High Court Judgement
  1. Home
  2. High Court Judgement

SGST High Court Cases

GST - Recovery of tax on various services rendered by Association to its members, Principle of Mutuality, Challenge to Constitutional validity of Section 2(17)(e) and amendment to Section 7(1)(aa) of the CGST Act, 2017 - Finance Act, 2021 introduced amendment to the CGST Act, inserting Section 7(1)(aa) and an Explanation, which deemed the supply of goods or services by a club/association to its members as a taxable supply, with retrospective effect from July 1, 2017 - Whether the provisions of Section 2(17)(e) and amendments to Section 7(1)(aa) of the CGST Act, which deem the supply of goods or services by a club/association to its members as a taxable supply are unconstitutional and ultra vires the provisions of Article 246A read with Article 366(12A) and Article 265 of the Constitution – When the Constitution has understood a taxable transaction as necessarily involving two persons, whether the Legislature deem a transaction that does not involve two persons as a taxable transaction – HELD - Notwithstanding the amendments effected to Sections 2(17) and Section 7(1) of the CGST Act, the activities of the Club/Association towards its members will not be liable to the levy of GST. The scheme of GST under the Constitution contemplates the existence of at least two persons- a provider and a recipient before one can infer either a “supply” or a “service” for the purposes of the levy of GST and excludes the concept of self-service for the purposes of the levy - While “goods” is a standalone concept, meaning thereby that it is not something that requires a plurality of persons to infer its existence, the concepts of “supply” and “service” require a plurality of persons to infer their existence - when a word/concept in the Constitution has been interpreted by the Supreme Court in a particular manner, the legislature cannot give it a different meaning that goes against the constitutional understanding of the same - even if there is now a deemed “supply”, based on the amendments effected to the CGST/SGST Acts, there is no deemed “service” in circumstances where the service is rendered by a club or association to its members since the definition of service has not been amended – The concepts of “supply” and “service” having been judicially interpreted as requiring at least two persons- a provider and a recipient and the Supreme Court having held in Calcutta Club case that the principle of mutuality has survived the 46th amendment to the Constitution, so long as the said judgment holds sway as a binding precedent and/or the Constitution is not amended suitably to remove the concept of mutuality from the concepts of supply and service thereunder, the impugned amendment to the CGST Acts fails the test of Constitutionality - the provisions of Section 2(17)(e) and Section 7(1)(aa) and the Explanation thereto of the CGST/KSGT Act, 2017 are declared as unconstitutional and void being ultra vires the provisions of Article 246A read with Article 366 (12A) and Article 265 of the Constitution – the writ appeal filed by IMA is allowed and the writ appeals filed by the Union of India and the State of Kerala are dismissed - Decision of State of West Bengal and Others v. Calcutta Club Ltd - Power of the Parliament to make amendment – HELD - The Constitution has not been amended to deem a supply of service by a club or association to its members as a taxable service for the purposes of GST. The decision of the Supreme Court in State of West Bengal and Others v. Calcutta Club Ltd. is authority for the proposition that the principle of mutuality has survived under the Constitution even after the 46th Amendment. If that be so, then the amendment exercise carried out by the Parliament would itself have to be seen as unconstitutional since it incorporates a definition of supply that militates against the constitutional understanding of the term - a phrase as understood under the Constitution cannot be statutorily expanded by any legislature since the power to legislate is itself one that is conferred by the Constitution - Whether the retrospective operation of the impugned amendments is valid – HELD - In light of the finding that the impugned statutory provisions are unconstitutional, it is unnecessary to go into the validity of the retrospective operation of the amendments. However, the Court agreed with the findings of the learned Single Judge that the retrospective operation of the amendments is illegal, as it violates the principle of fairness, which is an essential aspect of the Rule of Law - The retrospective operation of the amendments, which alters the basis of indirect taxation and imposes a liability for a prior period when the persons affected had not anticipated such a levy, militates against the concept of Rule of Law. The Court found no valid justification offered by the State for the retrospective operation of the impugned provisions.
Download File

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Tax Vista

Your Weekly Tax Recap

By Dr. G. Gokul Kishore

Weekly Summary

VIL Video

Credit Notes ITC Reversal in IMS…
By Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?