which was in the nature of
a tax and could not have been levied because Sections
143 and 144 of the State Act did not confer power on the
Taluk Development Board to levy a tax.
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17.3 The respondent-State of Mysore had sought to contend that
the demand notices as well as the Notification were rightly
issued and that the licence fee demanded by the them was
in the nature of a tax and that the 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
Murthy, it was observed that this Court had in unequivocal
terms had held that in respect of matters dealt with by the
Central Act, i.e. MMDR Act, 1957, the State Legislature had
no authority to make any law.
17.5 It was also observed that this Court in Hingir-Rampur or in HRS
Murthy did not decide the question as to what meaning should
be given to the expression ‘tax on mineral rights’ appearing
in Entry 50 – List II. It was further reasoned in paragraphs 17
and 18 as under:
“17. Entry 50 in List II which authorises the levy
of tax on mineral rights is subject to limitations
imposed by Parliament by law relating to mineral
development made in exercise of its power under
Entry 54 of List I. It was contended on behalf of the
respondents that in the instant case the tax was not
[2024] 7 S.C.R. 1795

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

on mineral rights, but on the activity of mining carried
on in certain areas. We find it difficult to accept the
said contention. As observed by the Supreme Court
in State of Orissa v. M.A. Tulloch, AIR 1964 SC
1284 by making a declaration under Section 2 and
enacting Section 18 of the Central Act, the intention
of the Parliament to cover the entire field of mineral
development including tax on mineral rights is made
clear. The levy of royalty under Section 9 of the
Central Act and the provision for making rules with
regard to the fixation and collection of dead rent,
fines and fees or other charges and the collection
of royalties on prospecting licence and mining lease
and the provisions of Section 25 of the Central Act
authorising the recovery of any tax payable under
the Central Act as arrear of land revenue, clearly
shows that the Parliament intended that the power
to legislate with regard to taxation on mineral rights
also should be assumed by it to the exclusion of the
State Legislatures. The expression ‘royalty’ is used
differently in different contexts. Sometimes it is used
as equivalent to a tax also and in some other cases it is
used as representing the amount payable by a lessee
in respect of minerals removed by the lessee even
though the lessor is not the sovereign Government
we are of the opinion that the expression ‘royalty’ in
Section 9 which requires payment of royalty to the
State Government as prescribed in the II Schedule
connotes the levy of a tax. Vide Laddu Mal v. The
State of Bihar, AIR 1965 Pat 491. It is a levy falling
outside the scope of Entry 84 in List I which provides
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
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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 legislative power under Entries 23 and 50 of List II
to the extent indicated in the Central Act. Hence, we
cannot accept the contentions of the respondents that
even after the passing of the Central Act, the State
Legislature by enacting Section 143 of the State Act
intended to confer power on the respondents to levy
tax on the mining activities carried on by persons
holding mineral concessions. It follows that levy of
tax on mining by respondents as Per the impugned
notification is Unauthorised and is liable to be set
aside. … … What is however liable to be set aside
is the notification issued by respondent 1 in exercise
of its power under Section 143 of the State Act to
the extent it levies a tax on mining of manganese
or iron ore.”
The Mysore High Court held that royalty under Section 9 of the MMDR
Act, 1957 is in the nature of a tax. Therefore, the levy of a licence fee
on mining activity by the Taluk Board as per the impugned notification
issued under the aforesaid provision was unauthorised and was set
aside as there was no power vested under Entry 50 – List II after
the enforcement of MMDR Act, 1957. This was because Section 9
was a limitation imposed by Parliament on Entry 50 – List II.
[2024] 7 S.C.R. 1797

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

17.6 This judgment is instructive inasmuch as it put into perspective
what was required to be decided, i.e. whether royalty is a tax
within the scope and meaning of Section 9 and other relevant
provisions of the MMDR Act, 1957 and not from any other
perspective.
Orissa Cement:
18. Subsequent to the judgment in India Cement, the validity of the
levy of a cess, based on the royalty derived from mining lands, by
the States of Bihar, Orissa and Madhya Pradesh was challenged
in Orissa Cement in the respective appeals filed by the State. On
discussing the legislative Entries and earlier decisions of this Court
and having regard to Section 2 of the MMDR Act, 1957 and the
various State enactments under which cess on royalty was sought
to be levied, this Court raised two questions as under:
“(1) Can the cess be considered as “land revenue” under
Entry 45 or as a “tax on land” under Entry 49 or as a “tax
on mineral rights” under Entry 50 of the State List?
(2) If the answer to question (1) is in the negative, can the
cess be considered to be a fee pertaining to the field covered
by Entry 23 of the State List or has the State been denuded
of the legislative competence under this Entry because of
Parliament 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
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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 legislature
had no competence to impose the cess. The same reasoning
was also applied insofar as the levy of cess in the State of
Orissa was concerned.
Mahalaxmi Fabric Mills:
19. In Mahalaxmi Fabric Mills, two questions fell for consideration in
the said appeals – firstly, whether Section 9(3) of the MMDR Act,
1957 was ultra vires the Constitution; and, secondly, whether the
notification dated 01.08.1991 issued by the Central Government
under Section 9(3) of the Act was ultra vires, illegal and inoperative in
law. This Court followed the earlier dicta in India Cement as well as
Orissa Cement and was observed that the contention of the Central
Government that prices of minerals for exports were fixed and could
not be escalated with the enhancement of the royalties by different
States as their working would become impossible. Therefore, the
Parliament had placed an embargo on enhancement of the royalty
directly or indirectly except by the Union and in the manner specified
under the MMDR Act, 1957. In paragraph 20 of the judgment, it was
observed that enhancing uniformly the rates of royalty for the entire
country even though minerals might be extracted from different States
is necessary for having a uniform pattern of price of minerals and
that has a direct linkage with the development of minerals. Further,
regulating the rates of royalty on extraction of minerals also has an
important role to play in opening up new mining areas for winning
minerals. In this connection, Section 18 of the Act which deals
with mineral development was referred to and it was observed that
fixation of royalty rates is in the realm of development of minerals as
envisaged by Section 18 of the MMDR Act, 1957 and the contrary
submission to the above was not accepted.
19.1 Referring to the definition clause which defines, inter alia,
‘minerals and minding operations’, it was observed that ‘mining
operation’ means any operation undertaken for the purpose of
winning any mineral. It was obvious that development of mineral
as envisaged by Section 18 of the MMDR Act, 1957 and even by
Entry 50 - List II necessarily would mean extraction of mineral
from the earth or from the crust of the earth by mining operations.
[2024] 7 S.C.R. 1799

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Therefore, the term development of minerals has a direct linkage
with mining operation. Without that, minerals cannot develop
by themselves. Therefore, it was held that regulation of mines
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 coal-bearing 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 Constitution. On discussing the earlier judgments of
this Court in light of the constitutional Entries in Lists I and II and the
Scheme of the MMDR Act, 1957 as well as the combined effect of
the proposed levy, the civil appeals were disposed of by concurring
with the conclusions of the High Court of Orissa to the effect that
the State had no legislative competence to levy the cess under the
aforesaid Act of 1992.
Saurashtra Cement.:
21. In this case, the interesting question was regarding the constitutional
validity of Section 9(3) of the MMDR Act, 1957, inter alia, on the
ground that the levy of royalty on minerals is a tax and the Union
Legislature did not have the power under Entry 54 - List I to enact
such a law which denudes the right of the State Legislature to levy
tax on minerals right under Entry 50 - List II. The Gujarat High Court
followed the dicta in India Cement and Mahalaxmi Fabric Mills and
disposed of the writ petitions.
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Goodricke:
22. In Goodricke Group Ltd. vs. State of West Bengal, 1995 Supp.
(1) SCC 707 (“Goodricke”), the validity of the levy of education cess
and rural employment cess created by the West Bengal Taxation
Laws (Second Amendment) Act, 1989 was called in question by way
of writ petitions preferred by several tea estates in West Bengal. The
first question considered was, whether, the impugned levy was a levy
upon the lands within the meaning of Entry 49 - List II. In this case,
the judgment of this Court in India Cement was considered and it
was observed that what was of crucial relevance in India Cement
was that the levy of cess was not upon the land or upon its yield (or
its income) but upon the royalty amount payable to the lessor, which
was included within the definition of “land revenue” under the Madras
Panchayats Act. The question in India Cement, therefore, arose
whether such cess levied with reference to or calculated on the basis
of amount of royalty can be called a tax on land. It was held that it
could not be so. It was pointed out that the royalty varies according
to the particular mineral quarried in a given year and if no mineral
was quarried, no royalty would be payable. However, the basis of the
judgment was that it was a case where 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 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
[2024] 7 S.C.R. 1801

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 as direct
levy upon the land. Therefore, in Goodricke, it was observed
that the mere fact that the tax was measured with reference to
the yield of the land did not make it any the less tax upon the
land directly and within the scope of Entry 49 - List II.
22.2 In my view, the aforesaid distinction brought out in Goodricke
between the levy of cess on royalty and levy of cess on yield
from land, clearly indicates that in India Cement, the cess was
struck down as not coming within the scope and ambit of Entry
49 - List II as the cess was not on land directly. Cess was on a
payment of royalty by a lessee conducting a mining operation
which is not a cess directly on the land but on exercising a
mineral right which aspect was under the control of the Union
by virtue of the MMDR Act, 1957.
22.3 However, in Goodricke, it was observed that tax imposed on
land measured with reference to or on the basis of its yield, is
certainly a tax directly on the land. Apart from income, yield or
produce, there can perhaps be no other basis for levy. Merely,
because a tax on land or building is imposed with reference
to its income or yield, it does not cease to be a tax on land
or building. The income or yield of the land/building is taken
merely as a measure of the tax; it does not alter the nature or
character of the levy. It remains a tax on land or building. The
aforesaid reasoning would not apply to the present case. The
payment of royalty on exercise of mineral right is itself a tax
and the royalty being considered as a measure for the purpose
of payment of tax on land within the scope and ambit of Entry
49 – List II would not arise in view of there being a separate
Entry 50 – List II.
22.4 Moreover, in Goodricke, what was considered was Entry
52 – List I and not Entry 54 – List I. Entry 50 – List I which is
subjected to Entry 54 – List I and the same being a unique
Entry, would not apply while considering Entry 49 – List II in
the context of Entry 52 – List I. This is because Entry 52 – List
I does not impose any limitation on Entry 49 – List II and if the
tax on exercise of mineral right squarely falls within the ambit
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of Entry 50 – List II then the limitation in the context of Entry
54 – List I would have to be borne in mind before the State
can embark upon levying any further tax on the basis of royalty
as a measure.
22.5 Having noted this sui generis relationship above, I may observe
the difficulty 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. It is settled law that there must be a reasonable
nexus between the nature of tax and the measure of tax. In
India Cement, this Court had noted that royalty is only indirectly
connected with land and cannot be said to be a tax directly on
land as a unit. In my opinion, this finding requires no second
look. The contention that royalty can be used a measure to tax
land under Entry 49 – List II would, in my opinion, inevitably
lead to conflation with the nature of tax that is reserved for Entry
50 – List II subject to any limitations imposed by Parliament by
law relating to mineral development.
Kesoram:
23. The dictum in India Cement by a seven-judge Bench and subsequent
decisions which followed it was doubted by a majority of a five-judge
[2024] 7 S.C.R. 1803

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

Bench of this Court in Kesoram. It would be useful to highlight the
relevant portions of the said judgment as the real controversy stems
from this Judgment. In the said case, three sets of matters arose
from West Bengal, which, for the sake of convenience, were called
as (A) “coal matters” (B) “tea matters” and (C) “brick earth matters”.
The other set of matters which arose from the State of Uttar Pradesh
was (D) “minor mineral matters”.
23.1 In the coal matters, the constitutional validity of the amendment
made to the Cess Act, 1880 and West Bengal Rural Employment
and Production Act, 1976 by which the expression “coal-bearing
land” was defined to mean holding or holdings of land having
one or more seams of coal comprising the area of a coal mine,
given effect to from 01.04.1992, was successfully impugned
before the High Court. Therefore, the State of West Bengal had
filed the appeal before this Court. The High Court had placed
reliance on the judgments of this Court in India Cement and
Orissa Cement wherein the levy of cess impugned therein
was struck down as unconstitutional. The Calcutta High Court
had held that the levy was without legislative competence of
the State and hence, was liable to be struck down. The High
Court had also concluded that the Cess cannot be said to be
on land so as to be covered by Entry 49 - List II.
23.2 A similar cess was levied by the State Legislature of Orissa as
the Orissa Rural Employment, Education and Production Act,
1992 on land-bearing coal and other minerals. A challenge to the
constitutional validity of such cess was successfully laid before
this Court and the Section 3(2)(c) of the Orissa legislation 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
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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 same,
which was ultra vires the power of the State Government as
that power could only be exercised by the Central Government.
The Allahabad High Court held that SADA Act and SADA Rules
and the levy of cess thereunder was within the competence of
the State Legislature with reference to Entry 50 - List II. Since
this Court, through a three-judge Bench, had noted a conflict
of decisions, the matters were placed before Hon’ble the Chief
Justice for appropriate directions. Thereafter, the matters were
listed before a five-Judge Constitution Bench.
23.4 The Constitution Bench in Kesoram noted the question of
constitutional significance centring around Entries 52, 54 and
97 - List I and Entries 23, 49, 50 and 66 - List II, as also the
extent and purport of the residuary power of legislation vested
in the Union of India. In Paragraph 52 of the judgment, this
Court noted the questions which arose in India Cement and
encapsulated the ratio of the said judgment.
23.5 In India Cement, the judgment of the Mysore High Court in
Laxminarayana Mining Co. was cited with approval. As already
noted, the Mysore High Court had struck down as violative of
the MMDR Act, 1957 imposition of a licence fee on mining
manganese, iron ore, etc., under a State legislation by issuance
of a notification. In Kesoram, while considering the ratio of the
judgment of the Division Bench of the Mysore High Court in
Laxminarayana Mining Co., which had held that, licence fee
was a step trenching upon the field of regulation and mineral
development, was liable to be struck down on that ground alone,
in paragraph 55, observed as under:
“55. In our view, the decision by the Mysore High
Court cannot be read so widely as laying down the
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law that the Union’s power to regulate and control
results in depriving the States of their power to levy
tax or fee within their legislative competence without
trenching upon the field of regulation and control.
There is a distinction between power to regulate
and control and power to tax, the two being distinct
and that difference has not been kept in view by the
Mysore High Court.”
In substance, this Court observed that Union’s power to regulate and
control is distinct from the State’s power to levy tax and the distinction
between the two had not been borne in mind by the Mysore High
Court which aspect shall be discussed later.
23.6 Moving further in paragraph 56, 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 Legislature is denuded of
its competence under Entry 23 of List II. In any event,
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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.”
23.7 In paragraph 57, this Court made its inferences on what was
observed by the seven-judge Bench of this Court in paragraph
34 (extracted above) of India Cement as under:
“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 the judgment
in its entirety. Vide paras 22 and 31, which precede para
34 abovesaid, Their Lordships have held that “royalty” is
not a tax. Even the last line of para 34 records “royalty on
mineral rights is not a tax on land but a payment for the
user of land”. The very first sentence of the para records
in quick succession “… as such a cess on royalty being
a tax on royalty, is beyond the competence of the State
Legislature….” What Their Lordships have intended to
record is “… that cess on royalty is a tax, and as such
a cess on royalty being a tax on royalty, is beyond the
competence of the State Legislature …”. That makes correct
and sensible reading. A doubtful expression occurring in a
judgment, apparently by mistake or inadvertence, ought to
be read by assuming that the Court had intended to say
only that which is correct according to the settled position
of law, and the apparent error should be ignored, far from
making any capital out of it, giving way to the correct
expression which ought to be implied or necessarily read
in the context, also having regard to what has been said
a little before and a little after. No learned Judge would
consciously author a judgment which is self-inconsistent
or incorporates passages repugnant to each other. Vide
para 22, Their Lordships have clearly held that there is no
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entry in List II which enables the State to impose a tax on
royalty and, therefore, the State was incompetent to impose
such a tax (cess). The cess which has an incidence of an
additional 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 else has the majority judgment
held royalty to be a tax.”
(underlining by me)
23.9 The inference being that there is an apparent error in holding
that “royalty to be a tax”, whereas “royalty is not a tax”. However,
the above inference loses sight of the fact that in paragraph 34
of the India Cement it has been observed that “Royalty on
mineral rights is not a tax on land, but a payment for the
user of the land”. This has been held to be a contradiction in
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Kesoram. However, what was actually meant in India Cement
was that royalty is a tax on mineral rights. The majority in
Kesoram thereafter noted how the matter was dealt with in
Mahalaxmi Fabrics Mills and Saurashtra Cement and made
observations therein, as noted in paragraph 70 of the judgment.
Ultimately, in paragraph 71, it was observed that royalty is
not a tax and royalty cannot be a tax and that even in India
Cement it was not the finding of the Court that royalty is a tax.
23.10 With regard to decisions post India Cement, the majority
expressed its dissent with that part of the judgment in
Mahalaxmi Fabrics Mills, which stated that there was “no
typographical error” in India Cement. The reasoning in
Mahanadi Coalfields was also not subscribed to in Kesoram
and it was held that the said case was not correctly decided
inasmuch as they applied India Cement and Orissa Cement
and therefore, it was over-ruled.
23.11 With great respect to the majority in Kesoram, the aforesaid
strong observations were in fact premised on a “typographical
error” in para 34 of the judgment in India Cement when there
was none. The entire reasoning in paragraph 57 of Kesoram
extracted above proceeded on the basis that a typographical
error was inadvertently or erroneously committed while typing
the correct text of the judgment and therefore, what was
a “sensible reading” was supplied by the majority to make
an omission or error, namely, “cess on royalty” instead of
“royalty” only.
23.12 With respect, I find that the aforesaid understanding by
the majority in Kesoram is incorrect, a departure from all
precedents right from the judgment of this Court in Hingir-
Rampur and contrary to the scheme of Entry 54 – List I and
Entry 50 – List II and the architecture of the MMDR Act, 1957
enacted pursuant to Entry 54 - List I and particularly, having
regard to Section 2 of the said Act. Therefore, there was no
necessity to doubt the proposition that royalty 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 nine-
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judge 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, thing or activity is the subject-matter of
tax and the amount of the tax to be levied. The
question which has to be answered on the basis of
the aforementioned principle is, is it a tax on land or
tax on mineral. If having regard to the nature of tax
and keeping in view the history of the legislation to
the effect that the State of West Bengal has all along
been trying to impose tax on minerals as opposed
to tax on land, is taken into consideration, it will be
noticed that endeavours have been made to continue
to impose “cess” on mineral and mineral rights in the
garb of “land tax”.”
(underlining by me)
23.14 Therefore, the pith and substance of the controversy being,
whether in the garb of imposition of impugned land tax on
the strength of Entry 49 - List II, the State has the power to
impose cess on royalty, or, in other words, cess on mineral
and mineral rights was rightly identified. This is because royalty
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is a payment for the exercise of mineral rights and not a tax
on land and if cess is levied on royalty, then the same is an
imposition on the exercise of mineral rights, which is covered
under Section 9 of the MMDR Act, 1957. It is in the aforesaid
context that Sinha, J. also referred to Section 25 of the MMDR
Act, 1957 which states that any rent, royalty, tax, fee or other
impost under the said Act or the Rules made thereunder
can be recovered as arrears of land revenue. Therefore, in
paragraph 321, it was opined by Sinha, J. as under:
“321. Section 25 of the MMRD Act, 1957 by necessary
implication refers to the taxing power of Parliament.
Imposition of taxes on mineral rights would affect the
development of mines and minerals. Parliament’s
authority to regulate and control mineral development
would be seriously impaired and affected if it is
held that the matter relating to imposition of tax on
minerals is also vested in the State. The vires of
Sections 9 and 9-A of the 1957 Act has not been
questioned. In fact, they have been held to be intra
vires in State of M.P. v. Mahalaxmi Fabric Mills Ltd.
[1995 Supp (1) SCC 642] , Saurashtra Cement and
Chemical Industries Ltd. v. Union of India [(2001) 1
SCC 91] and South Eastern Coalfields Ltd. [(2003)
8 SCC 648 : (2003) 7 Supreme 539] Unless power
to levy compulsory impost is held to be ultra vires
the Constitution, it cannot be held that Parliament
has encroached upon the States’ power of taxation.”
(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
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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
criticism by the majority in Kesoram is that there was no discussion
on those judgments in India Cement. The reasons for there being
no necessity for discussion of the said judgments are not far to see.
The judgments of the Patna and Mysore High Courts considered
at length the concept of royalty in the context of the constitutional
Entries in Lists I and II, as discussed above and in light of the
declaration made in Section 2 and the scheme of the MMDR Act,
1957. It was observed by the Patna and Mysore High Courts that
having regard to the constitutional scheme vis-à-vis the legislative
fields, in the context of making laws on mineral rights and mineral
development and Section 2 of the MMDR Act, 1957 payment of
royalty on a mining lease being covered under the Parliamentary
Act, i.e. MMDR Act, 1957, the same acted as a limitation imposed
by the Parliament by law relating to mineral development on the
States’ competence to also tax on exercise of mineral rights by
levying a cess or any other impost on royalty. Therefore, by a logical
deduction, it was held that royalty is a tax within the meaning of
Entry 50 - List II. Consequently, any cess on royalty or any other
impost on royalty or royalty being a basis for a further tax or impost
being levied by a State Government was impermissible. In other
words, the MMDR Act 1957 insofar as and to the extent dealt with
the aspect of royalty being payable by a holder of a mining lease
imposed a limitation on the States’ right to levy any other impost/
tax on mineral rights as royalty was payable for exercise of mineral
rights resulting from a mining operation and extraction of minerals.
It was in this context that it was reasoned that royalty is a tax. Also,
royalty could not be a basis for levy of any other tax on mineral
bearing land as land revenue.
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24.1 On the other hand, the judgments of four other High Courts,
namely, Punjab and Haryana, Orissa, Rajasthan and Gujarat
did not consider the controversy from the perspective of the
constitutional Entries and Section 2 of the MMDR Act, 1957.
The said judgments proceeded on the dictionary meaning of
‘royalty’ under various types of transactions under which royalty
has to be paid and concluded that royalty was not an impost
or tax, which approach was also adopted by the majority in
Kesoram. Thereby, Entry 54 - List I and Entry 50 - List II as
well as Section 2 of the MMDR Act, 1957 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 Parliament had enacted the MMDR Act,
1957 and the field was entirely covered and the State Legislature
was incompetent to levy the tax. The three-judge Bench concluded
that the charging Section of the impugned Act imposed a tax on
the minerals also and was not confined to a levy on land or surface
characteristic of the land. This was because non-mineral-bearing
lands and non-coal-bearing lands were left out of the levy. The levy
was struck down as the levy was not a tax on land, but on minerals
and mineral rights.
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Kannadasan:
26. In this context, it is significant to refer to another judgment of
this Court in Kannadasan wherein this Court, by following the
observations in India Cement and Orissa Cement, held that the
States are denuded of the power to levy any tax on minerals and
therefore, the State enactments were declared to be lacking in
legislative competence as in the aforesaid cases, insofar as they
pertained to levy of tax/cess on royalty paid on minerals extracted.
It was observed that the denudation of the States’ powers was not
partial but total and the States cannot levy any tax on mining and
minerals, so long as the declaration in Section 2 of the MMDR Act,
1957 stands. Once the denudation is total, there is no occasion
or necessity for any further declaration of denudation, or for that
matter, for repeated declarations of denudation. Kannadasan
was partially overruled by a three-judge Bench in District Mining
Officer vs. Tata Iron and Steel Company, (2001) 7 SCC 358
(“Tata Iron and Steel”), but on a different question which I shall
also advert to later.
26.1 However, what is relevant for the purposes of this reference
could be discussed in the first instance. In Kannadasan, the
appellants therein had challenged the validity of the Cess and
Other Taxes on Minerals (Validation) Act, 1992 (“Validation Act”
for short) enacted by Parliament. The High Court had rejected
the writ petitions. The background of the said Act was that in
India Cement, this Court had held that (i) the levy could not
be sustained under and with reference to Entry 49 - List II as
a tax on land; (ii) the levy was a levy on minerals and was
relatable to Entries 23 and 50 - List II; (iii) that on account
of the declaration made by Parliament contained in Section
2 of the MMDR Act, 1957, the State Legislatures had been
denuded of the power to levy tax on minerals. That regulation
of mines 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
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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 the said levies, the Union had to step in and
promulgated the Cess and other Taxes on Mineral (Validation)
Ordinance, 1992 on 15.02.1992 and thereafter replaced it by
a Parliamentary enactment called the Cess and other Taxes
on Minerals (Validation) Act, 1992 with effect from 04.04.1992.
The Act was enforced in order to validate the imposition and
collection of cesses and certain other taxes on minerals under
certain State laws. The Act was deemed to come into force on
04.04.1991. Under the said Act, a person could claim refund
of any cess or tax paid by him in excess of the amount due
from him under any such State law. The Schedule to Section
2 named the Acts of various States which were validated.
For immediate reference, Section 2 of the Validation Act is
extracted as under:
“2. Validation of certain State laws and actions
taken and things done thereunder. - (1) The laws
specified in the Schedule to this Act shall be, and
shall be deemed always to have been, as valid as
if the provisions contained therein relating to cesses
or other taxes on minerals had been enacted by
Parliament and such provisions shall be deemed to
have remained in force up to the 4th day of April,
1991.
(2) Notwithstanding any judgment, decree or order of
any court, all actions taken, things done, rules made,
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notifications issued or purported to have been taken,
done, made or issued and cesses or other taxes
on minerals realised under any such laws shall be
deemed to have been validly taken, done, made,
issued or realised, as the case may be, as if this
section had been in force at all material times when
such actions were taken, things were done, rules were
made, notifications were issued, or cesses or other
taxes were realised, and no suit or other proceeding
shall be maintained or continued in any court for the
refund of the cesses or other taxes realised under
any such laws.
(3) For the removal of doubts, it is hereby declared
that nothing in sub-section (2) shall be construed as
preventing any person from claiming refund of any
cess or tax paid by him in excess of the amount due
from him under any such laws.”
Section 2 was the validation clause stating that the laws
specified in the Schedule to the Act shall be, and shall be
deemed always to have been, as valid as if the provisions
contained therein relating to cesses or other taxes on minerals
had been enacted by Parliament and such 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.
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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 enacting the MMDR Act, 1957 was to bring about,
inter alia, a uniformity in taxes and royalties throughout the
country in the interest of mineral development in the country
for which only the Union or the Central Government could
impose a levy such as royalty or any other tax. There is not
a precondition to a law made by Parliament under Entry 54
- List I nor is there a limitation upon Parliament’s power. If
Parliament has enunciated the principle, it can also create
an exception thereto in appropriate circumstances or to meet
an exigency. The Validation Act was in order to meet such
an exigency. The said Act was both an addition to as well
as an exception to Section 9 of the MMDR Act, 1957. With
regard to Section 9 of the MMDR Act, 1957, it was reasoned
that in light of the decisions of this Court in India Cement
and Orissa Cement, the States were totally denuded of the
power to levy any taxes on minerals. The denudation of the
State is not partial; it is total insofar as the levy of any tax or
cess on mineral is concerned. So long as the declaration in
Section 2 stands, it is unnecessary to have a fresh declaration
to be made by Parliament whenever the Union increases the
rate of royalties.
26.4 It was further observed that what was sought to be levied
under the impugned enactment was a tax/cess and not
a fee and therefore, the Parliament was not bound to
utilize the taxes realized under the impugned Act, i.e., the
Validation Act, only for the purpose of regulation of mines
and mineral development. That even in the matter of fees,
it is not necessary that an element of quid pro quo should
be established in each and every case as fees can be both
regulatory and compensatory and that in the case of regulatory
fees, the element of quid pro quo is totally irrelevant vide
Corporation of Calcutta vs. Liberty Cinema, AIR 1965 SC
1107, (“Liberty Cinema”).
26.5 It was further observed that the Validation Act though a
temporary statute did not have an expiry date, in the sense it
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was deemed to come into force on 15.02.1992 and validated
all imposts up to 04.04.1991 and not thereafter. By this, it didn’t
mean that the statute itself expired on 04.04.1991 as it was
deemed to come into force on a later date, i.e. on 15.02.1992.
The Validation Act was also not a temporary statute. It was
observed that the duration of the levy validated under the
Act and the life of the Act are 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 cesses or surcharge on cesses on royalties as
directed by this Court which would have been a drain on the
States’ exchequers. Realising the financial predicament in
which the States were, the Parliament, in exercise of its unitary
powers and as the Union of the States, came to rescue all the
States by passing the Validation Act so that till 04.04.1991,
by a fiction the States’ levies in the form of cesses or other
taxes on royalty were validated as if the State laws were
enacted by Parliament itself. Therefore, all judgments which
had struck down the levies imposed by the State on mineral
rights discussed above if had directed to refund the levies
collected by them would now not have been necessary. Further,
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all such State levies being validated, arrears till 04.04.1991
could be collected by the States. Such an Act was passed
by way of an abundant caution as in certain other judgments
of this Court, there could be directions to refund the taxes or
levies collected and attended complications on the refund of
the said incompetent levies or in order to collect the arrears
till 04.04.1991. These aspects constrained the Parliament to
pass the Validation Act. In the circumstances, the appeals
and the writ petitions were dismissed.
26.7 The judgment in Kannadasan clearly established the fact
that the Parliament has supremacy over the regulation of
mines and development of minerals in view of Entry 54 - List
I read with Section 2 and the other provisions of MMDR Act,
1957, as Entry 23 – List II is also subject to Entry 54 – List
I. That levying of a uniform impost in the form of royalty and
dead rent imposed under Sections 9 and 9A of the MMDR
Act, 1957 throughout the length and breadth of the country,
insofar as a particular mineral is concerned, without letting any
State to impose any other levy over and above royalty is in
the interest of mineral development. Thus, Sections 9 and 9A
are an embargo and a limitation on the power of the State to
impose any tax on exercise of mineral rights. This is because
royalty is paid on exercise of mineral rights. It is a statutory
exaction under the MMDR Act, 1957 and is compulsory for
every holder of a mining lease to pay royalty to the State
Government which executes the lease deed in the status of a
lessor. Payment of royalty being compulsory by the holder of
a mining lease, it makes it a tax as the rate of royalty is fixed
by the Central 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
[2024] 7 S.C.R. 1819

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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 to
04.04.1991. Therefore, the States were not required to refund
the illegal levies collected by them and continued to collect the
same till 04.04.1991. The sustaining of the Validation Act by
this Court is also significant. Thus, as a result of the Validation
Act, the decades’ old controversy between States’ attempts
to levy taxes on royalty and the High Courts and this Court
striking down the same by holding that it was the Parliament
only which could do so by a law, brought down the curtains
on the said controversy till its revival in Kesoram.
26.8 Justice Jeevan Reddy speaking for the Bench in Kannadasan
cleared any lurking doubts about States having any power
to levy any cess, tax or other impost on exercise of mineral
rights; it was only the Parliament which could impose such a
levy either by way of royalty or in any other form.
26.9 Thereafter, in Tata Iron and Steel, the controversy arose from
the Patna High Court, in the context of the Validation Act,
1992 wherein it was held that the said Act did not authorise
recovery of any tax or cess after 04.04.1991, even if the liability
was incurred under the validated laws before 04.04.1991 and
consequently, it restrained the State of Bihar from taking any
steps to realise such demands. However, by then this Court
in Kannadasan had upheld the right of the State to demand
and collect levies which were collectable up to 04.04.1991.
The decision of the Patna High Court to the extent it restrained
the State from realising the demand was challenged before
this Court by the State of Bihar.
26.10 The matter was considered by a three-judge Bench as
Kannadasan was decided by a two-judge Bench. It was
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observed that the Validation Act had validated the levy of
taxes by eleven States upto 04.04.1991. That the Validation
Act fictionally held that the Parliament had in fact imposed the
cess and other taxes on minerals by keeping those provisions
of State Act, which had been struck-down, alive till 04.04.1991.
Although, Parliament never in fact re-enacted the eleven Acts
mentioned in the Schedule to the Validation Act but it merely
provided legislative competence for those Acts which related
to cesses or taxes on minerals. This was done owing to the
judgments of this Court in India Cement and Orissa Cement
that had led the to a situation that required a Validation Act to
save the State from refunding the incompetent levies 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 a right to make a levy or
collection of the cess and taxes on the minerals which were
collected upto 04.04.1991, as was held in Kannadasan. It
merely validated the collections already made so that the State
will not be burdened with the liability of refunding the amount,
already collected under void law. Therefore, the contrary view
expressed in Kannadasan was held to be not correct.
[2024] 7 S.C.R. 1821

Mineral Area Development Authority & Anr. v.
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26.12 With reference to Article 265 of the Constitution, it was
observed that the State laws which stood expired on various
dates prior to 04.04.1991 and on 04.04.1991 did not authorise
imposition and collection of taxes and cess on minerals after
04.04.1991 in respect of minerals extracted till 04.04.1991,
on which the cess was collectable. It was observed that
object of the Validation Act was only to confer the life to void
statutes by fictional re-enactment and granting legislative
competence for limited purpose so that the State would not be
called upon to refund the cess already collected under such
void law. Thus, the void laws never existed after 04.04.1991
and consequently, there was no right with the State to make
any levy or collection of the cess, which was collectable
up to 04.04.1991. Only past actions had been sought to
be validated, that too, by a fictional enactment of the State
laws by Parliament, keeping it alive till 04.04.1991. Even if
imposition of levy had been made but not collected, the same
could not be collected after 04.04.1991 as the Validation
Act had not provided any provision permitting State to levy
or collection after 04.04.1991. Therefore, it was held that
the States cannot be conferred a right to levy or collection
after 04.04.1991. Therefore, to that extent Kannadasan’s
observations were not approved.
26.13 The overruling of certain observations made in Kannadasan
by the three-judge Bench in Tata Iron and Steel does not
touch upon the question whether imposition of cess and other
taxes on the basis of royalty or in addition to royalty by a State
legislature is competent. The judgment in Tata Iron and Steel
on the other hand proceeds on the premise that India Cement
and Orissa Cement were rightly decided. The Validation
Act had been passed by the Parliament and there being a
confusion with regard to the actual collection of the levies by
the States on or after 04.04.1991 and in Kannadasan, this
Court having held that it could be so in the form 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
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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-à-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 of such
taxes/cesses after 04.04.1991.
26.15 In view of the aforesaid judicial and legislative history, can this
Court once again confer powers on the States to levy taxes,
etc. on the exercise of mineral rights in addition to royalty by
way of a cess or a surcharge on cess or independently on
the basis of royalty as a measure for imposing such taxes?
The majority judgment in Kesoram has attempted to do that.
This is by holding that royalty imposed under Section 9 of
MMDR Act, 1957 is not a tax and therefore, the States can
levy taxes on minerals rights either under Entry 50 or Entry
49 – List II.
Thus, the legal quagmire has not ended but continued.
27. In my view, the majority judgment in Kesoram is liable to be overruled
for holding that royalty is not a tax for the following reasons:
Firstly, because the doubt expressed in the said judgment by the
majority was premised on a “typographical error” in paragraph 34
of the main judgment in India Cement by failing to appreciate the
entire reasoning of the seven-judge Bench. It also failed to notice
that in the case of India Cement, Oza, J. penned a separate but
concurring opinion and arrived at a conclusion that royalty is in the
[2024] 7 S.C.R. 1823

Mineral Area Development Authority & Anr. v.
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nature of a tax by separate reasoning. The majority in Kesoram did
not find any “typographical error” in Oza, J.’s opinion.
Secondly, the majority in Kesoram came to the conclusion that royalty
is not a tax based on the definition of royalty in dictionary meanings,
etc. without reference to the constitutional Entries, particularly, Entry
50 - List II being limited by Entry 54 - List I and a Parliamentary
law MMDR Act, 1957 being made under the latter Entry and the
declaration made in Section 2 thereof. In this regard, it would be
useful to refer to the observations of this Court in State of Orissa
vs. Titaghur Paper Mills Company Limited, 1985 Supp. SCC 280
(“Titaghur Paper Mills”), wherein this Court discussed the scope
and ambit of the expression royalty and it was observed that while
understanding the meaning of an expression, the dictionary meaning
of a word cannot be looked at where that word has been statutorily
defined or judicially interpreted (in light of the constitutional Entries
in the Lists). Where there is no such definition or interpretation, the
Court may take the aid of dictionaries to ascertain the meaning of
a word in common parlance, bearing in mind that a word is used 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”) which led to the constitution of a
seven-judge Bench by Hon’ble the Chief Justice of India. By a majority
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of 5:2, the seven-judge Bench in the aforesaid case answered the
questions raised by the two-judge Bench and thereby set aside
the judgment of the five-judge Bench. The circumstances as, they
occurred in the case of A.R. Antulay did not present themselves in
Kesoram so as to doubt India Cement.
Fourthly, in my view, the opinion of the majority in the Kesoram is
per incuriam as it failed to follow the dictum in India Cement on the
basis of a “typographical error” in paragraph 34 thereof where there
was none. Judgments of larger Benches cannot be questioned by
smaller Benches on the basis of an imagined “typographical error”!
The entire judgment must be read and understood including its under
currents before negating it for what it stands. A judgment of a Court of
law is not a piece of legislation but one pregnant with reasoning and
it becomes the duty of a succeeding Bench considering a precedent
to be cautious in opining something contrary on the premise of a
“typographical error” in a judgment of a larger Bench by failing to
understand the import of the reasoning.
Fifthly, Kesoram also failed to note that the Parliament enacted the
Validation Act, 1992 on the definite premise that the States did not
have the legislative competence to levy the impugned levies which
were rightfully set aside by this Court in a series of judgments starting
from Hingir-Rampur.
Sixthly, I may observe that the Validation Act, 1992 clearly established
that the dicta of this Court in India Cement, Orissa Cement and
other cases which followed the said judgment are correct and
were accepted by the Parliament which acted on it by passing the
Validation Act.
Seventhly, in Kannadasan, the validity of the Validation Act, 1992
was upheld. This clearly established the fact that the State’s levies
which were quashed and set aside by this Court in India Cement
and other cases were not relatable to Entry 49 - List II. If that was
so, then Parliament could not have enacted the Validation Act, 1992
as only States can levy taxes on lands and buildings under the Entry
49 – List II.
Eighthly, the actual basis for the majority in Kesoram doubting the
judgment in India Cement is on the premise that there is a distinction
between the power to regulate and control and the power to tax, the
[2024] 7 S.C.R. 1825

Mineral Area Development Authority & Anr. v.
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two being distinct 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-à-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 Cement, Mahalaxmi Fabric Mills, Saurashtra Cement,
Mahanadi Coalfields, Kannadasan excluding to the extent
overruled in Tata Iron and Steel, and Tata Iron and Steel have
been correctly decided and therefore, are binding precedent and
cannot be overruled.
Entries 49 and 50 – List II:
29. The second aspect of this case which also requires consideration is
with regard to interplay of Entries 49 and 50 - List II in the context
of mineral bearing lands.
30. In the judgment proposed by Hon’ble the Chief Justice of India, it
has been concluded as under:
"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. Mineral-bearing land falls
within the description of “lands” under Entry 49 of List II;
f. The yield of mineral bearing land, in terms of the quantity of
mineral produced or the royalty, can be used as a measure
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to tax the land under Entry 49 of List II. The decision in
Goodricke (supra) is clarified to this extent;
g. Entries 49 and 50 of List II deal with distinct subject matters
and operate in different fields. Mineral value or mineral
produce can be used as a measure to impose a tax on
lands under Entry 49 of List II; and
h. The “limitations” imposed by Parliament in a law relating
to mineral development with respect to Entry 50 of List II
does not operate on Entry 49 of List II because there is
no specific stipulation under the Constitution to that effect.”
31. In India Cement, the State of Tamil Nadu mainly contended that
impugned levy, namely, imposition of cess on royalty under Entry 49
- List II as taxes on lands and buildings and therefore defining “land
revenue”, as including royalty on mineral bearing land in exercise
of mineral rights by the holder of a mining lease was justifiable.
In this regard, reference was made by the State of Tamil Nadu to
Raja Jagannath Baksh Singh vs. State of U.P., (1963) 1 SCR 220
(“Raja Jagannath Baksh Singh”), wherein it was indicated that
the expression “lands” in Entry 49 - List II is wide enough to include
agricultural as well as non-agricultural land. But this contention was
repelled by this Court by observing that ‘royalty’ being that which is
payable on the extraction of minerals from land and ‘cess’ being an
additional charge on the basis of royalty cannot be considered to
be a tax on mineral land under Entry 49 – List II. It was observed
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
[2024] 7 S.C.R. 1827

Mineral Area Development Authority & Anr. v.
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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 imposed directly on land but only for a particular act,
namely, the transfer of land by way of gift. In Union of India
vs. Harbhajan Singh Dhillon, (1971) 2 SCC 779 (“Harbhajan
Singh Dhillon”), the aforesaid two decisions were approved.
31.2 Further, it was observed in India Cement that royalty which is
indirectly connected with land cannot be said to be tax directly
on land as a unit. The cess impugned could not be levied if there
was no mining activity carried on as no royalty was payable as
payment of cess was on royalty. Hence, it was manifest that
cess on royalty was not relatable to land as a unit which is the
only method of valuation of land under Entry 49 - List II but
was relatable to minerals extracted, i.e. royalty was payable on
a proportion of the minerals extracted based on the rate fixed
under the Second Schedule to MMDR Act, 1957. Therefore, the
impugned cess on royalty was held in pith and substance to
be a tax on royalty and not a tax on land. Hence, royalty could
not be included within the definition of “land revenue” for the
purpose of imposition of a cess on land revenue, which means
cess on royalty, when royalty is itself a tax paid by a holder of
mining lease for exercise of his mineral rights, which is in the
interest of mineral development.
31.3 It was further observed in India Cement that Entry 23 - List
II deals with regulation of mines and mineral development
subject to the provisions of List I, i.e. Entry 54 - List I. Even
though the subject mineral rights are part of the State List,
taxes on mineral rights are treated separately and hence,
the principle that the specific excluded the general must be
applied. Therefore, it was observed that the word “lands” in
Entry 49 - List II cannot include mineral bearing lands. In this
connection, it was further observed that the extent to which
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regulation of mines and mineral development under the control
of the Union is declared by Parliament by law to be expedient
in the public interest (Entry 54 – List I), must be noted as, to
that extent, denuding the State Legislation of its power under
Entry 50 - List II. It was further observed that in view of the
Parliamentary legislation under Entry 54 - List I, namely, the
MMDR Act, 1957, and the declaration made under Section
2 and the provisions of Section 9 thereof, the State’s power
would be overridden to that extent.
31.4 Further, in India Cement, reliance 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 view of Section 9(3) of the MMDR Act, 1957.
It was also observed in India Cement that under Section 9
of the MMDR Act, 1957 the field was fully covered by the
Central legislation and that royalty is directly relatable only
to the minerals extracted. Hence, royalty was found relatable
only to Entry 50 - List II and not Entry 49 - List II. As the field
is covered by the MMDR Act, 1957, Entries 23 and 50 - List
II will be subject to the declaration made under Section 2 of
the MMDR Act, 1957 which has been enacted as per Entry
54 - List I.
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Mineral Area Development Authority & Anr. v.
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32. In view of the above, the reasoning in the proposed judgment of
the learned Chief Justice of India, in paragraph 339 that “though
Parliament can limit the taxing field entrusted to the State under
Entry 50 - List II through a law relating to mineral development,
the limitation operates on the field of taxing mineral rights. Such a
limitation cannot operate on Entry 49 - List II because there is no
specific stipulation under the Constitution to that effect. The nature
of taxes under both the Entries, that is Entries 49 and 50 - List II,
are distinct. The Constitution envisages the imposition of limitations
by Parliament on the legislative field of the state of taxes on mineral
rights, and not taxes on lands … Therefore, we are of the opinion
that the doctrine of generalia specialibus non derogant has no
application in the instant case because Entries 49 and 50 of List
operate in different fields” in my view is contrary to what has been
reasoned by the seven-judge Bench in India Cement and also the
scheme of Entry 54 - List I and Entries 23 and 50 - List II as well as
the object, intent and scheme of Parliament in making a declaration
under Section 2 of the MMDR Act, 1957. Further, the Validation Act
passed by the Parliament on the strength of Entry 54 – List I would
have been wholly unnecessary if Entry 49 – List II was applicable
to mineral bearing lands.
33. In view of what has been discussed above, in my view, Entry 49 - List
II is an Entry of the widest amplitude. Taxes on lands and buildings
would include taxes on agricultural land, non-agricultural land, etc.
But insofar as mineral-bearing land is concerned, there cannot be a
tax on such land per se to be levied by the State Legislature as well
as tax on mineral rights exercised on such land which is based on
the value of the minerals produced under a Central Act. The reasons
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.
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(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 for the time being specified in the Second
Schedule to MMDR Act, 1957 in respect of that mineral. There
is no payment of royalty on the basis of a private negotiation
between the lessor or lessee. The rate at which royalty has to
be paid is prescribed in the Second Schedule of the MMDR Act,
1957 mineral wise. Only the Central Government by notification
in the official gazette can amend the Second Schedule so as
to enhance or reduce the rate at which the royalty shall be
payable in respect of any mineral with effect from the date as
may be specified in the notification. Provided that the Central
Government shall not enhance the rate of royalty in respect of
any mineral more than once during any period of three years.
This power is reserved only with the Central Government, which
is in the interest of mineral development in a uniform manner
throughout the country.
(iv) Fourthly, there is no value that can be attached to a mineral
bearing land so as to impose tax on such land minus the
minerals. Insofar as extraction of minerals is concerned, being
an exercise of a mineral right, royalty is payable by a holder of
a mining lease and when no mining activity is carried on, dead
rent is payable by such a person. Thus, royalty being a tax or
an exaction, there cannot be another tax imposed by the State
under Entry 49 - List II on such mineral bearing land. Such
land is valuable because of the mining activity that is carried
thereon and the minerals are extracted. Such land is not the
same as agricultural or non-agricultural land or land on which
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Mineral Area Development Authority & Anr. v.
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buildings are constructed that is subjected to tax under Entry
49 - List II by a State Government.
(v) Fifthly, to reiterate, when the value of minerals extracted is the
basis of payment of royalty under the scheme of the MMDR Act,
1957, which is a Parliamentary legislation, such land cannot
be construed to be falling within the scope and ambit of Entry
49 - List II also so as to be subjected to a tax imposed by the
State. In other words, there cannot be a tax on mineral bearing
land twice over by the State Government: one, under Entry
49 - List II as land per se and another, under Entry 50 - List
II which is subject to any limitation being made by Parliament
by law i.e. MMDR Act, 1957 made pursuant to Entry 50 - List
I and more particularly, Section 2 read with Section 9 of the
said Act. If, for instance, Section 9 of the MMDR 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
the State Government. This is impermissible having regard to the
constitutional intent and scheme of Entries in the Lists. Therefore,
royalty cannot also be a measure to impose tax on mineral bearing
land. Hence, the State Legislature using royalty on mineral produce
as a measure to impose a cess under Entry 49 - List II on mineral
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bearing land would indeed overlap Entry 50 - List II. This is because
minerals are extracted by virtue of mining activity which is in exercise
of a mineral right and taxes on mineral rights are envisaged under
Entry 50 – List II subject to any limitation imposed by the Parliament.
Therefore, Entry 50 - List II would have to be viewed distinctly from
Entry 49 - List II. If so viewed, it becomes subject to Parliamentary
law in the form of MMDR Act, 1957 and the rules made thereunder
which would be a limitation on the power of the State to tax under
Entry 50 – List II. Hence to get over the rigour of Entry 50 – List II,
the States cannot resort to Entry 49 – List II.
Effect of Overruling India Cement:
35. A survey of cases on the aspect as to whether royalty is a tax or not
would reveal that Hingir-Rampur, M.A. Tulloch, Baijnath Kedia,
India Cement and the two judgments of Patna High Court and Mysore
High Court have clearly held that royalty is a tax coming within the
scope and ambit of Article 366(28) of the Constitution. There are
other judgments which have followed India Cement. This is having
regard to the interpretation of the Entries namely, Entry 50 – List II
in light of Entry 54 – List I and the declaration made in Section 2 of
the MMDR Act, 1957 and the scheme of the provisions of the said
Act. On the other hand, in HRS Murthy and Kesoram, it has been
held by this Court that royalty is not a tax.
35.1 What is significant is between India Cement and the
cases that have followed the said dictum and Kesoram is
the judgment of this Court in Kannadasan which marks a
watershed in the entire controversy and in fact had put a
closure to the same. The circumstance which led to the
Parliament enacting the Validation Act was to validate all
the incompetent levies imposed in the form of cesses and
surcharge on cesses, licence fee, etc. on royalty which had
been set aside by this Court. Parliament was constrained
to enact the Validation Act having regard to Entry 54 – List
I and Section 2 of the MMDR Act, 1957. This significant
aspect has not been appreciated 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.
[2024] 7 S.C.R. 1833

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

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
which is in addition to payment of royalty. Further, that such
levies could also be imposed under Entry 49 – List II thereby
making Entry 50 – List II redundant is not acceptable. As
a sequitur, this would result in mineral development in the
country in an uneven and haphazard manner and increase
competition between the States and engage them into what
has been termed by Louise Tillin in a ‘race to the bottom’
in a nationally sensitive market. There would be unhealthy
competition between the States to derive additional revenue
and consequently, the steep, uncoordinated and uneven
increase in cost of minerals would result in the purchasers of
such minerals coffing up huge monies, or even worse, would
subject the national market being exploited for arbitrage. The
steep increase in prices of minerals would result in a hike in
prices of all industrial and other products dependent on minerals
as a raw material or for other infrastructural purposes. As a
result, the overall economy of the country would be affected
adversely which may result in certain entities or even non-
extracting States resorting to importing minerals which would
hamper foreign exchange reserves of the country. There
would lead to a breakdown of the federal system envisaged
under the Constitution in the context of mineral development
and exercise of mineral rights. It could also lead to a slump
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in mining activity in States which have mineral deposits owing
to huge levies that have to be met by holders of mining
licences. Further, another impact of this would be a unhealthy
competition to obtain mining leases in States which have the
mineral deposits and who do not wish to impose any other levy
apart from royalty. It is, therefore, necessary to realise why the
framers of the Constitution took a clue from the Government
of India Act, 1935 in order to distribute the legislative powers
between the Union and the State List insofar as regulation of
mines and minerals is concerned.
35.3 At this juncture, I must also observe the overruling the judgment
in India Cement would mean that all judgments which are akin
to the ratio of India Cement whether prior to or subsequent
thereto, stand overruled irrespective of whether they are the
judgments of the High Courts or this Court. Consequently, all
States would once again start levying taxes on mineral rights
under Entry 49 - List II and thereby bypass Entry 50 - List 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 post-colonial 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 their
[2024] 7 S.C.R. 1835

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

foundations by the desire to boost industrial development and lay
the foundation for a national welfare state in a post-colonial future by
preventing the consolidation of ‘‘race to the bottom’’ dynamics arising
from unregulated inter-provincial economic competition.” According
to her, Indian federalism was influenced by emerging debates taking
place within India and in the international fora established alongside
the League of Nations after the First World War, about the regulation
of economic competition and the development of the twentieth century
welfare State. According to her, the distinctive element of Indian
federalism is the combination of a strong Centre and a substantial
sphere of shared Centre-State jurisdiction. This thinking was shaped
by nationalist politicians, industrialists, and labour leaders in the
decades prior to India’s Independence and the significant political
and economic factors that influenced the constitutional design of
federalism in India.
36.1 According to certain scholars, India’s founding fathers opted for
Parliamentary supremacy with a strong centre to prevent further
secessionist movements. That, Jawaharlal Nehru’s preference
was for a centralized model of federalism was to hold together
the fledgling Union and concerted efforts to foster a national,
civic identity rather than parochial identification with local or
linguistic identities. Therefore, the Constitution uses the word
“Union” instead of “Federation”.
36.2 Nehru, who was the Chairman of the Union Powers Committee
of the Constituent Assembly, was of the view that “it would
be injurious to the interests of the country to provide for a
weak central authority which would be incapable of ensuring
peace, of coordinating vital matters of common concern and of
speaking effectively for the whole country in the international
sphere.” (Nehru cited in M.P. Jain, Nehru and the Indian
Federalism, Journal of the Indian law Institute, Vol.19, No.4,
1977, p.408).
36.3 The Government of India Act, 1935 was the first comprehensive
blueprint for legislative division of power in India between
federal, provincial and concurrent spheres which resolved
residuary powers to rest with the Federal Government. Though
there are apparent similarities between the Government of
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India Act, 1935 and the Indian Constitution, yet factors, such
as, regulation of economic competition and the development
of twentieth 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 socio-economic
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:
“2.5.21 In every Constitutional system having two levels
of government with demarcated jurisdiction, contents
respecting power are inevitable. A law passed by a State
legislature on a matter assigned to it under the Constitution
though otherwise valid, may impinge upon the competence
of the Union or vice versa. Simultaneous operation side-
by-side of two inconsistent laws, each of equal validity,
will be an absurdity. The rule of Federal Supremacy is a
technique to avoid such absurdity, resolve conflicts and
ensure harmony between the Union and State laws. This
principle, therefore, is indispensable for the successful
functioning of any federal or quasi-federal Constitution. It
is indeed the kingpin of the federal; system. “Draw it out,
the entire system falls to pieces”
[2024] 7 S.C.R. 1837

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

2.5.22 If the principles of Union Supremacy are excluded
from Articles 246 and 254, it is not difficult to imagine its
deleterious results. There will be every possibility of our
two-tier political system being stultified by internecine
strife, legal chaos and confusion caused by a host of
conflicting laws, much to the bewilderment of the common
citizen. Integrated legislative policy and uniformity on basic
issues of common Union-State concern will be stymied.
The federal principle of unity in diversity will be very
much a casualty. The extreme proposal that the power of
Parliament to legislate on a Concurrent topic should be
subject to the prior concurrence of the States, would, in
effect, invert the principle of Union Supremacy and convert
it into one of State Supremacy in the Concurrent sphere.
The very object of putting certain matters in the Concurrent
List is to enable the Union Legislature to ensure uniformity
in laws on their main aspects throughout the country. The
proposal in question will, in effect, frustrate that object.
The State Legislatures because of their territorially limited
jurisdictions, are inherently incapable of ensuring such
uniformity. It is only the Union, whose legislative jurisdiction
extends throughout the territory of India, which can perform
this pre-eminent role. The argument that the States should
have legislative paramountcy over the Union is basically
unsound. It involves a negation of the elementary truth
that the ‘whole’ is greater than the ‘part’.”
(emphasis supplied)
As the paragraphs extracted above elucidate, the Commission was
of the firm 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
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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 therefore, not of legal
interpretation of their respective jurisdiction, but one
of evolving an understanding in regard to the extent
to which these sources of revenue can be exploited
keeping in view the overall national interest. Such
issues can best be sorted out through consultation
and consensus. We are of the view that the NEDC
proposed by us will be the best forum for this purpose.
It is, however, quite clear that the issues are inter-
linked. Mutual trust and confidence can be built up only
if, on the one hand, the Union Government promptly
revises royalty rates at reasonable intervals and on
the other, the States abstain from arbitrary action in
levy of cesses, etc. Parochial considerations must yield
to the larger interests of the nation in such matters.”
However, till the above situation is achieved
constitutional courts would have to adjudicate by
way of judicial review.
37.2 One has to also appreciate the pragmatic solution-oriented
approach coupled with the acknowledgment that the subject
matter of this lis-taxation on minerals-which are natural
resources, should be exploited for the development of the
country as a whole. Therefore, it is only Union legislation
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Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

which can ensure the same successfully. The Report further
states as under:
“13.5.15 Exploitation of mineral resources will
continue to increase. There is general agreement that
minerals are national resources and they should be
exploited and developed for the benefit of the country
as a whole. Only Union legislation can ensure such
regulation and development of minerals. The States
have been given an unrestricted field in respect of
‘minor minerals’ which have little all-India implications.
There is, however, need for periodic review of the
First Schedule to the MMRD Act, in consultation with
the States, say after every three years, as there is a
possibility that a particular mineral, not included in the
Schedule, may become a matter of national concern
or vice versa. Any amendment of the Act should
normally be preceded by consultation in the NEDC.”
(emphasis supplied)
38. However, the controversy in this case would demonstrate how a State
with substantial mineral reserves manages, regulates and taxes its
resources without hurting the national interest and the development
of the country in the context of mineral development. It is with the
above background that the distribution of legislative 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
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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 the States can impose levies under Entry 50 – List II over
and above the amount of royalty received by them under the MMDR
Act, 1957, is in the negative. The submission that Entry 50 – List II
is sui generis because it is the only legislative Entry which limits the
taxing powers of the State legislatures by reference to a general law,
is a correct submission made by Sri Harish Salve, learned senior
counsel. Therefore, the expression “mineral development” found in
Entry 50 – List II has to be traced to the entire architecture of the
MMDR Act, 1957 which serves as limitation of the taxing power of
the State legislature under Entry 50 – List II. To read it otherwise
would lead to destruction of the federal balance, as rightly contended
by Sri Salve. Further, tax on mineral right would also include royalty
as envisaged under Section 9 and the other Sections of the MMDR
Act, 1957 which is in the nature of sovereign exaction and every
holder of mining lease is bound to pay royalty in terms of Section 9
read with Second Schedule to the said Act. In that sense, royalty is
in the nature of a tax on mineral rights which has to be compulsorily
paid by the holder of a mining lease irrespective of who the owner
of the mineral bearing land is.
39.1 Also the MMDR Act, 1957 and the Rules made thereunder is a
complete Code on the regulation of mineral development and
royalty paid by a holder of a mining lease is in the nature of
a tax paid on mineral rights, the State legislature cannot, on
the basis of royalty paid, levy any other tax, cess or surcharge
on cess. The States can only levy tax on sale of mineral as
per Entry 54 – List II which is not a tax on mineral rights,
as rightly contended by Sri Datar, learned senior counsel.
Moreover, Entry 50 – List II is a recognition of parliamentary
superiority via imposition of a limitation, as rightly argued by
Dr. Singhvi, learned senior counsel.
39.2 Consequently, the contention of learned senior counsel
Sri Rakesh Dwivedi for the appellants-States to the effect
that value of the minerals could be used as a measure to
tax mineral bearing land under Entry 49 – List II cannot be
accepted. It is also not right to contend that the Parliament
[2024] 7 S.C.R. 1841

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

has only fixed the amount of royalty payable under Section 9
which cannot be a limitation on the taxing power of the State
legislature under Entry 50 – List II. Moreover, the expression
“any limitation” used in Entry 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 The true nature of royalty determined
of royalty determined under Section 9 read with Section
under Section 9 read 15(1) of the MMDR Act, 1957 is
with Section 15(1) of the that it is in the nature of a tax
MMDR Act? Whether coming within the scope and ambit
royalty is in the nature of Article 366(28) of the Constitution
of tax? 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 Entry 50 - List II of the Seventh
50 - List II of the Seventh Schedule is, no doubt, a taxation
Schedule? What is the Entry which deals with taxes on
ambit of the limitations mineral rights. But this Entry is
imposable by Parliament subject to any limitations imposed
in exercise of its legislative by Parliament by law relating to
powers under Entry 54 - mineral development. The use of
List I? Does Section 9, the word “any” means the limitation
or any other provision of could be in any form which can be
the MMDR Act, contain imposed only by the Parliament by
any limitation with respect law relating to mineral development.
to the field in Entry 50 - In view of the use of the expression
List II? “any limitations”, it must be given the
widest possible meaning to include
a limitation 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.
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Question Issues My Conclusions
c. Whether the expression The expression “subject to any
“subject to any limitations limitations imposed by Parliament by
imposed by Parliament law relating to mineral development”
by law relating to mineral in Entry 50 - List II pro tanto subjects
development” in Entry the Entry to Entry 54 - List I. The use
50 - List II pro tanto of the expression “any limitations”
subjects the Entry to would mean that the taxing Entry
Entry 54 - List I, which would be subject to a nontaxing or
is a non-taxing general general Entry such as in Entry 54 -
Entry? Consequently, is List I which could also be termed as
there any departure from a regulatory Entry. Consequently,
the general scheme of there is a departure from the general
distribution of legislative scheme of distribution of legislative
powers as enunciated powers as enumerated in MPV
in MPV Sundararamier Sundararamier insofar as Entry 50
(supra)? - 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.
d. What is the scope of Entry 49 - List II deals with taxation
Entry 49 - List II and of lands and buildings. It does not
whether it covers a tax cover taxes on mineral bearing
which involves a measure lands. The constitutional position is
based on the value of the different qua mineral bearing lands
produce of land? Would on account of Entry 50 - List II read
the constitutional position with Entry 54 - List I and Section 2 of
be any different qua the MMDR Act, 1957. Consequently,
mining land on account any imposition on the basis of royalty
of Entry 50 - List II read by a State Legislature or involving
with Entry 54 - List I? royalty as a measure of the value of
the minerals extracted from the land
is impermissible.
e. Whether Entry 50 - List Yes, Entry 50 - List II is a specific
II is a specific Entry in Entry in relation to Entry 49 - List
relation to Entry 49 - List II, II and would consequently subtract
and would consequently mining lands from the scope of Entry
subtract mining land from 49 - List II. This is particularly so
the scope of Entry 49 - having regard to Entry 50 - List II
List II?” to be read with Entry 54 - List I and
Section 2 of the MMDR Act, 1957.
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Mineral Area Development Authority & Anr. v.
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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
the said case, the scope and ambit as well the implication of
Entry 54 – List I on Entry 50 - List II was not considered at
all. Therefore, the principle stated in MPV Sundararamier is
foreign to the instant case and the ratio of the said decision
does not apply to the present case. No doubt, the legislative
power to tax mineral rights vests with the State legislature
but Parliament, though may not have an express power to
tax mineral rights under Entry 54 - List I, it being a general
Entry, Parliament can, nevertheless on the strength of Entry
54 - List I read with Section 2 of the MMDR Act, 1957, impose
any limitation on the power of the States to tax mineral rights
under Entry 50 - List II. Sections 9 and 9A of the MMDR Act,
1957 are two such instances of limitations imposed by the
Parliament on the taxing power of the State under Entry 50 -
List II. This is a unique Entry and must be given its true and
complete meaning and while interpreting the same one cannot
be swayed by the principles laid down in MPV Sundararamier
as the same do not apply in the instant case. At the cost of
repetition, it is stated that Entry 50 - List II never came for
consideration in the aforesaid case.
c. Parliament is not using its residuary power with respect to
imposing any limitation on the taxing power of the State under
Entry 50 – List II. In fact, even the Validation Act, 1992 enacted
by Parliament was upheld having regard to Entry 54 - List I read
with Section 2 of the MMDR Act, 1957 and not Entry 97 - List I.
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d. Entry 50 - 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, 1957
has imposed the limitations as envisaged in Entry 50 - List II in
Sections 9, 9A and 25, etc. on the strength of Entry 54 – List I.
e. I, however, concur with the learned Chief Justice that the scope
of the expression “any limitations” under Entry 50 - List II is
wide enough to include the imposition of restriction, conditions,
principles as well as a prohibition by Parliament by law.
f. The State legislatures have legislative competence under
Article 246 read with Entry 49 - List II to tax lands and buildings
but not lands which comprise of mines and quarries or have
mineral deposits as mineral bearing lands do not fall within the
description of lands (under Entry 49 - List II). Similarly, States
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. Entry 49 - List II does not
apply to mineral bearing lands as such lands are taxed in the
form of royalty or dead rent in the context of exercise of mineral
rights. Exercise of mineral rights is the basis for payment of
royalty or dead rent. Consequently, value of mineral produced
[2024] 7 S.C.R. 1845

Mineral Area Development Authority & Anr. v.
M/s Steel Authority of India & Anr. Etc.

cannot be used as a measure to once again impose a tax on
mineral bearing land under Entry 49 - List II. If so, Entry 50 –
List II would be rendered redundant.
i. As Entry 49 - List II does not apply to mineral bearing land,
the limitations imposed by Parliament by law relating to mineral
development with respect to Entry 50 - List II would restrict the
power of the State legislature to impose tax on mineral rights
under the latter Entry. Thus, the power of the State legislature to
impose tax under Entry 50 - List II is subject to the Parliament
imposing any limitation by law relating to mineral development.
42. In view of the above discussion, the eleven questions referred to this
Bench are accordingly answered. In particular, I hold that:
(i) Sections 9, 9A and 25 of the MMDR Act, 1957 denude or limit
the scope of Entry 50 - List II;
(ii) the majority decision in Kesoram is a serious departure from
the law laid down by the seven-judge Bench in India Cement
which was wholly unwarranted and therefore, in my view, the
said majority judgment is liable to be overruled and is overruled
to the extent of holding that royalty is not a tax;
(iii) taxes on lands and buildings under Entry 49 - List II contemplates
a tax levied directly on the land as a unit having a defined
relationship with the land and does not include mineral bearing
lands within its scope;
(iv) in view of the declaration under Section 2 of the MMDR Act,
1957 made in terms of Entry 54 - List I and to the extent of the
provisions of the said Act, the State legislature is denuded of
its powers under Enry 50 - List II; and
(v) Entry 50 - List II is a unique Entry because it is the only
taxation Entry in Lists I and II where the taxing power of a
State legislature has been subjected to “any limitations imposed
by Parliament by law relating to mineral development”. The
dictum in MPV Sundararamier has not discussed on Entry
50 – List II and hence the said decision has no bearing as
such on the present controversy. The conclusion that ‘royalty’
is a ‘tax’ is the only exception to the position of law laid down
in MPV Sundararamier. Of course, the scope of expression
1846 [2024] 7 S.C.R.

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“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.

Result of the case: Reference Answered.

†
Headnotes prepared by: Nidhi Jain