2026-VIL-744-KAR
  1. Home
  2. 2026-VIL-744-KAR

SGST High Court Cases

GST – Challenge to Constitutional Validity of Health Security and National Security Cess Act, 2025 - Levy of Cess on Machine Ownership instead of Actual Production - Deemed Production versus Actual Quantity Manufactured - Petitioners challenged the constitutional validity of the HSNS Cess Act which levies a cess on machines installed or processes undertaken for the manufacture or production of specified goods, particularly pan masala, contending that the Act was beyond the legislative power conferred under the Constitution and violated Articles 246A and 271 - The Respondents submitted that the impugned Act was a constitutionally valid piece of fiscal legislation enacted in public interest to regulate a sector notorious for tax evasion - Whether the Health Security and National Security Cess Act, 2025 and the Rules or the Notifications made in furtherance of the impugned Act and the Rules would fall foul of certain tenets of the Constitution of India - HELD - Article 246A of the Constitution provides for the imposition of GST. The taxable event in terms of the impugned Act being the ownership or possession of the installed machine and not on the supply of goods and services which is a taxable event under the GST, Article 246A is not applicable - The Parliament has the exclusive legislative power to make laws with respect to matters enumerated in List I of the Seventh Schedule and possesses residuary power under Entry 97 of List I to legislate on any matter not enumerated in List II or List III, including power to impose any tax not mentioned in either of those Lists, and therefore the contention that Parliament lacked the legislative competence to enact the impugned legislations is without merit. However, the manner in which the HSNS Cess Act and the HSNS Cess Rules levy the cess is unreasonable and vague, as it is based on assumption of quantity manufactured instead of actual quantity manufactured, thereby failing the tenets of Article 14 of the Constitution of India - The Act imposes a restriction by demanding cess on the deemed production and not on actual production, which attracts arbitrariness as obtaining under Article 14 of the Constitution of India - The imposition of cess on machinery presuming it would produce at maximum capacity when the actual production capacity falls significantly below that threshold, lacks any rational basis and rational classification, thereby rendering the Act and the Rules unconstitutional. The Health Security and National Security Cess Act, 2025 is held to be unconstitutional insofar as it seeks to impose upon the same class of property, persons, or transactions a burden that results in manifest inequality. The power of the Union Government to promulgate a law to levy cess is upheld, but the Act and the Rules are held to be unconstitutional and obliterated - The Notifications dated 16-12-2025, 31-12-2025, 01-01-2026 and 30-01-2026 stand obliterated. However, liberty is reserved to the Union to bring in the enactment, bearing in mind the observations made in the course of the order - The writ petitions are partly allowedrnrn^Challenge to Rule 15 of Health Security and National Security Cess Rules, 2025 - Abatement of Cess - Minimum Period of Continuous Non-operation of Fifteen Days - Arbitrariness and Violation of Article 14 of the Constitution - Petitioners challenged Rule 15(a) of the Health Security and National Security Cess Rules, 2026, which provides for abatement of cess only in cases where the manufacturing activity remains suspended continuously for a minimum period of fifteen days, contending that the Rule operated arbitrarily and violated Article 14 of the Constitution - Whether the prescription of a minimum threshold of fifteen continuous days for grant of abatement was arbitrary and violative of Article 14 of the Constitution - HELD - Rule 15(a) operates arbitrarily and is violative of Article 14 of the Constitution. The Rule fails to account for genuine hardship faced by assessees, for whom the Rules provide no alternative remedy. Further, the prescription of a minimum period of fifteen days proceeds solely on the presumption that assessees are likely to indulge in tax evasion and administrative difficulties in preventing tax evasion cannot, by themselves, justify the prescription of such an arbitrary threshold under the Rules - The contention of the Respondent that the prescription of a minimum threshold of fifteen continuous days for grant of abatement is a deliberate anti-evasion policy, intended to eliminate bogus claims for shorter periods, and that only a period of suspension extending to fifteen continuous days establishes the genuineness of the claim, cannot be accepted. Even where manufacturing activity is suspended for periods shorter than fifteen days due to genuine reasons, the Petitioners remain liable to pay cess, thereby incurring further losses in addition to those already suffered on account of the suspension of manufacturing activity. The Rule, therefore, operates arbitrarily and is violative of Article 14 of the Constitution of India. The Rules are held to be unconstitutional and obliterated.
Download File
show more Judgements  

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Tax Vista

Your Weekly Tax Recap

By Kasi Viswanathan V

Weekly Summary

VIL Video

GSTAT Filing Near: Closing Resolutions...
By CA 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

Security-Code
New Code?

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.

Security-Code
New Code?

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?