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TMI Blog2021 (5) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from imposition of IGST, although, the oxygen concentrator imported by him is gifted [i.e., has been received free of cost] and is for personal use. Condition no. 1, which exempts from the imposition of IGST only those oxygen concentrators that are imported, for COVID relief through a canalizing agency creates, to our minds, a manifestly arbitrary and unreasonable distinction between two identically circumstanced users depending on how the oxygen concentrator has been imported. Imposition of IGST is, thus, as per notification dated 03.05.2021, completely waived, i.e., exempted, if the oxygen concentrator is imported through a canalizing agency. The exclusion of individuals, such as the petitioner, from the benefits of the 03.05.2021 notification only because they chose to receive the oxygen concentrators as a gift, albeit directly, without going through a canalizing agency is, in our opinion, violative of Article 14 of the Constitution - There is no justification whatsoever in excluding individuals from the purview of notification dated 03.05.2021 only on the ground that they received oxygen concentrators directly as gifts from their friends and/or relatives located outside th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said provision does not bind the Government to issue an exemption notification even if a recommendation in that regard is made by the GST Council. Furthermore, a perusal of the notification dated 01.05.2021 and 03.05.2021, would show that the State has exercised its powers for grant of exemption by relying upon Section 25(1) and 25(2) of the Customs Act in respect of so much of IGST that was leviable under Section 3(7) of the CTA read with Section 5 of the IGST Act. There is no reference in these two notifications to Section 6(1) of the IGST Act. There is weight in Mr. Datar s argument that the power to grant exemption from IGST is relatable to Section 3(12) of the CTA. The compliance of clause (a) of condition no. 104 appended to entry no. 607A of the General Exemption No. 190, should suffice, in our opinion. Thus, it would be sufficient if the persons, who are similarly circumstanced as the petitioner, furnish a letter of undertaking, to the officer designated by the State which would, inter alia, state that the oxygen concentrator would not be put to commercial use. Till such time an officer is designated by the State, it would be in order, if the importer were to address the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the impression, that because of the prevailing chaos and confusion caused by the raging pandemic, the State had due to an oversight, not granted an exemption from imposition of Integrated Goods and Services Tax [in short "IGST"] on oxygen concentrators imported into the country, as a gift, for personal use. We had, in this belief, on 05.05.2021, observed as follows. "1. Via the captioned writ petition, a challenge has been laid to the notification bearing no. 30/2021-Customs, dated 01.05.2021, issued by the respondent. 2. This writ petition represents one of those rare writ actions, whereby, a notification issued in the realm of a tax statute has been, inter alia, assailed under Article 21 of the Constitution. 2.1. That tax is an exaction by the State is well known. That its levy and collection, ordinarily, does not encompass equity, is also, well known. But, presently, we are living in difficult times and, therefore, perhaps, the petitioner has invoked Article 21 of the Constitution. 3. Yesterday, i.e., 04.05.2021, we had requested the learned Additional Solicitor General of India [in short "ASG"] to join the proceedings. 3.1. Today, Mr. Chetan Sharma, learned ASG al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking the provisions of Article 21 of the Constitution of India, 1950 [in short the "Constitution"]. The petitioner's broad assertion is that the right to life encompasses several second-generation rights including the right to health, which stands compromised, because of the impugned notification. We must, however, clarify at this stage itself, that the writ action is not confined to the invocation of Article 21 only. The petitioner has invoked, and to our minds rightly, [something that we will discuss hereafter] Article 14 of the Constitution as well. The Context: - 6. The petitioner is 85 years old. He has approached this Court against the imposition of IGST on the import of the oxygen concentrator which has been gifted to him by his nephew. The petitioner, as alluded to above, asserts that the imposition of tax is discriminatory, unfair, and unreasonable and that it impinges upon his right to life and health. The clearance of the oxygen concentrator from the customs barrier required payment of IGST at the rate of 12%. It is relevant to note that before 01.05.2021, an individual importer would have had to pay IGST at the rate of 28% qua oxygen concentrator gifted to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customs are levied on the said goods under Section 12 of the Customs Act. iii. The source of power to levy and collect IGST on imports is rooted in the explanation appended to Article 269A (1) of the Constitution. iv. IGST has replaced countervailing duty [in short "CVD"] which was leviable under Section 3 of the CTA. CVD was traditionally levied on imported goods to ensure that a level playing field was available to domestic manufacturers. Thus, CVD levied on imported goods was equivalent to the basic excise duty on a like product produced or manufactured in India. With the enactment of the GST Act, it is now possible to levy simultaneously both Central GST as well as State GST. Excluding 6 items, Central Sales Tax Act, 1956 [in short "CST Act"] stands substituted by the IGST Act. Article 246A(2) gives Parliament the exclusive power to levy GST on the supply of goods and services that takes place in the course of inter-state trade and commerce. As indicated above, the explanation appended to Article 269A(1) creates a deeming fiction qua imported goods and services by treating such transaction as those having taken place in the course of inter-state trade or commerce. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on"] qua life-saving medicines provided for the imposition of BCD at the rate of 5% and CVD at the rate of 6% with effect from 01.07.2017, as noticed above, both bear nil rate of duty. xi. Oxygen concentrators would fall within the ambit of Entry no. 607A, Tariff Item no. 9804 of the General Exemption no. 190, as the definition of drugs as provided in Section 3(b) of the Drugs and Cosmetics Act, 1940 [in short "Drugs and Cosmetics Act"] would include medical equipment used for treating and preventing human disease. Furthermore, since an oxygen concentrator is, undoubtedly, a piece of life-saving equipment, it should not be subjected to the rigour of certification by officials, named in condition no. 104 stipulated against entry no. 607A. xii. The Government of India amended paragraph 2.25 of its Foreign Trade Policy, 2015-2020 [in short "FTP"] to permit import of life-saving drugs/medicines, oxygen concentrators, and Rakhi received as gifts (but not gifts related to Rakhi), as indicated above, via notification no. 4/2015-2020, dated 30.04.2021, issued by DGFT, which, in turn, resulted in exemption from BCD [vide notification no. 28/2021-Customs dated 24.04.2021]; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "adequate determining principle". In support of these submissions, reliance is placed on the following judgements. a) Union of India vs. N.S. Rathnam & Sons, (2015) 10 SCC 681. b) Shayara Bano vs. Union of India, (2017) 9 SCC 1. xvi. The right to life encompasses within it, the right to health. The right to health includes within it, the right to affordable treatment. The State has not only a duty but a positive obligation is cast upon it to ensure that the health of its citizens is duly protected. [See: Navtej Singh Johar vs. Union of India, (2018) 10 SCC 1] Given the circumstances obtaining in this case, the threshold for assailing the impugned notification, [unlike in ordinary circumstances, involving a challenge to a taxing statue], is low. It would be sufficient for the petitioner to demonstrate that there is a "distinct and noticeable burdensomeness" that is clearly and directly attributable to the impugned tax. The principle articulated in Indian Express Newspapers (Bombay) Private Limited vs. Union of India, (1985) 1 SCC 641 in the context of Article 19(1)(a) would equally apply to a challenge laid under Article 21 of the Constitution. xvii. The validity of the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k succession to mitigate the difficulties faced by the citizens having regard to the ground realities, the availability of drugs and medical equipment, domestically and their anticipated demand as well as the need to import such material to bridge the gap. In this context, several measures have been taken which include exemption from customs duty and extension of concessions qua IGST in respect of specified goods imported into the country. These steps have been taken after consultation with experts and various ministries. [With regard to the measures taken, our attention is drawn to averments made in paragraph 5 (i) to (x) of the counteraffidavit filed by the State.] ii. Since GST rates and general exemptions are notified based on the recommendations of the GST Council, the request received by the Government of India for extending GST exemptions qua COVID-19 related supplies shall be placed before the GST Council. The GST Council will consider the same and take steps having regard to the relevant factors and the situation prevalent in the country. The Government of India will also, thus, place the plea made by the petitioner [and the persons similarly circumstanced] that IGST on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Civil Liberties (PDS Matters) vs. Union of India & Ors., (2013) 2 SCC 688]. vii. The submission of the petitioner that the imposition of IGST on oxygen concentrators imported for personal use cannot be at the same rate as that which concerns the import of oxygen concentrators for commercial purposes - is misconceived, as the fixation of rate of duty is a legislative function, which is, often delegated to the executive. [See R.K. Garg Case; and Small Scale Industrial Manufactures Association (Regd.) vs. Union of India, 2021 SCC OnLine SC 246]. viii. It is pertinent to mention that the directions issued by the Kerala High Court, in the wake of the pandemic, via its judgement dated 19.03.2020, passed in W.P. (C) 8231/2020, titled P.D. Sunny vs Shiram Housing Finance Ltd. were stayed by the Supreme Court by an ex parte order dated 20.03.2020, in SLP (C) Diary No. 10669/2020. Furthermore, the Supreme Court in its order dated 26.10.2020, in W.P. (C) 725/2017 had granted liberty to the petitioner, in that case, to make a representation to the GST Council to seek exemption from levy of GST on products meant to assist differently-abled persons. ix. Given the aforesaid submissions, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinarily sustained, because the Courts presume [unless established otherwise] that it serves, inter alia, a higher purpose such as redistribution of wealth, providing a level playing field to local enterprises/manufacturers, generation of revenue for funding projects and causes, which are undertaken in public weal and for disincentivizing activities which degrade the environment and health of the public at large. The examples of the last two categories are environmental tax and tax on tobacco products. 10.2. Thus, the policymakers, while deciding on the imposition of a tax or even determining rates at which tax should be imposed, keep these, amongst other factors, in mind. The policymakers often give exemptions or rebates to incentivize economic activity or for securing better health and hygiene for its citizens. It is also not unknown that at times the State, to strengthen its efforts, in dealing with calamities caused by the aforesaid events, enhances tax rates, to garner funds. Usually, this happens when the State is short of resources. Therefore, citizens are called upon to lend their shoulder to the problem. The State has, in the instant matter, set up no such case, in its co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other patients to look for sources for supply which provide a viable alternative to LMO. Oxygen concentrators appeared to be that alternative. It is in this context that one would have to take judicial notice of the fact that since the production and supply of the oxygen concentrators did not commensurate with its demand, people looked for resources beyond our borders for supply of oxygen concentrators. 12.2. The petitioner, who is an 85-year-old man [and has a spouse who is a cancer survivor], was put in a similar predicament once he tested positive for coronavirus on 21.04.2021. 12.3. The State recognizing that if it was to stave off the pressure on public and private hospitals - it would have to take steps to provide necessary medical equipment to persons suffering from mild and moderate symptoms of coronavirus, so that they could be managed at home. 12.4. The State took a series of ameliorative steps. 12.5. One such step that the State took involved issuance of the notification bearing no. 28/2021-Customs, dated 24.04.2021, in the exercise of its powers under Section 25(1)4 of the Customs Act and Section 141 of the Finance Act, 2020. Via this notification, the State exempte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commissioner of Customs, as the case may be, at the port of import within a period of six months from the date of importation, or within such extended period not exceeding nine months from the said date as that Deputy or Assistant Commissioner of Customs may allow, a statement containing details of goods distributed free of cost duly certified by the said nodal authority of the State Government." 13. The conditions prescribed in the notification dated 03.05.2021, prevent the petitioner from claiming exemption from imposition of IGST, although, the oxygen concentrator imported by him is gifted [i.e., has been received free of cost] and is for personal use. Condition no. 1, which exempts from the imposition of IGST only those oxygen concentrators that are imported, for COVID relief through a canalizing agency creates, to our minds, a manifestly arbitrary and unreasonable distinction between two identically circumstanced users depending on how the oxygen concentrator has been imported. Imposition of IGST is, thus, as per notification dated 03.05.2021, completely waived, i.e., exempted, if the oxygen concentrator is imported through a canalizing agency. 14. The exclusion of indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him, which was a gift, albeit for personal use, could not be placed at par with the import of oxygen concentrators for commercial use; for the purposes of taking a decision as to the rate at which GST should be imposed on him. The discrimination, according to the petitioner, got exacerbated with the issuance of the notification dated 03.05.2021, which wholly exempted the imposition of IGST on oxygen concentrators that were imported through a canalising agency. 14.4. Therefore, what is, to be borne in mind, is not the benefits the State has granted up until now. What is instead, required to be judicially reviewed is the action of the State, in not treating, even-handedly, persons, who ordinarily should fall in the same class users. The distinction, drawn, as noted above, is manifestly arbitrary, unreasonable, unfair and wholly unsustainable. Issue No. (ii) and (iii): - 15. While there is recognition of the fact that right to health, amongst others, is a second-generation right that flows from the right to life as encapsulated in Article 21 of the Constitution, the right requires to be tempered as the State does not have inexhaustible resources. This principle, enunciated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table to its imposition. The State, in our opinion, could have discharged its onus, by adverting to such facts and figures, which would have persuaded us to hold that levy and collection of IGST, on individuals, who are similarly circumstanced as the petitioner, would enure to the good of the public at large in the battle against coronavirus. 15.5. In this context, it must be said that there is a positive obligation on the State to take ameliorative measures so that adequate resources are available to protect and preserve the health of persons residing within its jurisdiction. In this context, the following observations made by the Supreme Court in Navtej Singh Johar Case, being apposite, are extracted hereafter. "495. The jurisprudence of this Court, in recognising the right to health and access to medical care, demonstrates the crucial distinction between negative and positive obligations. Article 21 does not impose upon the State only negative obligations not to act in such a way as to interfere with the right to health. This Court also has the power to impose positive obligations upon the State to take measures to provide adequate resources or access to treatment facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are perusal of the IGST Act would show that the Government can exempt, generally, either absolutely or subject to such conditions as it may specify, inter alia, goods or services or both of any specified description from whole or any part of tax leviable thereof with effect from such date as it may indicate provided that it is satisfied that it is necessary in the public interest to do so based on a recommendation received from the GST Council in that behalf. 16.2. The said provision does not bind the Government to issue an exemption notification even if a recommendation in that regard is made by the GST Council. Furthermore, a perusal of the notification dated 01.05.2021 and 03.05.2021, would show that the State has exercised its powers for grant of exemption by relying upon Section 25(1) and 25(2) of the Customs Act in respect of so much of IGST that was leviable under Section 3(7) of the CTA read with Section 5 of the IGST Act. There is no reference in these two notifications to Section 6(1) of the IGST Act. Therefore, this argument advanced on behalf of the State cannot be accepted, as, in the past, it has issued notifications by relying upon the powers conferred upon it under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner or persons similarly circumstanced. The power to issue an exemption notification under Section 25 of the Customs Act is vested in the State. Having said so, the Court, to our minds, is not prevented from judicially reviewing an exemption notification once it is issued by the State. The State has issued the notification, dated 03.05.2021, granting exemption from imposition of IGST on import of oxygen concentrators that are routed through a canalising agency. This notification can and, in our view, must be saved, as it subserves a greater good, although partially, by interpreting and thus holding that entry no. 607A, Tariff Item no. 9804 of the General Exemption No. 190, issued under Section 25(1) of the Customs Act, which stipulates, NIL rate of IGST for "lifesaving drugs/medicines for personal use", supplied free of cost by the overseas supplier - would include medical equipment such as an oxygen concentrator being a "substance" used in the treatment, mitigation, prevention of infection caused by the coronavirus. The fact that oxygen concentrators are, in present times, placed at par with life-saving drugs and medicines, is evident upon a perusal of the notification dated 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be sufficient if the persons, who are similarly circumstanced as the petitioner, furnish a letter of undertaking, to the officer designated by the State which would, inter alia, state that the oxygen concentrator would not be put to commercial use. Till such time an officer is designated by the State, it would be in order, if the importer were to address the letter of undertaking to the Joint Secretary, Customs and/or his/her nominee and handover the same to the officer detailed at the customs barrier. 18. Before we conclude, we may note that one cannot quibble with the principles enunciated in the judgements cited, on behalf of the State. We have adverted to the principles embedded in those judgments, insofar as they are applicable to an action laying challenge to a tax legislation and/or the delegated legislation framed thereunder. However, what set's the present case apart, is, the context and the unique circumstances in which the challenge has arisen. 18.1. The order, dated 20.03.2020, passed in SLP (C) Diary No. 10669/2020, shows the importance placed by the Supreme Court on having the difficulties faced by the citizens, on account of the pandemic, being addressed. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be discriminatory as it treated unequals equally. The Court held: "Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question we shall take a hypothetical case of a number of persons owning and possessing the same area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue. The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in our illustration, would easily be able to bear the burden of the tax. The third one may be able to bear the tax. The first and the second one will hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct or context, - xxx xxx xxx [(b) "drug" includes- [(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;] (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of 10[vermin] or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;] [(iii) all substances intended for use as components of a drug including empty gelatin capsules; and (iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;] 8. [In short "Linde Case"]" "15. The learned counsel for the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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