9911796707
TMI Blog2023 (4) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... under the parent Notification. HELD THAT:- The Supreme Court in R.K Garg [ 1981 (11) TMI 57 - SUPREME COURT ] held that the question which the Constitutional Court must address to itself is whether the classification made by the statute satisfies the test of real and substantial distinction or is it arbitrary and irrational and hence violative of the equal protection clause in Article 14 of the Constitution. The ECOs for the purpose of Section 9(5) and Section 52 of the Act of 2017 are entities, which are liable to collect and pay tax on the supplies made through it by other individual suppliers. Thus, Sections 9(5) and 52 of the Act of 2017 statutorily recognises the ECO as a class distinct from the individual supplier registered with the ECO - The ECOs under Section 9(5) are liable to pay tax for the services provided by individual suppliers through it, even when the said individual supplier is otherwise exempt from taxation under Section 22(1) read with 23(2) of the Act of 2017. Section 52 makes the ECOs liable to collect the amount of tax collected at source from suppliers, who have made supplies through the ECO. To enforce this obligation of the ECO, the individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has to be borne in mind for determining validity of the classification, which is the subject matter of challenge in the present petition is the objective of the GST law. The constitutional scheme of GST has been looked into by the Supreme Court, in UNION OF INDIA ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [ 2021 (9) TMI 626 - SUPREME COURT ], wherein it has been held that The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax - thus, the classification between ECO and the individual service provider has a rational nexus with the object sought to be achieved by the Act of 2017. The impugned Notifications does not result in an artificial discrimination and classification based on the mode of booking - HELD THAT:- Petitioner 1 and 3 are not acting as agents of the auto-rickshaw drivers and the bus-operators. The ECOs charge commission to the registered driver partners and the bus operators for providing digital platform to connect with the potential consumers. This is in addition to the convenience charge, the ECOs c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the auto-rickshaw or the bus continues to be provided by an individual supplier, the said supply of service when provided through the ECO has been made exigible to tax under Section 9(1) read with Section 9(5) of the Act as a taxable event under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 read with the impugned Notifications. The locus of the Petitioner - HELD THAT:- The Respondents have raised an objection that Petitioner 2 which is a union has no locus to maintain the present petition. It is stated that since the withdrawal of the exemption effects the consumer using the auto rickshaw and since no consumer has objected to the said levy, the present petition is not maintainable at the behest of the Union. In this regard, reliance has been placed on a judgment of a coordinate Bench of this Court in Sitaram Mehto [ 2012 (9) TMI 1234 - DELHI HIGH COURT ] - the Respondents have also, on similar grounds, raised an objection that Petitioner 1 and 3 ECOs are not entitled to maintain the present petition since the levy has been made on the consumer and is payable by the rider. The conclusions drawn by this Court are as under: a) the Clauses (iii) and (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution ) and Section 9(5) and 11 of Central Goods and Service Tax Act, 2017 ( the Act of 2017 ). 1.1. All these petitions were heard together and are being disposed of by this common judgment. 2. The factual background that has given rise to the present batch of writ petitions are dealt herein under. 2.1. The Respondents issued Notification No. 11/2017 dated 28.06.2017 notifying the rate of tax on supply of services. The relevant portions of Notification No. 11/2017 read as under: Notification No. 11/2017-Central Tax (Rate) New Delhi, the 28th June 2017 G.S.R. 690(E) - In exercise of the powers conferred by sub-section (1), sub-section (3) and sub-section (4) of section 9, sub-section (1) of section 11, sub-section (5) of section 15, sub-section (1) of section 16 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken. [Please refer to Explanation no. (iv)] Or 6 - 4. Explanation. -For the purposes of this notification, - (i) (ii) (iii) Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that, - (a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and (b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder. (Emphasis supplied) 2.2. Notification No. 12/2017- Central Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er than- (i) first class; or (ii) an air-conditioned coach; (b) metro, monorail or tramway; (c) inland waterways; (d) public transport, other than predominantly for touring purpose in a vessel between places located in India; and (e) metered cabs or auto rickshaws (including e-rickshaws) Nil Nil (Emphasis supplied) 3. The relevant portions of the impugned Notification No. 16/2021 read as under: Notification No. 16/2021- Central Tax (Rate) New Delhi, the 18th November, 2021 G.S.R. 810(E). - In exercise of the powers conferred by sub-sections (3) and (4) of section 9, sub-section (1) of section 11, sub-section (5) of section 15 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby makes the following amendments further to amend the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No.12/2017- Central Tax (Rate), dated the 28th June, 2017 , publish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage carriage. 81 [Provided that nothing contained in items (b) and (c) above shall apply to services supplied through an electronic commerce operator, and notified under sub-section (5) of Section 9 of Central Goods and Services Tax Act, 2017 (12 of 2017).] Nil Nil 16 .. .. .. .. 17 Heading 9964 Service of transportation of passengers, with or without accompanied belongings by- (a) Railways in a class other than- i. first class; or ii. an air-conditioned coach; (b) metro, monorail or tramway; (c) inland waterways; (d) public transport, other than predominantly for touring purpose in a vessel between places located in India; and (e) metered cabs or auto rickshaws (including e-rickshaws) 82 [Provided that nothing contained in item (e) above shall apply to services supplied through an electronic commerce operator, and notified under sub-section (5) of Section 9 of the Central Goods and Services Tax, 2017 (12 of 2017).] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motor Vehicles Act, 1988 (59 of 1988). shall be substituted; 5. The summation of the grounds on which Petitioner 1, 2 and 3 have challenged the impugned Notifications, are as under: 5.1. Petitioner 1 and 2 have challenged the impugned Notifications on four main grounds, which are as under: a) impugned Notifications fail to satisfy the test of reasonable classification under Article 14 of the Constitution as there is differential treatment between auto rickshaw drivers providing services through the Petitioner 1 and street hailing auto rickshaw drivers; it suffers from palpable arbitrariness and not in conformity with the doctrine of level playing field; b) they are against public interest and impact the livelihood of the auto rickshaw drivers providing services through ECOs and freedom of choice to the consumers/riders ( consumers ), thereby violating Articles 19(1)(g) and 21 of the Constitution; c) the value of conveniences offered by ECOs, i.e., Petitioner 1 is charged separately and liable to GST; and there are no other instances of transportations supplied through ECOs being taxed differently such as that levied through the impugned Notifications, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituated, an incidence of taxation which leads to obvious inequality. 6.2.3. Article 14 of the Constitution embodies the principle of non-discrimination and includes the opportunity of level playing field. Level playing field provides space within which equally placed competitors operate. However, the impugned Notifications create a distinction between the similarly situated people and seek to take away the level playing field from auto rickshaw drivers who render their services through ECO such as that of Petitioner 1. 6.3. The impugned Notifications are against public interest and violative of Articles 19(1)(g) and 21 of the Constitution. 6.4. The market is always price sensitive. The customers may not opt for booking auto rickshaws through Petitioner 1, if the ultimate cost of services is on the higher side. Apart from the financial implications it may have on Petitioner 1, the financial autonomy of the drivers will be completely jeopardized. There is a strong likelihood that due to the impact of impugned Notifications, the general public would become reluctant to avail auto rickshaws services rendered by ECO like Petitioner 1. This will lead to a loss of livelihood for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat nature of the ultimate service provided to the consumer remains the same i.e., an auto rickshaw ride. Irrespective of whether the passenger transportation services are facilitated through ECOs or are availed directly through the street hailing auto rickshaws, it is an undisputed fact that the underlying nature of service remains the same. 6.10. The only difference that can be attributed to the transportation of passenger through the auto rickshaw driver by availing the services of ECO versus without availing the services of ECO, is the ease of booking that is facilitated by ECO such as Petitioner 1. 6.11. The Respondents, while correctly identifying the difference in the mode used by the consumer in availing the underlying service, however, failed to appreciate that the convenience availed by the consumer for using the mobile application ( the Uber App ) of Petitioner 1 is separately charged as convenience fee , which fee is already exigible to GST. The Petitioner 1 collects and pays GST on the said convenience fee charged by it, thereby eliminating the differentia pointed out by the Respondents. 6.12. A levy of GST has to be premised on the nature of the service avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------- 5-12% % GST ---------------------- | AFTER THE IMPUGNED NOTIFICATION A B C D E Railways (other than 1st class or A/C) Metro, Monorail, trams Inland waterways Public Transport in a vessel Metered cabs and auto rickshaw (including e-rickshaws) 1 Whether GST payable on convenience fee ? 2 Whether GST payable on FARE? X X X X *other than predominantly for tourism purpose, in a vessel between places located in India 6.16. Thus, it is only vis-a-vis passenger transport services facilitated by ECOs in the case of auto rickshaws that have been made taxable on the basis of mode of booking. Hence, the impugned Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondents cannot create a sub-classification to exclude one sub-category. ( Union of India and Others v. N.S. Rathnam and Sons, (2015) 10 SCC 681, Paras 12 13) 7.7. A differential tax treatment is made for the very same supply only on the basis of the mode of booking. Bookings made through ECOs are taxable, while bookings made for the same service through other modes are exempt from GST. Even when the bookings are made online, there is discrimination when bookings are facilitated through ECOs and when the booking is made via the bus operator s own website. There is no rationale or intelligible differentia for such differential tax treatment for the very same underlying service, provided through the same bus operator. It creates an artificial distinction with no basis and treats the same supply differently. [ Aashirwad Films v. Union of India, (2007) 6 SCC 624, Paras 14 25, Ayurveda Pharmacy Anr. v. State of Tamil Nadu, Para 6, 1989 2 SCC 285, State of UP v. Deepak Fertilizers Petrochemical Corporation Ltd., (2007) 10 SCC 342, Paras 13, 15 16]. 7.8. The irrationality and arbitrariness are evident from the following illustration. If on the very same bus, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said supplies are per se taxable. However, if such service is provided by the plumbers or carpenters directly by themselves, the same is exempted for the reason that their turnover is below the threshold specified in Section 22 of the Act of 2017. Thus, once the turnover of the individual plumbers or carpenters exceeds the threshold, they are liable to pay GST on all supplies without any distinction on the basis of mode of booking such supplies. However, in the instant case, the exemption benefit is denied to the consumer of ECOs in respect of the same supply/supplier only on the basis of mode of booking such supply. 7.15. If the liability to collect and pay tax is shifted on the ground of administrative convenience of the ECOs, then the same should be levied and collected in respect of all such similar supplies and it cannot be sub-categorized on the basis of the mode of booking. 7.16. The reliance placed by the Respondents on the judgment of the Supreme Court in All India Haj Umraj Tour Organiser Association Mumbai v. Union of India Ors., (2023) 2 SCC 484 ( Haj case ) dated 26.07.2022 is distinguishable from the instant case for the following reasons: 7.16.1. Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the rule and exemptions are to be kept to a bare minimum. One of the stated objectives of introducing GST in India is to comprehensively tax all supplies of goods and services so that the burden of tax does not fall only on a few suppliers of goods and services. 8.4. There is no equality in taxation. The Supreme Court in Union of India v. M.V. Valliappan, (1999) 6 SCC 259, para 12 held that differentiation is not always discriminatory. If there is a rational nexus on the basis of which differentiation has been made on the objects sought to have been achieved, then such differentiation is not discriminatory and does not violate the principles of Article 14 of the Constitution. 8.5. The purpose behind exempting auto-rickshaw drivers is that the said drivers are not in a position to bear the burden of compliance of the provisions of the Act of 2017. The classification and the differentia in levying GST is that, while the former is an unorganized small sector of independent auto-rickshaw drivers, who neither have the means nor the resources for compliance, ECOs admittedly have the resources and are in a position to meet the compliance requirements of Act of 2017. 8.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r all auto-rickshaws booked through its platform. The average fare of an auto-rickshaw ride is between Rs. 90-100, and the convenience fees of Rs. 20 along with GST results in about 25% increase in the fare of the auto ride booked through an ECO. The Uber App also charges surge prices in fare during peak hours, which are accepted by the consumers. Therefore, there is a disparity which exists between street hailed auto rickshaws and the ones that are booked online, not only in the nature and quality of service, but also in terms of the price. 8.11. The Petitioner 1 is already paying taxes on services of passenger transport supplied through them for vehicles other than auto rickshaws such as radio taxi, motor cab, maxi cab and motor cycle. By way of the impugned Notifications, the said taxation system has been extended to all types of passenger transport including metered cabs and non-air-conditioned stage carriage, whose services are being provided by ECOs. 8.12. The Minutes of the 45th GST Council Meeting records the decision for plugging the leaks in collection of GST, and transport of passenger, through any motor vehicle supplied through ECOs as one such area, which needed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid by ECOs, the same are recoverable from the consumer, who ultimately pays the GST on the said transport. Thus, Petitioner 1 being an ECO cannot be said to be aggrieved party and has no locus to file the writ petition. 8.16. The Petitioner 2, the union of auto rickshaw drivers has no locus to maintain the present petition as held by a Coordinate Bench of this Court in Sitaram Mehto Ors. v. Govt. of NCT of Delhi, W.P.(C) No. 2878/2011 dated 17.09.2012. 8.17. The Petitioner 1, 2 and 3 have contended that the impugned Notifications adversely impact their livelihood since they are providing their services through ECOs. However, the levy of GST is pass-through in nature and would be borne by the consumer. Thus, the question of impacting the livelihood of auto-drivers providing their service otherwise and not through ECOs does not arise. 8.18. The Petitioner 1 has further argued that there is no difference between the auto rickshaws supplying their service through offline mode and those who supply their service through ECOs. However, this is factually incorrect and untrue. 8.18.1. The auto-rickshaws operated through ECOs owing to the involvement of ECOs provide a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. Therefore, in cases where someone is supplying their own goods or services or both through their own website, the provisions of Sections 9(5) and 52 would not be applicable. 8.21. As regards the other forms of transportation in entries at Sl. No. 17 in the parent Notification, the remaining categories from (a) to (d) are those which are provided by the sovereign with an element of public welfare and subsidized rates, thus are not at par with the services provided through ECOs in (e). The said classification is founded on an intelligible differentia having a rational relation to the object sought to be achieved by the Act of 2017. 8.22. The scope of judicial review in relation to economic legislation is extremely narrow and economic regulations require due judicial deference. [ R.K Garg (supra)] 9. Ms. Arunima Dwivedi, senior standing counsel on behalf of Respondents 2 and 3, in response to the arguments of Petitioner 3 has submitted as under: 9.1. The reliance placed by Petitioner 3 on the case of Ashirwad Films (supra) is misplaced. The Supreme Court in the said case has held that the State enjoys greater latitude in the matter of a taxing statute, it may imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g goods and services from the larger organized players or makes it difficult for larger players to practice profession of their choice. 9.8. The contention that the impugned Notification is contrary to Sections 9 and 11 of the Act of 2017 is unfounded. The Section 11(1) of the Act of 2017 empowers the government to exempt supply of goods or services or both, either absolutely or subject to specific conditions. The impugned Notification vide which the exemption was granted to transport of passengers by stage carriage other than air-conditioned stage carriage, has been subjected to the condition that, the said exemption will not apply to services supplied through an ECO is within the power of the Respondent. 9.9. It was that the government is empowered to grant exemption in public interest, thus, as a corollary, the exemption may also be denied to any supplier only if it is in public interest. On the other hand, it was also contended that the impugned Notification is not in public interest as it restricts the freedom of choice and access to transportation facilities. The said contentions of the Petitioner are completely unfounded as it is a settled position of law that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey now sound platitudinous. The latest and most complete exposition of the propositions relating to the applicability of Article 14 as emerging from the avalanche of cases which have flooded this Court since the commencement of the Constitution is to be found in the judgment of one of us (Chandrachud, J., as he then was) in In re The Special Courts Bill, 1978 [(1979) 1 SCC 380 : AIR 1979 SC 478 : (1979) 2 SCR 476 : (1979) 2 SCJ 35]. It not only contains a lucid statement of the propositions arising under Article 14, but being a decision given by a Bench of seven Judges of this Court, it is binding upon us. That decision sets out several propositions delineating the true scope and ambit of Article 14 but not all of them are relevant for our purpose and hence we shall refer only to those which have a direct bearing on the issue before us. They clearly recognise that classification can be made for the purpose of legislation but lay down that: 1. The classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows: 14.1. Section 2(44) defines an electronic commerce as under: electronic commerce means the supply of goods or services or both, including digital products over digital or electronic network; 14.2. Section 2(45) defines electronic commerce operator as: electronic commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce; 14.3. Sections 9(1) and (5) explains the levy of tax on supply of goods or services or both through an ECO, as follows: 9. Levy and collection. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under Section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. xxx xxx xxx (5) The Government may, on the recommendations of the Council, by notification, specify catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to such supplies is to be collected by the operator. 15. The ECOs for the purpose of Section 9(5) and Section 52 of the Act of 2017 are entities, which are liable to collect and pay tax on the supplies made through it by other individual suppliers. Thus, Sections 9(5) and 52 of the Act of 2017 statutorily recognises the ECO as a class distinct from the individual supplier registered with the ECO. 15.1. The ECOs under Section 9(5) are liable to pay tax for the services provided by individual suppliers through it, even when the said individual supplier is otherwise exempt from taxation under Section 22(1) read with 23(2) of the Act of 2017. 15.2. Similarly, the ECOs under Section 52 are liable to collect tax at source for the taxable supplies made through it by other suppliers, even when the individual supplier itself is otherwise exempt from taxation as is evident from Section 24(ix) of the Act of 2017. 15.3. An analysis of the above referred provisions of the statute elucidates that the scheme of the Act of 2017, recognises the supply of services through the ECOs as an independent taxable event of supply distinct from the individual service providers. 15.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by way of House-Keeping, such as plumbing, carpenting etc., except where the person supplying such service through ECO is liable for compulsory registration under Section 22(1). All the provisions of the CGST/SGST/IGST Act shall apply to such ECO as if he is the supplier liable for paying the tax in relation to the supply of such services. 16.1. As per the aforesaid notifications, for instance, hotel ABC International 4 is exempt under Section 23(2) of the Act of 2017 from registration and if a customer walks into the hotel for a direct booking, he will not be liable to pay GST on the room rent. However, if another customer makes a booking through the e-platform of an ECO, for a room in same hotel ABC International, he will be charged with GST on the room rent and the ECO will be liable to pay the GST to the treasury. 16.2. Similarly, if a customer directly avails service of a plumber, Mr. XYZ 5 , who is exempt under Section 23(2) of the Act of 2017 from registration, the customer will not be liable to pay GST on the services rendered by the said plumber. However, if the same pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id services are exigible to levy of tax by the ECO under Section 9(5) of the Act of 2017. 16.7. The services of radio taxi, motor cabs, maxi cabs and motor cycles are also available through the Uber App of Petitioner 1 and similarly, GST is being levied under Section 9(5) of the Act of 2017 on the fare of these cabs when booked through its App. Similarly, Petitioner 1 has not objected to the said levy of GST being discriminatory. The effect of the impugned Notifications in levying GST on the fare of an auto-rickshaw ride booked through the Uber App is identical and not discriminatory. ECOs seeking parity with the individual auto-rickshaw drivers and bus operators and therefore seek equality amongst unequals 16.8. It is contended by Petitioner 1 and 2 that ECO supplying the transportation of passenger service through their registered driver partners, i.e., auto-rickshaw drivers, is on parity with the individual auto-rickshaw drivers which are street hailed. Similarly, Petitioner 3 asserts that the ECO supplying the transportation of passenger service by a non-air-conditioned stage carriage is at par with the individual bus operator. 16.9. To sum it up, Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he registered driver partner (i.e., member of Petitioner 2). 16.12. There is also merit in the contention of the Respondents that the profile of the consumer who uses the online application of the ECO on a smartphone or uses the website for making reservation forms a distinct category of consumer who has the wherewithal to pay GST. 16.13. It is an admitted fact that, when a consumer books an auto rickshaw using the Uber App, (i) the auto rickshaw comes to pick up the consumer at his/her doorstep; (ii) it tracks the ride through its share your trip status to assure the safety of the consumer; (iii) there are multiple payment options available to the consumer which includes digital payments in addition to cash, (iv) the supervisory role which the ECO plays to monitor the transaction etc. Therefore, whereas the quality of the physical ride in the auto rickshaw may remain the same even if it is street hailed, the experience of the doorstep convenience and the assurance Petitioner 1 is assuming the safety for the ride makes the experience different for the consumer. Therefore, the consumer who uses Uber App to an auto rickshaw ride and the consumer who uses a street hailed auto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 have to pay from their own pockets, if they could afford the tax. If they cannot afford the tax, the property is liable to be sold, in due process of law, for realisation of the public demand. It is clear, therefore, that inequality is writ large on the Act and is inherent in the very provisions of the taxing section. It is also clear that there is no attempt at classification in the provisions of the Act. Hence, no more need be said as to what could have been the basis for a valid classification. It is one of those cases where the lack of classification creates inequality. It is, therefore, clearly hit by the prohibition to deny equality before the law contained in Article 14 of the Constitution. (Emphasis supplied) 16.16. Therefore, this Court is of the opinion that the classification of the ECOs like Petitioner 1 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of the GST law. The constitutional scheme of GST has been looked into by the Supreme Court, in Union of India (UOI) and Others. v. VKC Footsteps India Private Limited (2022) 2 SCC 603 , wherein it has been observed as under: 47. The Statement of Objects and Reasons appended to the Constitution (One-Hundred and Twenty-Second Amendment) Bill 2014 which eventually became the Constitution (One Hundred and First Amendment) Act 2016 postulated that GST shall replace a number of indirect taxes levied by the Union Government and the State Governments. The object was to introduce a goods and service tax which would fulfil two fiscal priorities namely, (1) removing the cascading effect of taxes; and (2) providing for a common national market for goods and services. An extract from the Statement of Objects and Reasons is set out below: The Constitution is proposed to be amended to introduce the goods and services tax for conferring concurring taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Act will not be the processing charges alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given pro forma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56-A or 96-D of the Central Excise Rules, as the case may be. (Emphasis supplied) 17.5. The Petitioner 1, 2 and 3 have not disputed the aforesaid stated objective of the GST law that every transaction must be taxed. Therefore, the impugned Notifications, which seek to withdraw the exemption and tax the consumers who elect to avail a ride in the auto rickshaw or a non-air-conditioned stage carriage through ECOs, is in conformity with the stated objective of the Act of 2017. 17.6. Section 9(5) of the Act of 2017 creates a statutory fiction which permits the Respondents to consider the ECOs as the deemed suppliers of the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be. Explanation . For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both. (Emphasis supplied) 17.8. Therefore, in the opinion of this Court, the classification between ECO and the individual service provider has a rational nexus with the object sought to be achieved by the Act of 2017. The impugned Notifications does not result in an artificial discrimination and classification based on the mode of booking 18. The contention of the Petitioner 1 and 3 that the ECOs are merely facilitating a mode of booking and are therefore, entitled to the exemption as available to the individual suppliers providing the service is a half-truth. 18.1. The relationship between the ECOs, the consumer and the vendor are on a principal-to-princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECOs like Petitioner 1 and 3 assure a quality of service to the consumer with value added services such as security, digital payments, etc., which is in addition to the service provided by the individual suppliers. 18.4. For instance, in case of the cancellation of the ride, the refunds are an issue arising between the ECO and the consumer, without any reference to the supplier. Similarly, the services which are provided by the ECO to the consumer has add on features for which the ECO assumes responsibility. The consumer while opting to avail the services of ECO, is also opting for these add on services and therefore, the ECO itself steps into the shoes of the supplier and is not acting as an agent of the supplier. 18.5. In this conspectus of facts, the contention of the Petitioner 1 and 3 that ECOs are merely a platform which facilitates a mode of booking, is incorrect as the ECOs assume responsibility for the discharge of services assured by the ECOs to the consumer, which are rendered by the ECO. The ECOs are providing bundle of services and partake a charge/commission from both the consumers and the individual supplier. Therefore, for all purposes, the ECOs are an indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislation and held : (SCC pp. 168-69, para 24) 24. The history of taxation is one of evolution as is the case in all human affairs. Its progress is one of constant growth and development in keeping with the advancing economic and social conditions; and the fiscal intelligence of the State has been advancing concomitantly, subjecting by new means and methods hitherto untaxed property, income, service and provisions to taxation. With the change of scientific, commercial and economic conditions and ways of life new species of property, both tangible and intangible gaining enormous values have come into existence and new means of reaching and subjecting the same to contribute towards public finance are being developed, perfected and put into practical operation by the legislatures and courts of this country, of course within constitutional limitations. 109. The Court held that the principle of equality does not preclude the classification of property, trade, profession and events for taxation subjecting one kind to one rate of taxation and another to a different rate. The State may exempt certain classes of property from any taxation at all and impose different specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive . Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection. That is precisely the reason why courts are averse to entering the area of policy matters on fiscal issues. We are therefore unable to accept the challenge to the constitutional validity of Section 54(3). (Emphasis supplied) 19.2. In this regard, it is also instructive to refer to the judgment of Supreme Court in State of Rajasthan and Another v. J.K Udaipur Udyog Ltd. and Another, (2004) 7 SCC 673, wherein it was held as follows: 25. An exemption is by definition a freedom from an obligation which the exemptee is otherwise liable to discharge. It is a privilege granting an advantage not available to others. An exemption granted under a statutory provision in a fiscal statute has been held to be a concession granted by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot create sub-classification thereby excluding one sub-category, even when both the sub-categories are of same genus. If that is done, it would be considered as violating the equality clause enshrined in Article 14 of the Constitution. Therefore, judicial review of such notifications is permissible in order to undertake the scrutiny as to whether the notification results in invidious discrimination between two persons though they belong to the same class. In Aashirwad Films v. Union of India [(2007) 6 SCC 624] , this aspect has been articulated in the following manner: (SCC pp. 628-29, paras 9-12) 9. The State undoubtedly enjoys greater latitude in the matter of a taxing statute. It may impose a tax on a class of people, whereas it may not do so in respect of the other class. 10. A taxing statute, however, as is well known, is not beyond the pale of challenge under Article 14 of the Constitution of India. 11. In Chhotabhai Jethabhai Patel Co. v. Union of India [AIR 1962 SC 1006], it was stated: (AIR p. 1021, para 37) 37. But it does not follow that every other article of Part III is inapplicable to tax laws. Leaving aside Article 31(2) that the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the person challenging the act of the State as violative of Article 14 has to show that there is no reasonable basis for the differentiation between the two classes created by the State. Article 14 prohibits class legislation and not reasonable classification. (Emphasis supplied) 20.2. There is no mandate in the Act of 2017 which precludes Respondent from granting exemption to a recognised/distinct class of suppliers of service. The conditional exemption granted by the Respondents given to individual plumbers/carpenters illustrates the same. 20.3. Since, the Petitioner 1, 2 and 3 have failed to prove that they are similarly placed with the individual suppliers to whom the exemption have already been granted, this Court is of the opinion that the Respondents are well within their purview to deny the exemption to the ECOs like the Petitioner 1 and 3 in view of the impugned Notifications. Instances of levying tax on other transportations facilitated through ECOs 21. The contention of the Petitioner 1 and 3 that there are no instances of levying tax on a service simply on the basis that they are provided through an ECO is factually incorrect. In this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard, the submission of learned counsel for the Respondent, Ms. Arunima Dwivedi that transport of passengers by any motor vehicle designed to carry passengers, which includes non-air-conditioned stage carriage and auto rickshaw, is covered by Entry 8 (ii) and (vi) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, issued under Section 9(1) of the Act of 2017 is apposite. The withdrawal of exemption under the impugned Notification results in attracting levy under the Notification No. 11/2017 and therefore, the contention of the Petitioner 3 that liability has been created vide impugned Notifications under Section 9(5) of the Act of 2017, without there being any levy under Section 9(1) of the Act of 2017 is factually incorrect. 22.3. Thus, even in the case of the ECO, though the supply of service of transportation through the auto-rickshaw or the bus continues to be provided by an individual supplier, the said supply of service when provided through the ECO has been made exigible to tax under Section 9(1) read with Section 9(5) of the Act as a taxable event under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 read with the impugned Notifications ..... X X X X Extracts X X X X X X X X Extracts X X X X
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