2019 (5) TMI 568 - HC - GST

Challenge to an order passed by the National Anti-Profiteering Authority (NAPA) - validity of constitution of the NAPA - HELD THAT - Under Rule 122 (a) of the CGST Rules the NAPA consists of a Chairman who holds or has held a post equivalent in rank to the Secretary of Government of India. Under Rule 122 (b) the 4 technical members are those who are or have been Commissioners of State Tax or Central Tax for at least one year or have held an equivalent post under the existing law. The Chairman and Members of the NAPA are to be nominated by the GST Council. In other words, there is no judicial member in the NAPA. As far as the facts of the present case are concerned, one grievance is that although the Petitioners deal in as many as 393 products, and even according to the NAPA they are compliant in regard to the price of many of such products, the NAPA has been selective in drawing an adverse conclusion in respect of the price charged for a few of the products. It is open to Petitioner No.1, notwithstanding the reduction in the rate of tax after 15 November 2017 to raise the base price of the product so that the ultimate price payable by the customer inclusive of tax remains what it was prior to 15 November 2017. Mr. Rohatgi points out that simultaneously with the reduction of tax the ITC was taken away and this is an additional factor that has to be considered while determining whether the Petitioner could be held to be a profiteer‟ from the reduction of rate of tax. The Petitioners are required to deposit an amount of ₹ 41,42,97,629.35 with the Central and State Consumer Welfare Funds in a 50 50 ratio - subject to the Petitioners depositing the sum of ₹ 20 crores with the Central CWF within a period of four weeks from today, there shall be a stay of the impugned order dated 31st January 2019 of the NAPA as well as stay of further proceedings pursuant to the impugned notice dated 4th February 2019 issued by the Respondent No.2.

Summary

Issues:
Challenge to order of National Anti-Profiteering Authority (NAPA) and statutory provisions under CGST Act, challenge to impugned notice issued by Director General of Anti-Profiteering, constitutional validity of provisions under CGST Act, challenge to constitution of NAPA, challenge to functioning of NAPA, selective adverse conclusion by NAPA, legality of pricing decisions by Petitioner, interim relief sought by Petitioners.

Analysis:

The judgment deals with a challenge against the order of the National Anti-Profiteering Authority (NAPA) and statutory provisions under the Central Goods and Services Tax Act, 2017 (CGST Act). The challenge also extends to an impugned notice issued by the Director General of Anti-Profiteering proposing penal action against the Petitioners. The Petitioners argue that the provisions under the CGST Act, particularly Rules 126, 127, and 133, are violative of Articles 14 and 19 of the Constitution of India.

The Petitioners raise concerns regarding the constitution and functioning of the NAPA. They argue that the absence of a judicial member in the NAPA and the lack of provision for an appellate authority to review its orders go against established legal principles for quasi-judicial authorities. The NAPA's power to determine profiteering and issue notices without provisions for appeal are highlighted as contentious issues.

Regarding the specific case, the Petitioners, operating restaurants under a specific brand, are accused by the NAPA of profiteering by charging more than justified prices. The Petitioners contest this accusation, claiming that the NAPA's selective analysis of product pricing is unfair. They argue that considering the pricing of all products cumulatively, they comply with the law. The Petitioners also assert their right to set prices independently, especially after changes in tax rates and input tax credit.

The Court acknowledges the Petitioners' prima facie case and grants interim relief. The Petitioners are directed to deposit a specified amount with the Central Consumer Welfare Fund to stay the NAPA's order and further proceedings based on the impugned notice. Deadlines for filings and the next hearing date are set, ensuring due process in the legal proceedings.

In conclusion, the judgment addresses complex issues related to anti-profiteering measures under the CGST Act, focusing on the constitution and functioning of the NAPA, fairness in pricing assessments, and the balance between regulatory compliance and business autonomy. The interim relief granted reflects the Court's consideration of the Petitioners' arguments and the need for a thorough legal review of the case.