2024 INSC 607: Reportable

Reportable
2024 INSC 607
IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE/ORIGINAL JURISDICTION
Civil Appeal Nos. 4056-4064 of 1999
Mineral Area Development Authority & Anr. …Appellants
Versus
M/S Steel Authority of India & Anr Etc. …Respondents
With
Civil Appeal No. 7937 of 2019

With
Writ Petition (Civil) No. 512 of 2018
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Writ Petition (C) No. 729 of 2019
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Writ Petition (C) No. 1029 of 2019
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Special Leave Petition (C) No. 16028 of 2021
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Signature Not Verified
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Digitally signed by
Sanjay Kumar
Date: 2024.08.14
12:00:36 IST
Reason: With
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Special Leave Petition (Civil) No. 18600 of 2013
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Writ Petition (Civil) No. 376 of 2015
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T.P. (Civil) No. 722 of 2006
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T.P. (Civil) No. 481 of 2007
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T.P. (Civil) No. 906 of 2007
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T.P. (Civil) No. 951 of 2006
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T.P. (Civil) No. 613 of 2009
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T.P. (Civil) No. 626 of 2009
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Page 4 of 22
ORDER
Dr Dhananjaya Y Chandrachud, CJI
Table of Contents
A. Background ..........................................................................................................6
B. Submissions ........................................................................................................6
C. Prospective overruling ........................................................................................9
D. A pragmatic solution to reconcile the conflicting interests........................... 15
E. Conclusion .........................................................................................................21
Page 5 of 22
PART A&B
A. Background
1. In Mineral Area Development Authority v. Steel Authority of India,1 the
nine-Judge Bench of this Court answered the questions referred in terms of
the conclusions arrived at by the majority. In the process, the judgment
overruled India Cement Ltd. v. State of Tamil Nadu 2 and subsequent
decisions of this Court which relied on it. After the pronouncement of the
judgment, counsel for the assesses submitted that the judgment may be given
prospective effect. Therefore, the proceedings were listed for hearing
submissions on whether or not the judgment should be given prospective
effect.
B. Submissions
2. Mr R Venkataramani, Attorney-General for India, Mr Tushar Mehta, Solicitor-
General of India, Mr Harish Salve, Mr Abhishek Manu Singhvi, Mr Mukul
Rohatgi, and Mr Arvind Datar, senior counsel, made the following
submissions:
a. India Cement (supra) held the field for thirty-five years before it was
overruled in MADA (supra). Demands for tax under state legislation
pertaining to Entries 49 and 50 of List II of the Seventh Schedule have been
stayed in terms of the law laid down in India Cement (supra). The affected
1 Civil Appeal Nos. 4056-4064 of 1999; 2024 INSC 554 (“MADA”).

2 (1990) 1 SCC 12
Page 6 of 22
PART B
parties (which include public sector undertakings) have factored in the state
levies which were valid and applicable at the relevant point of time and
passed them on to the end consumers. If State legislatures are allowed to
renew the tax demands, end consumers will ultimately bear the burden;
b. After the decision in India Cement (supra), the levies collected by the States
were protected because of validation legislation enacted by Parliament. If a
ruling creates or renews a liability for the assesses, there is no protection
against retrospective demands;
c. Since 2015, entities bidding for mineral concessions have submitted their
financial bids on the basis of the legal position in India Cement (supra). If
MADA (supra) is given retrospective effect, it will rewrite commercial
bargains underpinning the mineral auctions. This Court ordinarily does not
disturb past or concluded transactions in tax matters;
d. The doctrine of prospective overruling is well-established in Indian
constitutional jurisprudence. MADA (supra) should be given prospective
effect because it lays down new constitutional principles; and
e. Where enforcement of taxing legislation was either partially or completely
interdicted by judicial orders, it should be directed that no new tax demand
be made for the period before the judgment in MADA (supra), that is, before
25 July 2024.
3. On the other hand, Mr Rakesh Dwivedi, Mr Vijay Hansaria, and Mr Tapesh
Kumar Singh, senior counsel, appearing for the States made the following
submissions:
Page 7 of 22
PART B
a. The doctrine of prospective overruling is applicable only when the judgment
invalidates a legislation or introduces a new interpretation by overruling its
earlier decision. The doctrine of prospective overruling has never been
applied to situations where the declaration of law attaches validity to taxing
legislation;
b. If MADA (supra) is applied prospectively, India Cement (supra) will have to
operate till 25 July 2024. Resultantly, all relevant state legislation will be
tested on the anvil of India Cement (supra) and may be declared ultra vires.
This consequence is unjust and against the public interest; and
c. In State of West Bengal v. Kesoram Industries Ltd, 3 a Constitution Bench
upheld the validity of legislation enacted by the State of West Bengal. After
Kesoram (supra), several states such as Chhattisgarh, Madhya Pradesh,
and Rajasthan enacted legislation which was upheld by the respective High
Courts. Giving prospective effect to MADA (supra) will result in a
discriminatory situation. While West Bengal will continue to collect tax (which
it has been doing since 1992), other states with similar enactments may be
deprived of collecting tax from the date of their enactments.
4. We have also heard Mr Pitambar Acharya, Advocate General of the State of
Orissa, who emphasized the importance of protecting the financial interests
of States.
3 (2004) 10 SCC 201
Page 8 of 22
PART C
C. Prospective overruling
5. The doctrine of prospective overruling is applied when a constitutional court
overrules a well-established precedent by declaring a new rule but limits its
application to future situations. The underlying objective is to avert injustice
or hardships. 4 The doctrine was applied by the courts in the US on the basis
that the US Constitution “neither prohibits nor requires retroactive effect.” 5
The US Supreme Court has considered the existence of a statute or judicial
decision as an “operative fact” having “consequences which cannot justly be
ignored” or “erased by a new judicial declaration.” 6 Therefore, it was held that
the effect of a subsequent ruling as to invalidity may have to be considered in
light of various aspects. 7
6. In Chevron Oil Company v. Huson,8 the US Supreme Court identified three
separate factors to be considered while deciding the applicability of
prospective overruling: (i) the decision to be applied prospectively must
establish a new principle of law, either by overruling clear past precedent on
which litigants may have relied, or by deciding an issue of first impression
whose resolution was not foreshadowed; (ii) the court must weigh the merits
and demerits in each case by looking to the prior history of the rule in question,
its purpose and effect, and whether retrospective operation will further or
4 Great Northern Railway Co. v. Sunburst Oil and Refining Co., 287 U S 358 (1932)
5 Linkletter v. Walker, 381 US 618 (1965)
6 Chicot County Drainage Dist. v. Baxter State Bank, 308 US 371 (1940)
7 Chicot County Drainage Dist (supra)
8 404 US 97 (1971)
Page 9 of 22
PART C
retard the operation of the rule; and (iii) whether the application of
nonretroactivity avoids substantial inequitable results, injustice or hardships.
7. This Court has adopted the doctrine of prospective overruling, partly inspired
by the jurisprudence developed in the US. In Golak Nath v. State of Punjab,
a Bench of eleven Judges of this Court was called upon to decide the validity
of the Constitution (Seventeenth Amendment) Act 1964 which included
certain state agrarian laws in the Ninth Schedule of the Constitution. The
majority held that an amendment to the Constitution was “law” according to
the definition under Article 13. Further, it was held that constitutional
amendments are also subject to limitations prescribed under Article 13(2).9
Resultantly, the constitutional amendment was declared void for infringing
Article 13(2). The next issue before the Court was whether the decision
should be applied prospectively.
8. Golak Nath (supra) overruled earlier decisions 10 of this Court which had held
that Parliament can amend or abridge the fundamental rights in Part III of the
Constitution. The States had relied on the earlier rulings to enact agrarian
legislation. During 1950 and 1967, various amendments were carried out to
the Constitution validating the agrarian reforms undertaken after
Independence. In this context, Chief Justice K Subba Rao observed that
giving retrospective operation to the decision “would introduce chaos and
9Constitution of India, Article 13

10Shankari Prasad Singh Deo v. Union of India, 1951 SCC 966; Sajjan Singh v. State of Rajasthan,
1964 SCC OnLine SC 25.
Page 10 of 22
PART C
unsettle the conditions in our country.” Resultantly, it was observed that
overruling the earlier decisions but restricting the ruling to the future and not
to the past was a “reasonable principle” to resolve extraordinary situations:
“49. […] It is really a pragmatic solution

reconciling the two conflicting doctrines,
namely, that a court finds law and that it does
make law. It finds law but restricts its operation to
the future. It enables the court to bring about a
smooth transition by correcting its errors without
disturbing the impact of those errors on the past
transactions. It is left to the discretion of the court
to prescribe the limits of the retroactivity and
thereby it enables it to mould the relief to meet
the ends of justice.”
(emphasis added)
9. The Chief Justice held that the power of this Court to apply the doctrine of
prospective overruling could be traced to Article 142 and formulated the
following propositions about the applicability of the doctrine:
a. It can be invoked only in matters arising under the Constitution;
b. It can be applied only by this Court as it has the constitutional jurisdiction to
declare law binding on all the courts in India; and
c. The scope of the retroactive operation of the law is left to the discretion of
this Court to be moulded in accordance with the justice of the cause or
matter before it.
Page 11 of 22
PART C
10. After laying down the broad canvas, the learned Chief Justice concluded:
“53. […] What then is the effect of our conclusion on

the instant case? Having regard to the history of
the amendments, their impact on the social and
economic affairs of our country and the chaotic
situation that may be brought about by the
sudden withdrawal at this stage of the
amendments from the Constitution, we think that
considerable judicial restraint is called for. We,
therefore, declare that our decision will not affect the
validity of the Constitution (Seventeenth
Amendment) Act, 1964, or other amendments made
to the Constitution taking away or abridging the
fundamental rights. We further declare that in future
the Parliament will have no power to amend Part III
of the Constitution so as to take away or abridge the
fundamental rights.”
(emphasis added)
11. Although Golak Nath (supra) was subsequently overruled in Kesavananda
Bharati v. State of Kerala, 11 the doctrine of prospective overruling has been
accepted by this Court. This Court has applied the doctrine in varied contexts.
The following principles emerge on the application of the doctrine:
a. The power of this Court to mould the relief claimed to meet the justice of
the case is derived from Article 142; 12
b. It is applied by this Court while overruling its earlier decision, which was
otherwise final. It has also been applied when deciding on an issue for
the first time; 13
11 (1973) 4 SCC 225

12 Belsund Sugar Co. Ltd. v. State of Bihar, (1999) 9 SCC 620 [112]
13 Somaiya Organics (India) Ltd. v. State of U P, (2001) 5 SCC 519 [24]
Page 12 of 22
PART C
c. The object is to validate all the actions taken before the date of
declaration in the larger public interest. 14 The doctrine does not validate
an invalid law, but the declaration of invalidation takes effect from a
future date;15
d. Cases that have attained finality are saved because doing otherwise
would cause unnecessary and avoidable hardships;16
e. It is applied to bring about a smooth transition of the operation of law
without unduly affecting the rights of the people who acted upon the
overruled law; 17
f. It is a device innovated to avoid: (i) reopening settled issues, (ii) refund
of amounts collected under invalid legislation, and (iii) multiplicity of
proceedings; 18 and
g. It is applied to avoid social and economic disruptions and give sufficient
time to the affected entities and institutions to make appropriate changes
and adjustments. 19
12. This Court has often used its powers under Article 142 to limit the retroactivity
of its decisions. In Union of India v. Mohd. Ramzan Khan, 20 a three-Judge
Bench of this Court held that non-furnishing of an enquiry report to a
delinquent employee would amount to a violation of the rules of natural
14 Baburam v. C C Jacob, (1999) 3 SCC 362 [5]

15 Somaiya Organics (supra) [37]
16 Raymond Ltd. v. MP Electricity Board, (2001) 1 SCC 534 [24]; Sarwan Kumar v. Madan Lal Aggarwal,
(2003) 4 SCC 147 [15]; Ramesh Kumar Soni v. State of M P, (2013) 14 SCC 696 [21].
17 L Chandra Kumar v. Union of India, (1997) 3 SCC 261 [94]; Ashok Kumar Gupta v. State of U P,
(1997) 5 SCC 201 [54]

18 M A Murthy v. State of Karnataka, (2003) 7 SCC 517 [8]; Shree Mahavir Oil Mills v. State of Jammu
and Kashmir, (1996) 11 SCC 39 [27]

19 New Noble Educational Society v. CIT, (2023) 6 SCC 649 [84]
20 (1991) 1 SCC 588
Page 13 of 22
PART C
justice. The Court declared the law to be prospective, but gave relief to the
employees before the Court. The correctness of Ramzan Khan (supra) came
up before a Constitution Bench in Managing Director, ECIL v. B
Karunakar. 21 The Constitution Bench upheld Ramzan Khan (supra). It was
further held that the law laid down in Ramzan Khan (supra) cannot be applied
retrospectively because:
a. the legal position on furnishing the report of an enquiry officer to the
delinquent employee was unsettled before Ramzan Khan (supra);
b. the authorities had proceeded on the assumption that there was no
requirement to furnish a copy of the enquiry report to the delinquent
officer; and
c. reopening of all disciplinary proceedings before Ramzan Khan (supra)
would result in grave prejudice to the administration which outweighed
the benefit to the employees.
Hence, it was held that no proceedings before the decision in Ramzan Khan
(supra) should be challenged on the ground that there was a failure to furnish
the enquiry report.
21 (1993) 4 SCC 727
Page 14 of 22
PART D
D. A pragmatic solution to reconcile the conflicting interests
13. In India Cement (supra), a Bench of seven Judges of this Court held that
royalty is tax. Resultantly, it was held that the State legislatures have no
legislative competence to impose cess on royalty under Entries 23 and 50 of
List II. Fifteen years later, a Constitution Bench in Kesoram (supra) held that
royalty is not a tax. It was further held that the power to levy tax on mineral
rights vests with the State legislatures and is subject to any limitations laid
down by Parliament by law relating to mineral development. Given this
divergence, a reference was made to a larger Bench. MADA (supra) has laid
down the principles for interpreting Entry 54 of List I and Entries 23 and 50 of
List II. In the process, this Court overruled India Cement (supra).
14. The doctrine of prospective overruling has been applied by this Court in
situations where the new declaration results in the invalidation of legislation,
which would otherwise have been valid under the old declaration. 22 The
doctrine has also been used where this Court has declared a legislation as
ultra vires. 23 In the case of taxing statutes, such a declaration would make the
State liable to refund all amounts collected under the invalid legislation.
Therefore, this Court declares the new rule to apply prospectively not only to
secure the revenues of the State but also to protect the rights and obligations
crystallized by persons and entities under the old regime.24
22 Golak Nath (supra) [53]; Synthetics & Chemicals Ltd v. State of U P, (1990) 1 SCC 109 [89]
23 Gaurav Kumar v. Union of India, 2024 SCC OnLine SC 1841 [108]
24 India Cement Ltd v. State of T N, (1990) 1 SCC 12 [35]; Orissa Cement Ltd v. State of Orissa, 1991
Supp (1) SCC 430 [69]
Page 15 of 22
PART D
15. This Court generally does not declare prospective overruling when upholding
the legislative competence of legislatures. In Municipal Council, Kota v.
Delhi Cloth & General Mills Co. Ltd.,25 this Court was called upon to decide
the validity of the dharmada tax levied and collected by the Municipal Council.
The High Court held that the Municipal Council was not authorized to collect
the tax. Further, the High Court directed the State government to refund the
collections made to the assesses. In the appeal, a two-Judge Bench of this
Court upheld the competence of the Municipal Council to levy the tax. It also
set aside the order of the High Court granting refunds to the assesses.
16. In Jindal Stainless Ltd. v. State of Haryana, 26 a Bench of nine Judges of
this Court held that a non-discriminatory tax does not per se constitute a
restriction on the right to free trade, commerce and intercourse guaranteed
under Article 301. This Court overruled long-standing precedents that held
that taxes, except for compensatory taxes, offend Article 301. 27 In that case,
the counsel specifically submitted that the judgment should be given a
prospective effect. 28 However, the decision was given a retrospective effect.
In her concurring opinion, Justice Banumathi dealt with the issue raised by
the assesses about payment/refund of tax in case the validity of the legislation
was upheld or otherwise. The learned Judge rejected the claim of the
assesses for refund of taxes thus:
“481. It is well settled that a claim of refund can be

allowed only when the claimant establishes that he
25 (2001) 3 SCC 654

26 (2017) 12 SCC 1
27 Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232; Automobile Transport (Rajasthan) Ltd. v.
State of Rajasthan, AIR 1962 SC 1406

28 Jindal Stainless Ltd. (supra) [897]
Page 16 of 22
PART D
has not passed on the tax burden to the consumers.

No refund can be granted so as to cause windfall
gain to any person when he has not suffered the
burden of tax. The possibility of the tax burden
having been passed on to the consumers by the
assessees cannot be ruled out in the present case.
Applying the law laid down above to the present
case, it emerges that the assessees cannot claim
refund irrespective of whether the impugned
legislations are declared valid or
unconstitutional. Unless the assessees
establish that they have not passed on the tax
burden to the consumers, they cannot make a
claim for refund and unjustly enrich
themselves.”
(emphasis added)
17. MADA (supra) has upheld the legislative competence of States under Entries
49 and 50 of List II. If MADA (supra) is given a prospective application, the
validity of all relevant legislation enacted before the date of the decision, that
is 25 July 2024, will have to be tested on the touchstone of the previous law.
The previous law on the aspects of interpretation of Entry 54 of List I and
Entries 23 and 50 of List II of the Seventh Schedule was unsettled because
of the conflicting decisions in India Cement (supra) and Kesoram (supra).
There is always a presumption of constitutionality in favor of a statutory
enactment. It is based on the theory that the elected representatives are
aware of the needs of the citizens and are best placed to frame policies to
resolve them. 29 Legislation represents the will of the people and cannot be
lightly interfered with unless it transgresses constitutional principles. 30 If
29Association for Democratic Reforms v. Union of India, (2024) 5 SCC 1 [45]

30Charanjit Lal Chowdhury v. Union of India, (1950) SCR 869; State of Bihar v. Bihar Distillery Ltd.,
(1997) 2 SCC 453 [17]
Page 17 of 22
PART D
MADA (supra) is applied prospectively, the relevant taxing legislations may
conceivably be invalidated, requiring the States to refund the amount
collected to the assesses. Since MADA (supra) has answered the reference
and resolved the conflict, it would be iniquitous to apply the decision
prospectively.
18. The learned Solicitor General relied on the Constitution Bench decision in
Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.31 to
draw upon the point that this Court has applied the doctrine of prospective
overruling where the parties have entered into commercial relations based on
the prevailing legal position. In Bharat Aluminium (supra), this Court held:
“197. The judgment in Bhatia International [(2002) 4

SCC 105] was rendered by this Court on 13-3-2002.
Since then, the aforesaid judgment has been
followed by all the High Courts as well as by this
Court on numerous occasions. In fact, the judgment
in Venture Global Engg. [(2008) 4 SCC 190] has
been rendered on 10-1-2008 in terms of the ratio of
the decision in Bhatia International [(2002) 4 SCC
105]. Thus, in order to do complete justice, we
hereby order, that the law now declared by this Court
shall apply prospectively, to all the arbitration
agreements executed hereafter.”
19. The decision in Bharat Aluminium (supra) was applied prospectively to
arbitration agreements concluded after the date of judgment. However, the
legal context in the present batch of matters is different. Article 265 of the
Constitution prescribes that no tax shall be levied or collected except by
authority of law. The law must be valid in the sense that it must be within the
legislative competence of the legislature and consistent with other provisions
31 (2012) 9 SCC 552
Page 18 of 22
PART D
of the Constitution.32 Further, the power to levy tax is an incidence of
sovereignty. 33 If we are to give a prospective application to MADA (supra), it
would result in a situation where the legislation enacted by the States in
pursuance of their plenary powers under Entries 49 and 50 of List II may
conceivably be invalidated based on a position of law which has been
overruled. This would not be a constitutionally just outcome.
20. After India Cement (supra), Parliament enacted the Cess and Other Taxes
on Minerals (Validation) Act 1992 to validate the imposition and collection of
taxes on minerals made under the State legislations before 1991. The Central
Government also increased the rates of royalty to compensate the States for
the loss of mineral revenues. 34 The recalibration of the royalty rates protected
the States from the amount lost due to the abolition of cess on minerals and
mineral rights. The assesses submit that in the interregnum they have
structured their commercial bargains in terms of the prevalent law.
Subsequently, Kesoram (supra) took a view that diverged from the ruling in
India Cement (supra). Kesoram (supra) is an operative fact based on which
many State legislatures have already enacted taxing statutes. A pragmatic
solution to reconcile the financial interests of the States and the assesses can
be achieved by proscribing the States from demanding taxes pertaining to
Entries 49 and 50 of List II of the Seventh Schedule for the period before
Kesoram (supra).
32 Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536 [25]

33 Jindal Stainless Ltd (supra) [17]
34 See ‘Mineral Royalties’, Government of India, Ministry of Mines (2011) 16.
Page 19 of 22
PART D
21. The learned Solicitor General has pointed out that the total amount due by
the assesses (which includes public sector undertakings) to the governments
is substantial and will impose a heavy financial burden on the assesses.
During the pendency of the present reference, this Court passed interim
orders in the tagged matters. These include (i) rejection of the stay of
proceedings while allowing restitution in the event the appeal is allowed;35 (ii)
grant of interim stay subject to the assesses submitting bank guarantees for
the whole amount sought to be recovered;36 and (iii) direction to the States to
take no coercive steps against the assesses for recovery of any demands of
tax pending the appeal. 37 The payment or non-payment of the dues was thus
made subject to the outcome of the appeals or petitions. It is a settled legal
position that a beneficiary of an interim order of stay has to pay interest on
the amount withheld or not paid under the interim order in the event the
outcome goes against the beneficiary. 38
22. The total amount, that is the principal plus the interest, due by the assesses
in the pending matters may be substantial in comparison to their total net
worth. Steel Authority of India has stated on affidavit that retrospective
application of MADA (supra) will lead to revival of cumulative demands to the
tune of approximately Rupees three thousand crores from different States.
The delay in the court proceedings should not be to the detriment of the
35 Civil Appeal No. 5329 of 2002; Civil Appeal No. 4745 of 2006; Civil Appeal No. 4478 of 2010
36 Civil Appeal No. 6498 of 2008
37 Civil Appeal No. 874 of 2013; Civil Appeal No. 3642 of 2011; Civil Appeal No. 10082 of 2016; Civil
Appeal No. 4588 of 2017.

38 State of Rajasthan v. J K Synthetics Ltd., (2011) 12 SCC 518 [23]; State of U P v. Prem Chopra, 2022
SCC OnLine SC 1770 [24]
Page 20 of 22
PART E
assesses. 39 Taking into consideration the lapse of more than three decades
since India Cement (supra) and more than a decade since the matter was
referred to a larger Bench, equities will be balanced if the State governments
waive the outstanding interest accrued on the principal due from the
assesses. This direction applies to all assesses, regardless of whether they
have approached this Court or the High Courts challenging the validity of the
relevant statutes.
23. During the proceedings, the Solicitor General submitted that a few States do
not wish to collect the dues accrued before the decision in MADA (supra). It
is the prerogative of the State legislatures to determine whether to forego the
dues for the period before 25 July 2024.
E. Conclusion
24. The submission that MADA (supra) should be given prospective effect is
rejected.
25. Bearing in mind the consequences that would emanate from the past period,
the following conditionalities are directed to prevail:
a. While the States may levy or renew demands of tax, if any, pertaining to
Entries 49 and 50 of List II of the Seventh Schedule in terms of the law laid
down in the decision in MADA (supra) the demand of tax shall not operate
on transactions made prior to 1 April 2005;
b. The time for payment of the demand of tax shall be staggered in instalments
over a period of twelve years commencing from 1 April 2026; and
39 See K C Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663 [339]
Page 21 of 22
PART E
c. The levy of interest and penalty on demands made for the period before 25
July 2024 shall stand waived for all the assesses.
..….…….……………………………………CJI
[Dr Dhananjaya Y Chandrachud]
..….…….………………………………………J
[Hrishikesh Roy]
..….…….………………………………………J
[Abhay S Oka]
…….……………………………………………J
[J B Pardiwala]
…….……………………………………………J
[Manoj Misra]
…….……………………………………………J
[Ujjal Bhuyan]
…….……………………………………………J
[Satish Chandra Sharma]
…….……………………………………………J
[Augustine George Masih]
New Delhi;
August 14, 2024
Page 22 of 22

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2024 INSC 607

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 4056-4064 of 1999

Mineral Area Development Authority & Anr. …Appellants

M/S Steel Authority of India & Anr Etc. …Respondents

Civil Appeal No. 7937 of 2019

Dr Dhananjaya Y Chandrachud, CJI

C. Prospective overruling ........................................................................................9

D. A pragmatic solution to reconcile the conflicting interests........................... 15

1. In Mineral Area Development Authority v. Steel Authority of India,1 the

nine-Judge Bench of this Court answered the questions referred in terms of

the conclusions arrived at by the majority. In the process, the judgment

overruled India Cement Ltd. v. State of Tamil Nadu 2 and subsequent

prospective effect. Therefore, the proceedings were listed for hearing

submissions on whether or not the judgment should be given prospective

2. Mr R Venkataramani, Attorney-General for India, Mr Tushar Mehta, Solicitor-

General of India, Mr Harish Salve, Mr Abhishek Manu Singhvi, Mr Mukul

Rohatgi, and Mr Arvind Datar, senior counsel, made the following

overruled in MADA (supra). Demands for tax under state legislation

pertaining to Entries 49 and 50 of List II of the Seventh Schedule have been

1 Civil Appeal Nos. 4056-4064 of 1999; 2024 INSC 554 (“MADA”).

passed them on to the end consumers. If State legislatures are allowed to

were protected because of validation legislation enacted by Parliament. If a

ruling creates or renews a liability for the assesses, there is no protection

against retrospective demands;

MADA (supra) is given retrospective effect, it will rewrite commercial

disturb past or concluded transactions in tax matters;

d. The doctrine of prospective overruling is well-established in Indian

constitutional jurisprudence. MADA (supra) should be given prospective

effect because it lays down new constitutional principles; and

e. Where enforcement of taxing legislation was either partially or completely

interdicted by judicial orders, it should be directed that no new tax demand

3. On the other hand, Mr Rakesh Dwivedi, Mr Vijay Hansaria, and Mr Tapesh

a. The doctrine of prospective overruling is applicable only when the judgment

invalidates a legislation or introduces a new interpretation by overruling its

earlier decision. The doctrine of prospective overruling has never been

applied to situations where the declaration of law attaches validity to taxing

b. If MADA (supra) is applied prospectively, India Cement (supra) will have to

This consequence is unjust and against the public interest; and

c. In State of West Bengal v. Kesoram Industries Ltd, 3 a Constitution Bench

Kesoram (supra), several states such as Chhattisgarh, Madhya Pradesh,

Courts. Giving prospective effect to MADA (supra) will result in a

deprived of collecting tax from the date of their enactments.

4. We have also heard Mr Pitambar Acharya, Advocate General of the State of

Orissa, who emphasized the importance of protecting the financial interests

3 (2004) 10 SCC 201

5. The doctrine of prospective overruling is applied when a constitutional court

overrules a well-established precedent by declaring a new rule but limits its

application to future situations. The underlying objective is to avert injustice

that the US Constitution “neither prohibits nor requires retroactive effect.” 5

The US Supreme Court has considered the existence of a statute or judicial

decision as an “operative fact” having “consequences which cannot justly be

ignored” or “erased by a new judicial declaration.” 6 Therefore, it was held that

the effect of a subsequent ruling as to invalidity may have to be considered in

light of various aspects. 7

6. In Chevron Oil Company v. Huson,8 the US Supreme Court identified three

separate factors to be considered while deciding the applicability of

prospective overruling: (i) the decision to be applied prospectively must