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Kirloskar Ferrous Industries Ltd. v. Union of India

Writ Petition (Civil) · 2026 INSC 679Decided 13 Jul 2026
Writ Petition (C) No. 733 of 2025, Diary No. 40654/2025
Justice J.B. Pardiwala · Justice K.V. Viswanathan · Justice Arun Palli

Background

Mining companies challenged the constitutional validity of rules under the Mines and Minerals (Development and Regulation) Act, 1957: specifically the Explanation to Rule 38 of the 2016 Concession Rules and the identical Explanation to Rule 45(8)(a) of the 2017 Conservation and Development Rules, which require that, when computing the "average sale price" (ASP) used to calculate royalty, no deduction is allowed for amounts already paid towards royalty, District Mineral Foundation (DMF) contributions, and National Mineral Exploration Trust (NMET) contributions. The petitioners argued this creates a cascading, compounding effect where royalty is effectively charged on royalty itself (unlike the formula used for coal), inflating costs over time, and that this was arbitrary and unconstitutional under Articles 14 and 19(1)(g). A related, earlier petition on the same issue had been disposed of by the Supreme Court in 2025 without a ruling on constitutionality, leaving the door open for this fresh challenge.

Decision Breakdown

The Court rejected the challenge and upheld the rules as constitutional. It applied the presumption of constitutionality attaching to subordinate legislation, held that the different treatment of coal (where no ASP concept applies) and iron ore/other minerals is not comparable and so does not violate Article 14, and found the measure of levy to be a legitimate, rational anti-evasion mechanism rather than a change in the fundamental nature of the levy (a royalty on minerals removed, not a tax on sale value per se). It held the recommendations of expert committees favouring reform were merely advisory and did not establish that the existing rules were illegal, and that the three-year cap on revising royalty rates under Section 9(3) MMDR Act was not breached since the sale-value formula, not the royalty rate itself, was what was in question. The writ petition was dismissed with no order as to costs.

Lesson Learnt

Government rules that use a broader measure (like sale value inclusive of levies already paid) to calculate a tax or royalty are not automatically unconstitutional merely because they produce a higher effective payment. Courts give considerable deference to such measures when they serve a legitimate anti-evasion purpose, and mere recommendations by expert committees for reform do not by themselves render existing rules invalid.

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

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