Royalty Ruling Not Prospective; Mineral Tax Demands Cannot Cover Pre-2005 Transactions, Interest and Penalty Waived

After MADA overruled India Cement, the assessees asked that it be given prospective effect, and the matters were listed to hear that question (para 1). The Attorney-General, the Solicitor-General and senior counsel submitted that India Cement held the field for thirty-five years, that levies had been passed on to end consumers, and that no new demand should be made for the period before 25 July 2024 (para 2). The States replied that the doctrine had never been applied where a declaration upholds taxing legislation (para 3). Steel Authority of India put revived demands at about three thousand crores (para 22).

Prospective overruling limits a new rule to future situations to avert injustice or hardship (para 5), and the power to apply it was traced to Article 142 (para 9). It has been applied where a new declaration invalidates legislation, to protect revenues and rights settled under the old regime (para 14). The Court generally does not declare prospective overruling when upholding legislative competence (para 15), and Jindal Stainless was given retrospective effect (para 16). MADA upheld State competence under Entries 49 and 50 of List II, and testing earlier laws against the previous, unsettled law could invalidate them and require refunds, so prospective application would be iniquitous (para 17). Bharat Aluminium concerned commercial bargains, while Article 265 requires a valid law and the power to tax is an incidence of sovereignty (paras 18-19). Since Kesoram was an operative fact on which States enacted taxing statutes, barring demands for the period before Kesoram offered a pragmatic solution (para 20). Given the lapse of more than three decades since India Cement, equities would be balanced by waiving the accrued interest for all assessees (paras 21-22).