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2022 (5) TMI 1553 - HC - GSTConstitutional validity of Section 7 of the CGST Act/UPGST Act - declaration is that Section 7 read with Schedule II of the Central Goods and Service Tax Act, 2017 in so far as it includes the transaction of sale within the scope of supply and levy tax on such sales as ultra vires the Constitution, null and void - waiver of mandatory 10% deposit for filing an Appeal under Section 107 of U.P. GST Act, 2017 by the petitioner - Principles of Natural Justice. HELD THAT - By 101st Amendment in Constitution of India, a new Article 246-A was inserted with overriding effect to Articles 246 and 254 of the Constitution of India. By Clause (1) of Article 246-A, the Parliament, and, subject to clause (2), the Legislature of every State, have been empowered to make laws with respect to goods or services tax imposed by the Union or by such State. Clause (2) has given exclusive powers to the Parliament to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce - Prior to 101st Amendment to the Constitution of India, Entry 52 of List II - State List of the Seventh Schedule of the Constitution of India provided for taxes on entry of goods into a local area for consumption, use or sale therein . Entry 54 of List II provided for taxes on sale or purchase of goods other than newspaper, subject to the provisions of Entry 92-A of List I. Entry 55 of List II provided for taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television . Entry 62 of List II provided for taxes on luxuries including taxes on entertainment, amusements, betting and gambling . Overall reading of 101st Amendment to the Constitution of India leaves no manner of doubt that Article 246-A and other relevant provisions were enacted by the Constitution (101st Amendment) Act, 2016 so as to bring the taxes on purchase and sale of goods, duties on excise and entertainment tax etc. under one umbrella by empowering the Parliament and the State Legislatures to enact laws with respect to taxes on supply of goods or services or both - Statement of Object and Reasons to the 101st Amendment to the Constitution of India and Statement of Object and Reasons of the Central Goods and Services Tax Act, 2017 and the U.P. Goods and Services Tax Act, 2017, leave no manner of doubt that these Acts were enacted as per powers conferred under Article 246-A of the Constitution of India so as to levy tax on all goods or services or both in place of multiplicity of taxes provided under the erstwhile Central Acts and State Acts levying taxes on purchase or sale of goods, entry tax, entertainment tax and duties on excise etc. It is well settled that the court can look into the Statement of Objects and Reasons for the purposes of deciphering the object and purposes of the Act. Reference to background and circumstances in which the Act was passed is permissible for appreciating the mischief, the legislature had in mind and the remedy which it wanted to provide for preventing that mischief. Reference to object and reasons is permissible for understanding the background, the antecedent state of affairs, the surrounding circumstances in relation to the statute, and the evil which the statute sought to remedy - the Parliament does not lack legislative competence to enact Section 7 of the CGST Act levying tax on supply of goods or services or both. Likewise, in view of Article 246-A of the Constitution of India, State Legislature does not lack legislative competence to enact Section 7 of the UPGST Act. In the case of PROMOTERS BUILDERS ASSOCIATION OF PUNE VERSUS PUNE MUNICIPAL CORPORATION ORS 2007 (5) TMI 601 - SUPREME COURT , Hon'ble Supreme Court has held that while exercising legislative function, unless unreasonableness and arbitrariness is pointed out it is not open for the Court to interfere. While examining the challenge to the constitutionality of an enactment, the court is to start with the presumption of constitutionality and try to sustain its validity to the extent possible. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of language employed. An act made by the legislature represents the will of the people and that cannot be lightly interfered with. It is presumed that the legislature expresses wisdom of the community, does not intend to exceed its jurisdiction and correctly appreciates the need of its own people. In view of these settled principles and the discussions made above on legislative competence and presumption of constitutional validity, we hold that Section 7 of the CGST Act/UPGST Act does not suffer from lack of legislative competence. In other words, Section 7 of the CGST Act/UPGST Act is wholly valid - there are no merit in challenge to the constitutional validity of Section 7 of the CGST Act/UPGST Act. Therefore, the challenge to the constitutional validity of Section 7 of the CGST Act/UPGST Act is hereby rejected. Principles of Natural Justice - HELD THAT - The copies of all relied upon documents have been given by the Assessing Authority to the petitioner and he has also been allowed to inspect the records. Opportunity of hearing is also reflected from the notices including the notice dated 05.01.2022 in which the date, place and time for appearance has been informed to the petitioner by the Deputy Commissioner, Commercial Tax, Division-17, Ghaziabad - there are no substance in challenge to the impugned assessment order on the ground of alleged breach of principles of natural justice or provisions of Section 75(4) of the CGST Act/UPGST Act. The writ petition is dismissed, leaving it open for the petitioner to challenge the impugned Assessment Order in appeal before the appellate authority, if so advised.
Issues Involved:
1. Legislative Competence of Section 7 of the CGST Act/UPGST Act. 2. Constitutional Validity of Section 7 of the CGST Act/UPGST Act. 3. Alleged Breach of Natural Justice in the Impugned Assessment Order. Issue-wise Detailed Analysis: Legislative Competence of Section 7 of the CGST Act/UPGST Act: The petitioner challenged the legislative competence of Parliament and the State Legislature to enact Section 7 of the CGST Act and UPGST Act, arguing that Article 246-A of the Constitution does not confer the power to impose tax on the sale of goods. The court examined the 101st Amendment to the Constitution, which introduced Article 246-A, and noted that it confers concurrent taxing powers on the Union and State Legislatures to levy GST on the supply of goods or services. The court highlighted that the amendment subsumed various indirect taxes into a single GST, thereby empowering both Parliament and State Legislatures to enact laws on GST, including the tax on the supply of goods or services. The court concluded that the Parliament and State Legislature did not lack legislative competence to enact Section 7 of the CGST Act/UPGST Act. Constitutional Validity of Section 7 of the CGST Act/UPGST Act: The petitioner argued that Section 7 of the CGST Act/UPGST Act is ultra vires the Constitution. The court emphasized the presumption of constitutional validity and the burden on the petitioner to prove otherwise. The court referenced multiple Supreme Court judgments affirming the presumption of constitutionality and the broad legislative powers conferred by Article 246-A. It concluded that Section 7, which defines "supply" to include the sale of goods, is within the legislative competence of Parliament and State Legislatures. The court also noted that the GST is a consumption and destination-based tax, reinforcing the validity of Section 7. Alleged Breach of Natural Justice in the Impugned Assessment Order: The petitioner claimed that the assessment order violated principles of natural justice, alleging that not all relied-upon documents were provided and that there was no opportunity for a hearing. The court found that the petitioner was given copies of all relevant documents and allowed to inspect the records. Notices were issued, and the petitioner had submitted a detailed reply which was considered by the assessing authority. The court noted that the petitioner has the right to appeal the assessment order under Section 107 of the UPGST Act. Therefore, the court dismissed the challenge to the assessment order on the grounds of natural justice violations. Conclusion: The court dismissed the writ petition, holding that: 1. Article 246-A empowers both Parliament and State Legislatures to enact laws on GST, including the supply of goods or services. 2. Section 7 of the CGST Act/UPGST Act is constitutionally valid and within legislative competence. 3. The assessment order did not breach principles of natural justice, and the petitioner retains the right to appeal.
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