High Court: FDT can’t be levied from private mining lease holders

Krishnaprasad  Bengaluru | Updated on January 22, 2018

‘Forest Development Tax can be levied only on mineral rights purchased from State’

In a major relief to several mining companies, the Karnataka High Court has ruled that private mining or quarrying leaseholders in forest areas are not liable to pay the tax when they dispose of iron ore and other minerals.

Declaring that the Forest Development Tax (FDT) could not be levied when the mineral rights were purchased from private mining lessees or from National Mineral Development Corporation Ltd (NMDC), the Bench directed the State government to refund within three months a part of the FDT amount deposited by mining leaseholders. However, the court said FDT could be levied on the purchasers who buy mineral rights directly from the State government or from a corporation owned or controlled by the State government. Also, the court said the Karnataka Forests Act provides for levy of only 8 percent as FDT and not 12 percent as claimed by the State government.

Competency questioned

A division bench of Acting Chief Justice Subhro Kamal Mukherjee and Justice BV Nagarathna on Thursday delivered the verdict on the petitions filed by the NMDC, Vedanta, MSPL, and many other companies and individual mining leaseholders.

The petitioners had questioned the competency of the State legislature to make provision in the law for the levy FDT on mining leaseholders; enhancement of FDT to 12 percent from 8 percent of mineral sale consideration; and the demand notices issued by the authorities for payment of FDT.

Further, the court said the State could not levy the FDT at all if the purchased minerals were utilised or to be utilised for “the export or inter-State sale” as it came within the domain of the Union government.

Partial relief

The court in an earlier verdict had declared that the FDT was a “tax” and not a “fee” as claimed by the State government.

Meanwhile, in a partial success to the State, the Bench upheld the powers of the State legislature, which had made provision for imposing FDT under the Section 98-A of the Karnataka Forests Act, 1963, to impose FDT by holding “the State legislature is not denuded of its legislative competency to levy FDT on the disposal of minerals as a forest produce.”

The court permitted the State to appropriate the deposits made towards payment of FDT by those petitioners who had purchased mineral rights from the State or a corporation owned or controlled by it, such as Mysore Minerals Ltd at the rate of 8 per cent.

Published on December 06, 2015

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