The Supreme Court has held that the mining authorities in the states cannot recover any tax or cess which were due before April 1991 and their demand notices to the firms for that period are not valid. There will be no refunds either.
The apex court upheld the judgment of the Patna High Court holding this view, but set aside the judgments of the high courts of Karnataka and Andhra Pradesh which held the contrary view.
The question regarding Tamil Nadu is yet to be settled as the Supreme Court has reversed its own judgment of 1996 in petitions from that state.
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The situation in Madhya Pradesh is also to be settled in another proceeding.
The case of a large number of mining firms from the four states, apart from leading mining companies like Tata Iron & Steel Co were before the court. A three-judge bench headed by Justice GB Pattanaik decided the case, while overruling the judgment of the two-judge bench of the Supreme Court delivered in 1996.
The case arose when the mining firms challenged the constitutionality of the Cess and Other Taxes on Minerals (Validation) Act 1992 in several high courts. This law was passed because several cess laws of the states before that period were struck down by courts.
The Validation Act was upheld by the Supreme Court. But the question was whether the cess due before April 1991 could be collected.
The state governments argued that there should not be any embargo on their power to realise the cess even after the cut-off date.
On the other hand, the mining firms argued that the Validation Act was passed by Parliament after different cess legislations were struck down by the courts on the ground of lack of legislative power.
The Validation Act was to ensure that the levies collected were not required to be refunded by the states which would have a serious impact on the state revenues. Therefore, the taxes not already collected should not be collected.
This view was accepted by the Supreme Court which stated that fresh levy or collection of the old liabilities which were due before April 1991 could not be collected. There would be no refunds either.