The recent amendment to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), authorized by the President on August 17, introduces pivotal changes. While some align with the Supreme Court’s judgment in Mineral Area Development Authority v. Steel Authority of India (2024) (commonly known as the MADA case), others directly challenge this landmark ruling. The MADA case redefined legal interpretations that have been in place since 1990, when a seven-judge bench in India Cement Ltd v. State of Tamil Nadu (1990) determined that the imposition of royalties by states as per Section 9 of the MMDR Act constituted a tax related to Entry 50 in the State List, regulated by Parliament under Entry 54 of the Union List. The court held that taxation concerning Entry 50 was occupied by Section 9, preventing states from levying ceases on royalties, as ceases were considered additional taxes not sanctioned by Section 9.
Parliament’s Power to Regulate State Taxation
The core issue today is whether Parliament, through this amendment, can limit the states’ ability to tax mineral-bearing lands by instituting conditions within new Section 9D. This provision, yet to be notified, currently lacks prescribed conditions by the Central government. Consequently, the states’ taxation power remains entirely on hold.
Section 9D impacts both future and past operations. Prospectively, it prevents states from taxing mineral-bearing land based on mineral quantity, its value, or the royalty payable, except under conditions prescribed by the Central government. Retrospectively, it invalidates any uncollected tax levied by states before the amendment, irrespective of any court verdicts, although taxes already collected are preserved. This leaves states unable to impose future taxes until permitted by the Union, with only already collected dues remaining valid.
Constitutional Concerns of the Amendment
The context of this amendment is crucial for evaluating its constitutional legitimacy. In the MADA case, the Union contended, unsuccessfully, that Parliament could regulate state taxation on mineral lands under Entry 54 of the Union List. The court rejected this, affirming that state taxation power on mineral-bearing lands falls under Entry 49, which is broad and unrestricted.
Parliament’s attempt to counter the Supreme Court’s decision through Section 9D, without amending the Constitution, challenges the court’s protection of state legislative powers under Entry 49. The amendment restricts the very tax measures the Supreme Court upheld for states, questioning the legislative competence the court previously confirmed.
More Read
Historically, as seen in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969), Parliament cannot simply overturn Supreme Court declarations without addressing the foundational reasons for the court’s decision. Here, the constitutional framework—specifically Entry 49—remains intact and unfettered by higher authority.
Impact on State Revenue and Federal Principles
The MADA case enabled states to levy and collect taxes on mineral-bearing lands. The Supreme Court’s August 14, 2024, order facilitated states to recover taxes from April 1, 2005, over twelve years, starting April 1, 2026. Parliament’s recent amendment, shortly after tax recoveries commenced, appears to undermine this decision.
Interpreted as the Union desires, the amendment threatens both the principle of separation of powers and the federal structure by reducing state revenue autonomy and increasing dependency on the Union, disrupting constitutional balance.
Parliament should reconsider the amendment’s implications on state taxation autonomy before the Supreme Court revisits the issue. Kamaldeep Dayal is an advocate practicing at the Supreme Court of India and the High Court of New Delhi.
