Bengaluru: The high court of Karnataka on Wednesday directed the state government to refund the forest development ‘fee’ collected from mining companies. The direction comes as an embarrassing setback to the government.

K N Srinivasa, one of the advocates appearing for two mining companies, said the state government may have to refund around Rs 5,000 crore, collected since 2008. The state government had collected the fee after an amendment to the Forest Development Act, 1963.

Hearing a batch of petitions filed by over 75 mining companies, a division bench, comprising Chief Justice S K Mukherjee and Justice P S Dinesh Kumar, declared the amendment as unconstitutional. The mining companies have challenged the state government notification, which had imposed a forest development tax. The court held that the state government has no authority to collect such taxes as it is under the ambit of the Central government.