LI Network
Published on: 30 January, 2024 at 09:00 IST
In a recent verdict, the Delhi High Court upheld the anti-profiteering provisions under the Central Goods and Services Tax (CGST) Act, 2017, and its corresponding rules, asserting that they constitute “beneficial legislation” designed to foster consumer welfare.
The division bench, comprising Acting Chief Justice Manmohan and Justice Dinesh Kumar Sharma, deemed the measures constitutional and beneficial to consumers.
The Court specifically affirmed the constitutional validity of Section 171 of the CGST Act, 2017, along with Rules 122, 124, 126, 127, 129, 133, and 134 of the associated rules.
Section 171 of the Act stipulates that any reduction in the tax rate on goods or services or the benefit of input tax credit should result in a corresponding reduction in prices for the recipient.
The Act also empowers the Central Government to establish the National Anti-Profiteering Authority (NAA) to scrutinize whether input tax credits or tax rate reductions have genuinely led to price reductions.
The Court acknowledged the possibility of arbitrary exercise of power under the anti-profiteering mechanism but clarified that any such issues should be addressed by setting aside erroneous orders on their merits rather than challenging the provision itself.
The Court addressed over 100 pleas from various companies challenging the constitutional validity of anti-profiteering provisions, the legality of notices proposing penalties issued by NAA, and the final orders passed by the Authority.
In its ruling, the bench emphasized that the obligation to effect a “commensurate” reduction in prices aligns with the primary objective of the Goods and Services Tax (GST) regime, ensuring that suppliers pass on the benefits of tax reductions to consumers. The court clarified that Section 171 is not a price control measure but is directly connected to the GST regime’s objectives.
The Court concluded that Section 171 embodies the principle of unjust enrichment, serving as a consumer welfare regulatory measure. It emphasized the presence of a robust mechanism with judicial oversight for addressing grievances related to breaches of Section 171(1) of the Act.
The NAA was characterized as a fact-finding body responsible for investigating whether suppliers have passed on the benefits to recipients through reduced prices, in accordance with Section 171 of the Act. The court highlighted that the NAA performs functions that require expertise in the relevant domain.
