2021 (2) TMI 558 - HC - GST

Exclusion of ice cream from the benefits of Composition Scheme under Section 10 of CGST Act - violation of the spirit of Articles 14 and 19 of the Constitution of India or not - violation of principles of natural justice or not - It is the argument of the counsel for the petitioner that ice cream comprises of a large number of other components which are assessable to GST and thus the reasoning emanating from the minutes of the impugned meeting of the respondent no.2 GST Council for excluding ice cream from the benefit of Section 10(1) of the Act, is fallacious - HELD THAT - A reading of Section 10(2)(e) of the Act shows that no parameters, whatsoever, on the anvil of which, the respondent no.2 GST Council may recommend for notification, any goods from the benefit of Section 10(1) of the Act, have been prescribed. The legislature has vested the Government with absolute discretion, to exempt whichsoever goods it may deem necessary, from the benefit of Section 10(1) of the Act. The only limitation placed on the Government is, to act on the recommendation of the GST Council, established under Article 279A of the Constitution of India. The said GST Council comprises of Union Finance Minister, Union Minister of State in charge of Revenue or Finance and the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government. It will thus be seen that the GST Council is a high powered constitutional entity. It is well settled that a State does not have to tax everything in order to tax something and it entitled to pick and choose, if it does so reasonably. Mention may also be made of STATE OF JAMMU AND KASHMIR AND ANOTHER VERSUS M/S. TRIKUTA ROLLER FLOUR MILLS PVT. LTD. AND ANOTHER, SANSAR OIL MILLS AND ANOTHER, R.C. FLOUR MILLS AND ANOTHER, SUDERSHAN STEEL (P) LTD., JAMMU STEEL INDUSTRIES AND ANOTHER, BARI BRAHMA INDUSTRIAL ASSOCIATION AND OTHERS AND K.B. ROLLER FLOUR MILLS 2017 (8) TMI 678 - SUPREME COURT holding that grant of refund on CST paid, to boost entrepreneur investment, was primarily an executive economic policy decision, the scope of judicial scrutiny and interference wherewith is limited to on the grounds of mala fide, unreasonableness, arbitrariness or unfairness and that there is no legal or indefeasible right to claim refund of CST paid. To the same effect is UGAR SUGAR WORKS LTD. VERSUS DELHI ADMINISTRATION AND ORS. 2001 (3) TMI 1008 - SUPREME COURT . The only direction which can be issued in this petition is, to direct the respondent no.2 GST Council to reconsider the exclusion of small scale manufactures of ice cream from the benefit of Section 10(1) of the Act, including on the aforesaid two parameters i.e. the components used in the ice cream and the GST payable thereon and other similar goods having similar tax effect continuing to enjoy the benefit - The respondent no.2 GST Council to take up the aforesaid aspect in its next meeting and to take a decision thereon at the earliest, keeping in view that the ice cream season has just begun, and preferably within three months of today. The petition is disposed of.

Summary

Issues:
Challenge to GST Council's decision excluding ice cream from Composition Scheme under Section 10 of CGST Act, 2017.

Analysis:
1. The petitioner challenged the GST Council's decision excluding ice cream from the Composition Scheme under Section 10 of the CGST Act, 2017, citing violation of Articles 14 and 19 of the Constitution and principles of natural justice.
2. The court entertained the petition and issued notice to the respondents.
3. The respondent no.2 GST Council filed a counter affidavit, but it was not on record during the hearing.
4. The court proceeded with the hearing due to the urgency, as the ice cream sales season was approaching, and both parties were ready to present arguments.
5. Section 10(1) of the Act allows registered persons with turnover below specified limits to opt for a Composition Scheme, subject to conditions. Section 10(2)(e) empowers the Government, on GST Council's recommendation, to exclude specific goods from the Scheme.
6. The respondent no.2 GST Council recommended excluding ice cream from the Scheme, affecting small ice cream manufacturers with turnover below a certain limit.
7. Similar petitions on ice cream issue were pending in other High Courts, indicating a broader concern.
8. No previous High Court decision existed on this issue.
9. The court decided not to delay the judgment, as it could apply to similar petitions pending in other courts.
10. The petitioner argued against clubbing ice cream with sin goods like pan masala and tobacco, questioning the rationale behind the exclusion.
11. The petitioner contended that the reasoning for excluding ice cream based on GST on milk was flawed, as ice cream contains other taxable components.
12. The court examined the broad discretionary powers of the GST Council under Section 10(2)(e) and questioned its authority to substitute the Council's decision.
13. Citing legal precedents, the court emphasized limited judicial review over government economic decisions and policy matters.
14. The respondents highlighted that aerated water was also excluded from the Composition Scheme, supporting the decision on ice cream.
15. Legal precedents emphasized the state's discretion in taxation matters and limited judicial interference in economic policy decisions.
16. Additional legal cases were referenced to support the respondents' arguments.
17. The court reviewed the minutes of the GST Council meetings provided by the respondents.
18. The minutes reiterated the taxation impact as a key factor in excluding ice cream from the Scheme.
19. The court inquired about studies or considerations of tax effects on similar goods and services, which were not evident from the minutes.
20. Lack of evidence of comprehensive study or consideration for similar goods was noted by the court.
21. The respondents argued that socio-political factors also influenced such decisions.
22. The court directed the GST Council to reconsider the exclusion of small ice cream manufacturers from the Composition Scheme, considering components used and GST implications compared to similar goods.
23. The GST Council was instructed to address this issue in its next meeting and make a decision within three months.
24. The petition was disposed of with this directive.