SC declines stay on rural development tax

The Supreme Court declined on Monday to stay an act enacted by the Madhya Pradesh government, which requires firms engaged in mining activities to pay a cess towards funding rural development, and directed several private companies to shell out Rs 1,200 crore (Rs 12 billion) as tax.

A bench, comprising Chief Justice S H Kapadia and Justices K S Radhakrishnan and Swatanter Kumar, directed the companies to pay Rs 1,200 crore as the amount due for the state government.

The apex court said the only kind of relief that could be given to the companies on the matter is waiver of interest and penalties imposed on them by the government.

The state government may also be directed to take the payment in instalments, it added.

"We cannot waive the amount. . . can remove penalty and interest imposed on you. We would fix instalments in which you can pay," the bench said.

Following this, the court directed the companies to give their suggestions on the mode of payment by July 23.

The companies involved are Birla Corporation, Jai Prakash Associates, Grasim Industries, Maihar Cements, Western Coalfield and Prism Cement.

Earlier, the state high court had also refused to stay the Madhya Pradesh Rural Infrastructure and Rural Road Development Act, 2005, which made it mandatory for companies to pay tax on mineral-bearing land owned by them.

The money taken from them was supposed to fund rural infrastructure in the state. During the proceedings, counsels appearing for the companies opposed the act by stating that the previous state government had assured them there would be no taxation on this account.

The companies had further contended that though a similar act was enacted by the Orissa government, the Cuttack high court had struck it down.