Mining tax by states: Tata Steel to file curative petition in Supreme Court

On July 25, a nine-judge Constitution Bench of the Supreme Court ruled that states have the power to levy cess on mining and mineral-use activities. Tata Steel's petition seeks a remedy to this order

Tata Steel is in the process of filing a curative petition in the Supreme Court in connection with the apex court ruling which said that states have the power to levy cess on mining and mineral-use activities.

 

The petition by one of the leading steel manufacturing companies of India is aimed at seeking remedy to the order, passed by a nine-judge Constitution Bench of the Supreme Court on July 25.

 

However, Tata Steel’s managing director and chief executive officer T V Narendran told Business Standard that there was no demand note on the company.

 

Tata Steel has captive mines in Jharkhand and Odisha. The state of Odisha had enacted the Orissa Rural Infrastructure and Socio-Economic Development Act, 2004 (ORISED Act) with effect from February 1, 2005, levying tax on mineral-bearing land. Following this, Tata Steel had received demands amounting to Rs 129 crore in respect to its mines in Odisha. Tata Steel had contested this in the Odisha High Court and it was quashed. However, Odisha appealed in the Supreme Court.

 

Subsequently, the matter relating to legislative authority of the states to tax minerals was referred to the Constitution Bench of the Supreme Court. On July 25, 2024, a nine-judge Constitution Bench of the Supreme Court ruled that states have the power to levy cess on mining and mineral-use activities. It allowed states to collect dues retrospectively from April 1, 2005 in a judgment in August. A review petition filed by the Centre and others was dismissed.

 

Tata Steel said while announcing its results for the second quarter of the financial year 2025 (Q2FY25) that pending hearing of the appeal filed by the state of Odisha before the appropriate regular bench of the Supreme Court, it was unclear/uncertain regards the form and manner in which the Orissa Rural Infrastructure and Socio-Economic Development (ORISED) Act, 2004 may get enacted.

 

The company was in the process of filing a curative petition with the Supreme Court and was also in active discussions with the state authorities on the way forward, it disclosed.

 

On the feedback from the state authorities, Narendran noted that the state governments would not want to do something which derailed the industry.

 

When the ORISED Act came into effect in 2005, he pointed out, there was no auctioning of mines or the DMF (district mineral foundation).

 

“Now, particularly if you look at Odisha, they are getting a lot of revenue from the mining royalties. So unlike the earlier situation, states are conscious of it,” Narendran said.

 

The DMF under the MMDR Amendment Act 2015 is a trust set up as a non-profit body in districts affected by mining works. It is funded through contributions by miners.

 

Narendran said states were internally discussing what would be fair to them and the industry. “The Centre is also watching because they don’t want the industry to be unfairly taxed. End of the day, this will have an impact across the country on multiple industries. If you start taxing coal very high, it will have an impact on the power cost,” he said.

 

In Q1FY25, the company had made a disclosure on a contingent liability of Rs 17,347 crore till June 30, 2024 relating to its mines in Odisha. However, in its notes to Q2 results, the company said that there was no present/legal obligation in respect of the levy related to the ORISED Act and its financial impact along with possibility of outflow at this stage was unlikely. Accordingly, it had not recognised any provision in its standalone and consolidated financial results.