2017 (8) TMI 1194 - HC - GST

Constitutional validity of the Goods and Services Tax (Compensation to States) Act, 2017 - Clean Energy Cess progressively increased and stood at ₹ 400 per tonne from @ ₹ 100 per tonne - Clean Energy Cess that was already paid by the Petitioner under the FA 2010 - no input credit - new GST regime Held that - For the purpose of providing compensation to States for loss of revenue arising out of the implementation of the GST regime, Section 8 contemplates the cess being collected in such a manner as may be prescribed. This has led to the enactment of the Goods and Services Tax Compensation Cess Rules, 2017. Notification No.1/2017-Compensation Cess (Rate), dated 28th June 2017 issued by the Ministry of Finance, Department of Revenue has re-introduced the cess @ ₹ 400 per tonne of coal. If the Act is vulnerable to being challenged for lack of legislative competence then the Rules can fare no better. The Court, at this stage, is of the view that, the Petitioner has made out a prima facie case for partial ad interim relief subject to conditions. As far as the additional levy on the stocks of coal on which it has already paid the Clean Energy Cess in terms of FA Act, 2010, the Petitioner should not be required to make any further payment. However, on stocks of coal on which no Clean Energy Cess under the FA, 2010 was paid, any payment made in terms of the impugned Act would be subject to the result of this petition. It is ordered accordingly. It is made clear that, in the event of the Petitioner succeeding in the present petition, the Petitioner would be entitled to a refund of amounts of Clean Energy Cess paid under the Act and on such terms as the Court may determine in the final order. It is made clear however, that on those stocks for which the Petitioner is not able to produce a satisfactory proof of already having paid the Clean Energy Cess under the FA, 2010, the Petitioner will be required to pay the cess under the impugned Act. This would be subject to the directions issued hereinbefore.

Summary

Issues:
Constitutional validity of the Goods and Services Tax (Compensation to States) Act, 2017; Legislative competence of Parliament to levy cess under the Act; Double taxation issue due to imposition of new cess without input credit for previously paid Clean Energy Cess.

Analysis:

Constitutional Validity of the Act:
The petition challenges the constitutional validity of the Goods and Services Tax (Compensation to States) Act, 2017, specifically focusing on the abolition of Clean Energy Cess under the Finance Act, 2010, and its replacement with the new GST regime. The petitioner, a coal trader, argues that the Act does not align with the constitutional provisions related to compensation to States for revenue loss due to GST implementation. The court acknowledges the petitioner's contention and finds prima facie merit in the argument, questioning the legislative competence of Parliament to enact the impugned Act.

Legislative Competence Issue:
The core argument revolves around Section 18 of the Constitution (One Hundred and First Amendment) Act, which mandates compensation to States for revenue loss post-GST implementation. The petitioner asserts that this provision does not authorize the imposition of a new cess, especially after the abolition of Clean Energy Cess. The court agrees that the Act's reliance on Section 18 may lack a clear legal basis, raising concerns about the Parliament's authority to introduce the Compensation to States Act.

Double Taxation and Input Credit:
Another significant issue highlighted is the double taxation dilemma faced by the petitioner. The Act imposes a fresh levy of cess on coal stocks, even for which Clean Energy Cess was previously paid under the Finance Act, 2010. The absence of input credit for the earlier paid cess further exacerbates the financial burden on the petitioner. The court acknowledges the petitioner's genuine concerns regarding the additional financial strain caused by the new cess without corresponding credit provisions.

Interim Relief and Refund Entitlement:
In response to the petitioner's plea, the court grants partial ad interim relief, exempting the petitioner from further payment on coal stocks where Clean Energy Cess was previously paid. However, for stocks without prior cess payment, the liability under the impugned Act remains subject to the ongoing legal proceedings. The court ensures that in case of a favorable outcome for the petitioner, a refund of the Clean Energy Cess amounts paid under the Act will be granted, subject to court determination.

Operational Procedures and Future Proceedings:
To facilitate the interim order implementation, the court directs the concerned department officers to verify the Clean Energy Cess payment status for the petitioner's coal stocks. Coercive recovery actions are temporarily halted pending verification. The court sets deadlines for filing replies and lists the case for further hearings, emphasizing the need for procedural compliance and timely responses from all parties involved.

This detailed analysis encapsulates the multifaceted legal issues, procedural steps, and interim relief measures outlined in the judgment, offering a comprehensive understanding of the complex legal intricacies addressed by the Delhi High Court in this case.