Judicial Bench: The ruling was delivered by a 9-Judge Constitution Bench led by Chief Justice DY Chandrachud. The judgment emphasized that the constitutional scheme distinctly enumerates the powers of taxation and regulatory powers separately.
Key Points of the Ruling:
Taxation vs. Regulatory Entries:
- The Supreme Court clarified that taxation entries are separate from regulatory entries within the 7th Schedule. Regular entries under List I and List II should not be expanded to include taxation powers, which are specifically mentioned in other entries.
States' Power to Tax Mineral Rights:
- States have the power to levy taxes on mineral rights under Entry 50 of List II. This power is subject to limitations imposed by Parliament through specific legislation relating to mineral development.
Parliamentary Limitations:
- The Court noted that the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), enacted under Entry 54 of List I, does not curtail the States' power to tax mineral rights. This act provides a regulatory framework but does not impose specific limitations on the States' taxing powers.
Sundararamier Principle:
- The ruling reinforced the 'Sundararamier Principle,' which asserts that taxation powers cannot be derived from general legislative entries and must be explicitly stated in specific taxing entries. Entry 50 of List II aligns with this principle, allowing states to tax mineral rights independently of regulatory entries.
Incidental and Subsidiary Powers:
- While legislatures have incidental and subsidiary powers related to their legislative entries, the power to tax is neither incidental nor subsidiary to regulatory powers. Taxation powers must be expressly conferred by specific entries in the 7th Schedule.
Scope of Entry 50 List II:
- Entry 50 List II is limited to laws made by Parliament regarding mineral development. Unless Parliament imposes explicit limitations, States retain plenary powers to tax mineral rights.
Royalty Under the MMDR Act:
- The Court stated that royalties under Section 9 of the MMDR Act are not considered taxes on mineral rights. Therefore, any limitations on increasing royalty rates do not affect the States' power to tax mineral rights under Entry 50 List II.
Taxation of Mineral-Bearing Lands:
- States can tax lands used for extracting minerals under Entry 49 of List II, which pertains to taxes on lands and buildings. This entry allows States to tax mineral-bearing lands without considering the specific use of the land.
Flexibility in Land Taxation:
- State legislatures have broad discretion in classifying lands for taxation purposes, enabling them to create different categories of land for imposing varied tax rates. This flexibility supports the States' power to tax mineral-bearing lands.
Subsoil Minerals:
- Minerals in their natural state are considered part of the land, and thus subsoil minerals fall under the taxation domain of Entry 49 of List II. This interpretation aligns with the constitutional view of land as including everything above and below the surface.
Conclusion: The Supreme Court's ruling affirms that the power to tax must be explicitly stated in the 7th Schedule of the Constitution and cannot be inferred from general regulatory entries. This decision ensures a clear demarcation of legislative powers, maintaining the constitutional balance between the Union and the States. The judgment underscores the importance of adhering to the specific constitutional framework for taxation, safeguarding the autonomy of States in their respective domains.
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