2020 (1) TMI 878 - HC - GST

Turnover limit for Composition Levy under GST - treatment of Ice Cream equally with Pan Masala - Constitutional Validity of N/N. 8 of 2017 Central Tax and N/N. 14/2019 - Praying for quashing the impugned recommendations of GST Council being void ab initio - HELD THAT - It is well settled that a legislative provision cannot be struck down as being arbitrary, irrational or unreasonable. No enactment can be struck down by just saying that it is arbitrary or unreasonable. While dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the court must have regard to the following principles (i), there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found (iii), the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence (iv), hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and (v), in the field of taxation, the Legislature enjoys greater latitude for classification. The classification cannot be said to be without any rationale - petition dismissed.

Summary

Issues:
Challenge to validity of GST Council recommendations and notifications under Article 226 of the Constitution of India.

Analysis:
The petitioner, a society of Small Scale Ice Cream Manufacturers, challenged the validity of notifications treating ice cream like Pan Masala and Tobacco products. The petitioner argued that such classification was unjust and would harm small-scale ice cream manufacturers, leading to shutdowns. The challenge was based on violation of Article 14 of the Constitution of India, claiming the notifications were arbitrary and unreasonable.

The court emphasized that legislative provisions cannot be struck down merely for being arbitrary or unreasonable. Referring to legal precedents, the court highlighted that for a classification to be valid, it must be based on intelligible differentia with a rational relation to the object sought to be achieved. The burden of proof lies on the party challenging the constitutionality of an enactment to demonstrate a clear violation of constitutional principles.

Moreover, the court reiterated that laws related to economic activities should be viewed with greater latitude than those affecting civil rights. In cases of taxation laws, there is a presumption in favor of their constitutionality, and the court should not consider the wisdom or justice of the law, as the legislature is deemed best to understand the needs of the people. The court also noted that in the field of taxation, the legislature enjoys greater latitude for classification.

After considering these principles, the court concluded that the classification in the challenged notifications was not without rationale. Consequently, the court found no merit in the petitioner's writ petition and dismissed it, without awarding any costs.

In summary, the judgment upheld the validity of the GST Council recommendations and notifications, emphasizing the importance of a rational classification based on intelligible differentia and the presumption of constitutionality in taxation laws.