The Supreme Court on Wednesday reserved its verdict on whether its recent judgement upholding the power of states to tax mines and minerals rights would apply retrospectively, reported Live Law.

A nine-judge bench headed by Chief Justice DY Chandrachud on July 25 held that the royalty paid by mining operators to the Union government is not a tax and the states have the right to levy cesses on mining and mineral-use activities. Justice BV Nagarathna had dissented from the majority.

The bench was deciding on whether state governments have the authority to regulate and tax activities relating to mines and minerals under the Mines and Minerals Development and Regulation Act.

The judgement had noted that mineral-rich states like Chhattisgarh, Jharkhand and Odisha continue to have per capita income below national averages and trail in economic development.

Solicitor General Tushar Mehta, appearing for the Centre on Wednesday, urged the court to clarify that the judgement would only apply prospectively, reported The Hindu. He added that allowing states to demand retrospective taxes on mines and minerals rights would have a cascading effect that would ultimately harm citizens.

He said that many industries, including public sector undertakings involved in the manufacture of iron to steel, rely on mines.

The mines were leased out in public auctions based on the terms of the 2015 amendments made to the Mines and Minerals (Development and Regulations) Act of 1957. The bids were formulated according to the rates that existed then. Retrospective evaluation of tax would lead to a heavy load which may crush these sectors, Mehta argued.

Senior Advocate Harish Salve, appearing for Mahanadi Coalfields, submitted that retrospective implementation of the judgement ran the risk of bankrupting many companies.

However, Jharkhand and Uttar Pradesh sought retrospective implementation of the judgement, reported Live Law.

Senior Advocate Rakesh Dwivedi, appearing for Jharkhand argued that allowing the judgement only a prospective effect would mean that the laws validly enacted by the states would be deemed ineffective till July 25.

Last week’s judgement overruled a 1989 order in which the Supreme Court had held that the royalty was a type of tax as per the Mines Act. Therefore, the state government did not have the power to add cesses on such royalties.

The case involved cement manufacturer India Cements and the Tamil Nadu government.

In a case involving Kesoram Industries and the West Bengal government in 2004, a five-judge bench said that the 1989 Bench had made a typing error and had meant to rule that only the cess on royalty is a type of a tax and not the royalty itself.

In 2011, a three-judge bench held that there was a prima facie conflict between the two verdicts of 1989 and 2004 and referred the matter to a nine-judge bench.