‘Royalty itself a tax’: In mining law amendment, echo of SC judge Nagarathna’s dissent in key 2024 order
Commentary on the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 notes that its new restriction on state mineral taxation mirrors reasoning that a lone dissenting judge had offered in a 2024 nine-judge Supreme Court bench ruling on the same question
The 2024 majority (8:1) had held that royalty paid under the MMDR Act is not a tax, and that states retain independent power to tax mineral rights and mineral-bearing land
The sole dissent, by Justice B.V. Nagarathna, had argued that royalty is itself in the nature of a tax and had warned that allowing states unrestricted independent mineral levies would trigger competitive, uncoordinated taxation across states
The 2026 amendment does not overturn the majority's core holding that royalty is not a tax, but it imposes the kind of central check on state mineral taxation that Justice Nagarathna's dissent had favoured
Mineral Area Development Authority v. Steel Authority of India (2024) — Majority Holding
A nine-judge Constitution Bench, then headed by CJI D.Y. Chandrachud, decided by an 8:1 majority (July 25, 2024) that royalty payable under Section 9 of the MMDR Act, 1957 is a contractual consideration paid by a mining lessee to the lessor (the state, as owner of the mineral) for the right to extract minerals — not a "tax," which is a compulsory exaction for public purposes unconnected to a specific service or contractual relationship. On this basis, the majority held that a state's power to tax mineral rights under Entry 50 of the State List is not exhausted or occupied merely because royalty is separately payable under a central law.
Key Details
- The ruling overruled the seven-judge bench decision in India Cement Ltd. v. State of Tamil Nadu (1990), which had treated royalty as a tax and denied states independent mineral-taxation power
- The majority held that using mineral value/quantity as a measure for state taxation under Entry 49 (tax on land) does not convert that levy into an impermissible tax on mineral rights under Entry 50
- A subsequent order (August 14, 2024) gave the ruling retrospective effect but excluded demands for periods before April 1, 2005, and staggered recovery of past dues over 12 years from April 1, 2026
The 2026 amendment's Section 9D operates within — not against — this majority ruling: it does not reclassify royalty as a tax, but instead uses Entry 50's built-in "subject to Parliament" qualifier to cap the very taxing power the majority recognised.
Justice B.V. Nagarathna's Dissent — "Royalty Is Itself a Tax"
Justice Nagarathna, the sole dissenting judge on the nine-judge bench, held that royalty under Sections 9 and 9A of the MMDR Act is itself a form of tax, reasoning that Entry 50 (State List) was drafted to be the exclusive taxation entry for mineral rights and that mineral-bearing land should not be subject to a second, overlapping levy under Entry 49. She warned that recognising an independent state power to tax mineral rights, on top of central royalty, would create "unhealthy competition between the States to derive additional revenue," leading to "uncoordinated and uneven" mineral development and higher mineral costs nationally.
Key Details
- Her dissent argued the taxation entries in the Seventh Schedule were meant to be mutually exclusive, so a mineral-bearing plot should not face both Entry 49 (land tax) and Entry 50 (mineral-rights tax) simultaneously
- She cautioned that unrestrained state mineral levies could produce a "race to the bottom" or upward bidding dynamic among mineral-rich states, distorting the national market for minerals used in core sectors like steel and power
- As the sole dissent on a nine-judge bench, her opinion carries no binding precedential force under Article 141 (which binds courts to the law declared by the Supreme Court, meaning the majority view), but remains persuasive/minority reasoning that can inform future legislative or judicial thinking
Section 9D's national cap on state mineral levies is, in substance, the policy outcome Justice Nagarathna's dissent had argued for judicially, now achieved through ordinary legislation under Entry 50's parliamentary-limitation clause rather than through a reinterpretation of "tax."
Legislative Response to a Judicial Ruling — Parliament's Power to Act Within a Judgment's Space
When the Supreme Court interprets a constitutional entry to permit a certain state power (as the 2024 majority did with Entry 50), Parliament remains free to legislate within the boundaries the Court identified — including using any qualifying clause the Court itself relied upon. This is distinct from Parliament attempting to overrule a judicial interpretation of the Constitution outright, which would require a constitutional amendment.
Key Details
- Entry 50 itself contains the words "subject to any limitations imposed by Parliament by law relating to mineral development" — the 2024 majority's ruling expressly preserved Parliament's ability to use this clause
- This differs from instances where Parliament has needed a constitutional amendment to reverse a Supreme Court ruling (e.g., the 42nd and 44th Amendments in response to Kesavananda Bharati and Minerva Mills era disputes over amending power)
- Because Section 9D operates through the ordinary-legislation route Entry 50 already provides, it does not require a special/two-thirds majority or state ratification under Article 368
The amendment illustrates a recurring pattern in Centre-state jurisprudence: rather than seeking to overturn a Supreme Court majority via constitutional amendment, the Centre used a limitation clause the Court's own majority opinion had flagged as available to it.
- Case: Mineral Area Development Authority v. Steel Authority of India, Supreme Court of India, nine-judge Constitution Bench
- Majority: 8:1, delivered July 25, 2024; then-CJI D.Y. Chandrachud headed the bench
- Sole dissenting judge: Justice B.V. Nagarathna
- Case overruled by the 2024 majority: India Cement Ltd. v. State of Tamil Nadu (1990), a seven-judge bench ruling
- Retrospective application (separate order, August 14, 2024): no tax demands for periods before April 1, 2005; past dues recoverable in instalments over 12 years starting April 1, 2026
- Relevant Seventh Schedule entries: Entry 49 (State List — tax on land and buildings), Entry 50 (State List — tax on mineral rights, subject to parliamentary limitation)
- Article 141 of the Constitution: the law declared by the Supreme Court (i.e., the majority opinion) is binding on all courts within India
- New provision responding to the case: Section 9D, inserted into the MMDR Act, 1957 by the Mines and Minerals (Development and Regulation) Amendment Bill, 2026