2024 (5) TMI 606 - HC - GST

Validity of Section 108 of Finance Act, 2021 whereby Section 7 (1) (aa) has been introduced vide notification dated 21.12.2021 under the Goods and Services Tax Act, 2017 w.e.f. 01.07.2017 - HELD THAT - Mr. Gagandeep Singh Malhotra, Jr. Standing Counsel accepts notice on behalf of respondents No. 1 and 2; and Ms. Tanisha Peshawaria, DAG, Haryana accepts notice on behalf of respondents No. 3 to 5. They seek time to file reply. May do so, on or before the next date of hearing with a copy in advance to the counsel opposite. In the meanwhile, until further orders, the effect and operation of the show cause notice dated 18.12.2023 (Annexure P-8) shall remain stayed - List again on 03.09.2024.

Summary

Issues involved:
The challenge to the provisions of Section 108 of Finance Act, 2021 introducing Section 7 (1) (aa) under the Goods and Services Tax Act, 2017 from 01.07.2017.

Issue 1: Challenge to the modification of the definition of 'person'

The petitioner's counsel assailed the introduction of Section 7 (1) (aa) under the GST Act, 2017, contending that it modifies the definition of 'person' under Section 2 (84) without any formal amendment. The original definition of 'person' includes associations or bodies of individuals, both in India and internationally. However, the new section clarifies that, for the specified clause, the person and its members shall be treated as separate entities, affecting the mutuality clause and disrupting mutual transactions among members. Moreover, this change is applied retrospectively from 2017, raising concerns about its legality.

Issue 2: Demand notice under Section 73 (1) of the HGST/CGST Act, 2017

Based on the contested clause, a demand notice under Section 73 (1) of the HGST/CGST Act, 2017 was issued against the petitioner for the financial years 2019-20, 2020-21, 2021-22, and 2022-23. The respondents' counsels accepted the notice and requested time to file a reply, which was granted until the next hearing date. Additionally, the operation of the show cause notice dated 18.12.2023 was stayed until further orders.

Conclusion:
The High Court of Punjab and Haryana granted time for the respondents to respond to the challenge raised by the petitioner regarding the modification of the definition of 'person' under the GST Act, 2017. The court also stayed the operation of the demand notice issued against the petitioner until the next hearing scheduled for 03.09.2024.