Supreme Court

Royalty not in nature of tax but consideration for enjoyment of mineral rights

A 9 (nine) judges Constitution Bench of the Hon'ble Supreme Court of India (“Supreme Court”) in the case of Mineral Area Development Authority and Anr. vs. Steel Authority of India and Anr.¹ held that royalty is not in the nature of tax and therefore, States have the authority to impose taxes on mineral rights. The dispute stems from the fact that several States sought to impose taxes on mineral bearing land in pursuance of Entry 49 of List II of the Constitution of India by applying mineral value or royalty as the measure of tax. The SLP² was filed in the Supreme Court on the primary ground that levy of royalty on mineral rights was beyond legislative competence of State Legislatures.