Delhi HC Upheld the Constitutional Validity of Anti-Profiteering Measures Under Section 171

Case Details: Reckitt Benckiser India (P.) Ltd. v. Union of India - [2024] 158 taxmann.com 675 (Delhi)

Judiciary and Counsel Details

• • Manmohan, ACJ. & Dinesh Kumar Sharma, J.
  • P. Chidambaram, Sr. Adv. R. Jawahar Lal, Siddharth Bawa, Anuj Garg, Mohit Sharma, Ms Harshita, Amar Dave, Amicus Curiae & Vikramaditya Bhaskar, Advs. for the Petitioner. & Others.
  • Zoheb Hossain, Sanjeev Menon, Vivek Gurnani, Kavish Garach, Ms Abhipriya, Vivek Gaurav, Ms Sejal Aneja, Ms Manisha, Asheesh Jain, Gaurav Kumar, Farman Ali, Ms Usha & Krishan Kumar, Advs. for the Respondent. & Others.

Facts of the Case

In the present case, the petitioner challenged the constitutional validity of the Anti-profiteering measures under section 171 of the CGST Act, 2017. It was submitted that the provisions of Section 171 of the CGST Act, 2017 are ultra vires to the Constitution as they violate article 19(1)(g) and article 300A of the Constitution of India.

High Court Held

The High Court held that the intent of the CGST Act, 2017 is to provide a common national market, boost productivity, increase competitiveness, broaden the tax base and make India a manufacturing hub. As a measure, Section 171 mandates that tax foregone has to be passed on as a commensurate reduction in price. Thus, Section 171 falls within the law-making power of the parliament under Article 246A of the Constitution.

Moreover, Section 171 lays out a clear legislative policy and does not delegate any essential legislative function. Further, the provisions of Section 171 of the CGST Act are not a price-fixing mechanism; neither do they violate either article 19(1)(g) or article 300A of the Constitution. The High Court upheld the constitutional validity of anti-profiteering provisions under GST.

The Court also held that there is no requirement of Judicial Member for constitution of National Anti-profiteering Authority. Also, the Court held that there is no scope for governmental interference in functions exercised by National Anti-profiteering Authority. However, the Court held that for arbitrary exercise of power under anti-profiteering mechanism by erroneously enlarging scope of proceedings beyond jurisdiction or on account of not considering genuine basis of variations, such orders were to be set aside.

List of Cases Reviewed

• • Union of India v. VKC Footsteps India (P) Ltd. (supra) (para 106)
  • Welfare Association, A.R.P., Maharashtra v. Ranjit P. Gohil [2003] 9 SCC 358 (para 106)
  • R.S. Joshi, Sales Tax Officer, Gujarat & Ors. v. Ajit Mills Limited & Anr. [1977] 4 SCC 98 (para 106)
  • Re The Delhi Laws Act AIR [1951] SC 332 (para 110)
  • D.S. Grewal v. State of Punjab 1958 SCC OnLine SC 9 (para 115)
  • Dhanjibhai Ramjibhai v. State of Gujarat [1985] 2 SCC 5 (para 126)
  • Chairman & MD, BPL Ltd. v. S.P. Gururaja and Ors. [2003] 8 SCC 567 (para 126)
  • Maganlal Chhaganlal (P) Ltd. v. Municipal Corporation of Greater Bombay & Ors. [1974] 2 SCC 402 (para 138)
  • Collector of Customs v. Nathella Sampathu Chetty, 1962 SCC OnLine SC 30 (para 138)
  • Mafatlal Industries Ltd. v. Union of India [1997] 5 SCC 536 (para 138)
  • P.T. Rajan v. T.P.M. Sahir and Ors. [2003] 8 SCC 498 (para 158)
  • Excel Crop Care Ltd. v. Competition Commission of India [2017] 8 SCC 47 (para 161), followed.
  • Ahmedabad Urban Development Authority (supra) (para 102)
  • Indian Carbon Limited (supra) (para 102); V.V.S. Sugars (supra) (para 102)
  • Shree Bhagwati Steel Rolling Mills v. CCE (supra) (para 102)
  • CIT v. B.C. Srinivasa Setty [1981] 2 SCC 460
  • CCE v. Larsen & Toubro Ltd. [2016] 1 SCC 170 (para 121), distinguished.