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Federation of Indian Mineral Industries & Ors. v. Union of India & Anr.

Transferred Case (Civil) · 2017 INSC 1042Decided 13 Oct 2017
Transferred Case (Civil) No. 43 of 2016
Justice Madan B. Lokur · Justice Sanjay Kishan Kaul · Justice Deepak Gupta

Background

This was a large batch of transferred cases, writ petitions and SLPs filed by mining lease holders challenging the establishment of "District Mineral Foundations" (DMFs) under Section 9B of the MMDR Act, and the requirement that lease holders contribute a share of royalty to these DMFs. The petitioners argued that several state notifications had set up the DMFs with retrospective effect from 12 January 2015, and that the Central Government's rules fixing the contribution rate were also being applied retrospectively, which they said was unlawful.

Decision Breakdown

The Supreme Court held that treating the DMFs as established from 12 January 2015 did not amount to unlawful retrospective operation, since no vested rights were prejudicially affected, relying on the Constitution Bench ruling in A. Thangal Kunju Musaliar. However, on the second question, the Court held that because the Central Government had not fixed the actual contribution rate until later notifications (17 September 2015 for most minerals, 20 October 2015 for coal/lignite/sand), lease holders could not be made liable to pay contributions from the earlier date of 12 January 2015: a tax/levy requires a definite, ascertainable rate before it can be enforced. A subsequent 2016 notification purporting to make the coal-sector contribution retroactive to January 2015 was struck down as beyond the Central Government's rule-making power. The Court fixed 17 September 2015 and 20 October 2015 respectively as the effective dates from which contributions became payable, and gave defaulters time until 31 December 2017 to pay (with 15% annual interest thereafter), while denying refunds to anyone who had already paid for the earlier period.

Lesson Learnt

A government cannot make a citizen pay a tax or statutory levy for a period before the rate of that levy was actually and clearly fixed by law: certainty of rate is an essential ingredient of any lawful exaction, even when the underlying scheme (here, a fund for mining-affected communities) is established earlier.

Official source (sci.gov.in)View Judgment (PDF)

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