THE CESS AND OTHER TAXES ON MINERALS (VALIDATION) ACT – 1992
Sections 9 and 9 (A) of the Mines and Mineral (Regulation and Development), Act 1957, provide that the rates of royalty or dead rent shall be those as will be determined by the second and third schedules respectively of the Act. These rates of royalty or dead rent are notified by the Central Government. But its collection and utilization of the amount thus collected is made by the concerned State Governments. In the above said situation, a question regarding the competence of the State Legislatures about imposition of any other levy on minerals has arisen.
Various State Governments have levied cess and other taxes on minerals on minerals on the basis of laws passed by their respective State Legislatures. Such levies are in addition to royalty notified by the Central Government under Mines and Minerals (Regulation and Development) Act, 1957. The legality of these levies was suspect and these suspicions were raised under the provisions of division of powers as provided in the Constitution of India are the provisions of Section 9 and 9 (A) of the Act of 1957. Some persons challenged the State Governments’ powers in courts regarding imposition of such cesses and other taxes on minerals.
Various courts and the Supreme Court in two special cases have repealed the corresponding provisions of various Acts passed by various States with regard to imposition of cesses and other taxes on minerals. The first judgment was given by the Supreme Court on 25-10-89 in India Cement Ltd. Vs Tamilnadu State case. The Supreme Courts stated in its verdict that royally is a tax and cess having been a tax on royally is beyond the jurisdiction of State Legislatures because all of their powers have been superseded under Section 9 of the Act of 1957. In its second decision on 4.4.91 in the case of M/s Orissa Cement Ltd Vs. Orissa State and other the Supreme Court settled several cases relating to the State of Orissa, Bihar and Madhya Pradesh.
The Supreme Court opined that levies imposed by these States violate the provisions of the Constitution. In its above judgment the Supreme Court issued instructions for compulsory refund of the levies collected on minerals upto the date of the repealment of the levy. Such dates for Bihar, Orissa and Madhya Pradesh were 4/4/91, 22/12/89 and 28/3/86 respectively.
Following the Supreme Courts decision on 4.4.91, the Orissa and Madhya Pradesh Governments would have to refund huge amount collected by them. Refund of this could have adverse affect on the revenue of these States.
After examining the above points and also taking into account the pressure from some State Government about refund of levy, the President of India promulgated the Mineral cess and other Taxes (Falidation) Ordinance, 1992 on February 15, 1992. Through this Ordinance seven State Governments would have to validate the collection of cess and other taxes on minerals upto 4.4.91. These seven State Government such as Andhra Pradesh, Bihar, Karnataka, Madhya Pradesh, Maharashtra, Orissa and Tamil Nadu could not recover levies after this date.
The purpose of the cess and other taxes on minerals (validation) act-1992 was to validate the imposition and collection of cesses and certain other taxes on minerals under certain State laws.
