2024-VIL-84-DEL
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SGST High Court Cases

GST - Constitutional validity of Anti-Profiteering provisions of the CGST Act, 2017 and CGST Rules, 2017 – Challenge to Constitutional validity of Section 171 of the CGST Act, 2017 – HELD - The obligation of effecting a “commensurate” reduction in prices is relevant to the underlying objective of the GST regime which is to ensure that suppliers pass on the benefits of reduction in the rate of tax and Input Tax Credit to the consumers - Section 171 of the CGST Act, 2017, therefore, is not to be looked at as a price control measure but is to be seen to be directly connected with the objectives of the GST regime. Consequently, the word ‘commensurate’ in Section 171 of the CGST Act, 2017 means that whatever actual saving arises due to the reduction in rates of tax or the benefit of the Input Tax Credit, in rupee and paisa terms, must be reflected as equal or near about reduction in price. In other words, tax foregone by the authorities has to be passed on to the consumer as commensurate reduction in price - the objective behind Section 171 is directly relatable to the Directive Principles of State Policy contained in Article 38(1) of the Constitution which requires the State to strive to secure a social order in which justice, social, economic and political shall inform all institutions of the national life and Articles 39(b) and (c) of the Constitution which require the State to direct its policy towards ensuring that the ownership and control of the material resources of the community are so distributed as best to sub-serve the common good and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment - Section 171 of the Act mandates that whatever is saved in tax must be reduced in price. The Section 171 incorporates the principle of unjust enrichment. Accordingly, it has a flavor of consumer welfare regulatory measure, as it seeks to achieve the primary objective behind the GST regime to overcome the cascading effect of indirect taxes and to reduce the tax burden on the final consumer - Section 171 of the CGST Act falls within the law-making power of the Parliament under Article 246A of the Constitution dealing with the ancillary and necessary aspects of GST and is not beyond the legislative competence of the Parliament - Section 171 of the Act is a complete code in itself and it does not suffer from any ambiguity or arbitrariness - Section 171 neither delegates any essential legislative function nor violates Article 14 of the Constitution of India - Section 171 also does not violate Article 19(1)(g) of the Constitution of India, as it is not a price-fixing mechanism - if the supplier is to assert reasons for offsetting the reduction in prices of the goods and services, it must establish the same on cogent basis and must not use it merely as a device to circumvent the statutory obligation of reducing the prices in a commensurate manner contemplated under Section 171 of the CGST Act - so long as the methodology determined by NAA is fair and reasonable, the petitioners cannot raise the objection that the specifics of the methodology adopted are not prescribed - the constitutional validity of Section 171 of CGST Act, 2017 as well as Rules 122, 124, 126, 127, 129, 133 and 134 of the CGST Rules, 2017 is upheld – List the matters before the Division Bench for appropriate directions
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