The Supreme Court ruled that the division of
legislative powers between the Union and the States is a key component of
India's federal framework. Under normal circumstances, Parliament cannot
trespass on the plenary power of state legislatures, unless the Constitution
specifically allows it.
Indian federalism is classified as asymmetric because
it tilts towards the Centre, although majority judges found that state
legislatures are not subject to the Union in areas solely allocated for them.
The Mines and Minerals (Development and Regulation)
Act (MMDRA), 1957, gives both the Union and State governments more
responsibilities for mineral development in India.
Then the question arises:
Who has the actual power to tax mines and minerals?
The court had to interpret Entry 54 of the Union List,
which is part of the Seventh Schedule to the Constitution and deals with mine
and mineral development regulations. The majority judges ruled that this is a
generic entry that does not include the right to tax.
As a result, Article 54 of the Union List prohibits
Parliament from imposing a tax on mining rights. However, under Entry 50 of the
State List, the State Legislature is responsible for taxing mineral rights.
Article 246 of the Constitution empowers state
legislatures to enact laws pertaining to entries on the State list, which
include taxes on mineral rights under entry 50; thus, this entry allows States
to tax mineral rights subject to any limitations imposed by Parliament by law
relating to mineral development.
But in case,
India Cement Ltd vs State of Tamil Nadu
The Supreme Court concluded that the States could not
levy mineral taxes due to the limitation set by Section 9 of the MMDRA, which
is the imposition of royalty. Here, royalty is interpreted as a tax.
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