Solution

The nine-judge Constitution Bench, led by Chief Justice of India D.Y. Chandrachud, ruled by an 8:1 majority that States have the unlimited right to tax mineral-bearing lands and quarries. The judgment emphasized that Parliament cannot limit this power of the State legislatures, as restricting States' taxing powers would impact their ability to raise revenue. This, in turn, affects their capacity to deliver welfare schemes and services, which is crucial for maintaining fiscal federalism. The court clarified that the Mines and Minerals (Development and Regulation) Act of 1957 cannot prevent States from legislating on the taxation of mining lands and quarries. Additionally, it was noted that the royalty paid by mining leaseholders to States is not considered a tax but a contractual consideration for mineral rights. The power of the States to tax mines and quarries is derived from Article 246 read with Entry 49 (tax on lands and buildings) in the State List of the Seventh Schedule of the Constitution. The sole dissenting opinion by Justice B.V. Nagarathna agreed that royalty is not a tax but held that the States' power to tax under Entry 49 did not include mineral-bearing lands.