TMI Blog2024 (1) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the rate of tax or the Input Tax Credit to its consumers / recipients along with interest. Principles for adjudicating the constitutionality of an enactment - HELD THAT:- A Statute can be declared as unconstitutional only if the Petitioners make out a case that the Legislature did not have the legislative competence to pass such a Statute or that the provisions of the Statute violate the Fundamental Rights guaranteed under Part-III of the Constitution of India or that the Legislature concerned has abdicated its essential legislative function or that the impugned provision is arbitrary, unreasonable or vague in any manner. D.D. Basu in Shorter Constitution of India (16th Edn., 2021) has enumerated the grounds on which a law may be declared to be unconstitutional as follows:- ( i) Contravention of any fundamental right, specified in Part III of the Constitution. (ii) Legislating on a subject which is not assigned to the relevant legislature by the distribution of powers made by the Seventh Schedule, read with the connected articles. (iii) Contravention of any of the mandatory provisions of the Constitution which impose limitations upon the powers of a legislature e.g. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Tax Credit, the cascading effect i.e. tax on tax is removed - Consequently, the intent of the Act, 2017 is to provide a common national market, boost productivity, increase competitiveness, broaden the tax base and make India a manufacturing hub. Section 171 mandates that tax foregone has to be passed on as a commensurate reduction in price - HELD THAT:- Section 171 of the Act, 2017 mandates that whatever is saved in tax must be reduced in price. Section 171 of the Act, 2017 incorporates the principle of unjust enrichment. Accordingly, it has a flavor of consumer welfare regulatory measure, as it seeks to achieve the primary objective behind the Goods and Services Tax regime i.e. to overcome the cascading effect of indirect taxes and to reduce the tax burden on the final consumer. Consequently, the judgments of AHMEDABAD URBAN DEVELOPMENT AUTHORITY VERSUS SHARAD KUMAR JAYANTIKUMAR PASAWALLA AND OTHERS [ 1992 (5) TMI 175 - SUPREME COURT] , M/S. SHREE BHAGWATI STEEL ROLLING MILLS VERSUS COMMISSIONER OF CENTRAL EXCISE ANOTHER [ 2015 (11) TMI 1172 - SUPREME COURT] , relied on by the Petitioners, are not applicable as they deal with the validity of delegated authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he language, scope or object of the statute . Therefore, the principle of delegatus non potest delegare is not applicable to the present batch of matters. Further, Section 166 of the Act, 2017 provides that every rule made by the Government in exercise of its powers under Section 164 of the Act, 2017 shall be laid before each house of the Parliament and that if both Houses agree to make any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect as the case maybe - the Executive by framing Rule 126 of the Rules, 2017 has in no manner encroached upon the jurisdiction of the Parliament. The Petitioners, throughout the hearing of the case, have repeatedly pointed out that the NAA has adopted varied approaches with regard to entities dealing with similar products in identical circumstances. If that is the case, then, it may make the orders passed by NAA bad, but would not invalidate either Section 171 or the Rules framed thereunder. Further, as the substantive mandate under Section 171(1) is itself a sound guiding principle for the framing of Rules and the functioning of NAA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenses in a real estate project are not uniform throughout the life cycle of the project and the eligibility of credit depends on the nature of the construction activity undertaken during the particular period. As it is an admitted position that neither the advances received nor the construction activity is uniform throughout the life cycle of the project, the accrual of Input Tax Credit is not related to the amount collected from the buyers. This Court is in agreement with learned counsel of the petitioners that one needs to calculate the total savings on account of introduction of Goods and Services and Tax for each project and then divide the same by total area to arrive at the per square feet benefit to be passed on to each flat buyer. This would ensure that flat-buyers with equal square feet area received equal benefit. The Court, while hearing the present batch of matters on merits, shall take the aforesaid direction/interpretation into account. It is the prerogative of the legislature to decide how the benefit is to be passed on the consumers - HELD THAT:- It is settled law that it is the prerogative of the Legislature to decide the manner as to how the reduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is an apprehension of misuse of statutory provision or possibility of abuse of power. It must be presumed, unless the contrary is proved, that administration and application of a particular law would be done not with an evil eye and unequal hand . To not compare taxes levied after the introduction of the Act, 2017 with a basket of distinct indirect taxes applicable before the operation of the Act would go against the intent and objective of Act, 2017 - HELD THAT:- There was multiplicity of taxes as they were levied on the same supply system. This had a cascading effect as there was no provision for set off. The Hon ble Prime Minister at the launch of Goods and Services Tax stated If we take into consideration the 29 states, the 7 Union Territories, the 7 taxes of the Centre and the 8 taxes of the States, and several different taxes for different commodities, the number of taxes sum up to a figure of 500! Today all those taxes will be shred off to have ONE NATION, ONE TAX right from Ganganagar to Itanagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with Article 50 - there is no scope for Governmental interference in functions exercised by NAA - HELD THAT:- This Court is of the view that Rule 124 of the Rules, 2017 is in consonance with Article 50 of the Constitution, inasmuch as, selection to NAA is made on the recommendation by a Selection Committee constituted by the Goods and Services Tax Council which is a constitutional body. Similarly the services of the Chairperson and members of NAA can be terminated only with the approval of the Chairman of the Goods and Services Tax Council. Consequently, the members of NAA are free to carry out their function as they deem fit and there is no scope whatsoever for any Governmental interference in the functions exercised by NAA. Rule 133 to the extent it provides for levy of interest and penalty is within the rule making power of the Central Government - HELD THAT:- This Court is of the view that Section 171 of the Act, 2017 is broad enough to empower the Central Government to prescribe penalty and interest to ensure that the suppliers are deterred from pocketing the benefits meant for the consumers when taxes are foregone by the Government. Merely empowering NAA to direct re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a statute which is procedural in nature although employs the word shall may not be held to be mandatory if thereby no prejudice is caused. Consequently, the time limit provided for furnishing of report by DGAP is directory in nature and not mandatory. Expansion of investigation beyond the scope of the complaint is not ultra vires the statute - HELD THAT:- Section 171 of the Act, 2017 is widely worded and does not limit the scope of examination to only goods and services in respect of which a complaint is received. The scope of powers of the DGAP is provided for in Rule 129 of the Rules, 2017. From a reading of the said Rule especially the expression any supply of goods or services used in sub-rule (2) of Rule 129, it is apparent that the scope of the DGAP s powers is very wide and is not limited to the goods or services in relation to which a Complaint is received. The word any includes within its scope some as well as all - In any event, the ignorance of the consumer or lack of information or surrounding complexity in the supply chain cannot be permitted to defeat the objective of a consumer welfare regulatory measure and it is in this light that the subject pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Deepak Thackur and Ms. Aakansha Wadhwani, Advocates., Mr. Rohan Shah, Adv. Mr. Priyadarshi Manish, Mrs. Anjali Jha Manish, Mr. Saksham Garg and Ms. Ankita, Advs. Mr. Saurabh Dugar and Mr. Ajitesh Dayal Singh, Advocates. Mr. Nikhil Gupta, Mr. Vipin Upadhyay, Mr. Prince Nagpal and Mr. Rochit Abhishek, Advocates Mr. Monish Panda, Advocate with Mr. Mrinal Bharat Ram and Mr. Gaurav Dabas, Advocates. Mr. Tushar Jaswal, Mr. Rahul Sateeja with Mr. Pranav Bansal and Mr. Sanyam Agarwal, Advs. Mr. Rajat Bose with Mr. Ankit Sachdeva and Ms. Shohini Bhattacharya, Advs. Mr. Kishore Kunal and Ms. Ankita Prakash Mr. Anuj Kumar, Advs. Mr. Mihir Deshmukh, Mr. Rajat Mittal, Mr. Jay Gandhi and Ms. Megha, Advocates. Mr. Abshishek A. Rastogi and Mr. Pratyush Prava Saha, Advocates. Mr. Sujit Ghosh, Mr. Mannat Waraich, Mr. Ashray Behura and Ms. Ananya Goswami, Advs. Mr. K.S. Suresh, Advocate with Mr. Ajay Aggarwal, Advocate., Ms.Ruby Singh Ahuja, Ms. Kritika Sachdeva, Mr. Vishal Gehrana and Mr. Jappanpreet Hora, Advocates Mr. Kunal Vajani with Mr. Kunal Mimani, Mr. Kartikey Bhatt and Mr. Gaurav Katri, Advs. Mr. Preetesh Kapur, Sr. Advocate with Mr. Shaunak Kashyap, Mr. Balasubramanian R. Iyer and Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.R. Mishra, Advocate for UOI. Mr. Ripu Daman Bhardwaj, CGSC with Mr. Kushagra Kumar, Advocate for UOI. Mr. Abhay Prakash Sahay, CGSC, Ms. Mannu Singh, Mr. Kunal Dhawan, Ms. Swayamprabha, Advs for UOI. Mr. Ravi Chawla, St. Counsel for NAA with Mr. Avneesh Kumar Upadhyay, Advocate. Mr Saksham Sethi, GP, Mr. Sarvan Kumar, Advocate for UOI. Mr. Manish Mohan, CGSC with Mr. Devendra Kumar, Advocate for UOI. Mr. Sushil Kumar Pandey, SPC with Mr. Neha Yadav, Mr. Kuldeep Singh, Advocates for UOI. Mr. Satyakam, ASC with Mr. Pradyut Kashuyap, Adocate for GNCTD. Mr. Ashish Verma and Mr. Debopriya Moulik, Advocates Ms. Usha Jamnal and Mr. Krishan Kumar, Advocates for R-2 3. Mr. Viraj R. Datar, Sr. Advocate with Mr. Nitish Chaudhary, Advocate for R-1 with R-1 present-in-person. Mr. Rajesh Kumar with Ms. Ramneet Kaur, Advocates for UOI. Mr. Apoorv Kurup, CGSC with Mr. Shivansh Dwivedi, Advocate for UOI. Mr. Ruchir Mishra, Mr. Mukesh Kr. Tiwari, Ms. Reba Jena Mishra and Ms. Poonam Shukla, Advocates for UOI. Mr. Vikram Jetly CGSC and Ms. Shreya Jetly, Adv. for UOI Ms. Sonu Bhatnagar, Sr. Standing Counsel, with Ms. Venus Mehrotra, Adv. Ms. Kanak Grover, Adv. for R-2 5. Mr. Jatin Puniyani, G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi Suri, Advocate with Mr. Mayur, Advocate for R-4. Mr. Jatin, Sr.Panel Counsel with Ms. Chetanaya Puri, Advocate for UOI. Mr. Vipul Agrwal, Adv. for NAA/DGAP, Mr. Anurag Ojha, Sr. Standing Counsel with Mr. Vipul Kumar, Advocate respondent No.3 4. Mr. Vijay Joshi, Adv. for R-1. Ms. Anushree Narain, Standing counsel with Ms. Simran Kumari, Advocate for GST. Mr. Chiranjeev Kumar, Mr. Mukesh Sachdeva, Advocates for R-1. Mr. Jatin Singh, SPC for R-1. Mr. Sanjay Kumar. SPC for R-1. Mr. Neeraj, SPC with Mr. Vedansh Anand, Ms.Sahaj Garg and Mr. Rudhra Paliwal, Advs for UOI. Mr. Gigi C. George with Mr. Dheeraj Singh, Advocates for R-1/UOI. Mr. S.V. Tyagi Mr. Shivam Tyagi, Advs for R-2. Mr. Virender Pratap Singh Charak, Ms. Shubhra Parashar, Mr. Yash Hari Dixit Ms. Vidya Mishra, Advocates for UOI. Mr. Sushil Raaja, Advocate for UOI W.P.(C) 7743/2019, W.P.(C) 10999/2018, W.P.(C) 12444/2018, W.P.(C) 13194/2018, W.P.(C) 378/2019, W.P.(C) 1418/2019 CM APPL. No. 6501/2019, W.P.(C) 1655/2019, W.P.(C) 2347/2019, W.P.(C) 3759/2019, W.P.(C) 4213/2019, W.P.(C) 5558/2019 CM APPL. No. 24368/2019, W.P.(C) 8162/2019, W.P.(C) 7910/2019 CM APPL. No. 32779/2019, W.P.(C) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 639/2022 CM APPLs. 38309-38310/2022 39263/2022, W.P.(C) 12797/2022 CM APPLs. 38922-38924/2022, W.P.(C) 13657/2022 CM APPLs. 41646-41647/2022, W.P.(C) 13715/2022 CM APPLs. 41879/2022, 45056/2022 and 45505/2022, W.P.(C) 14835/2022, W.P.(C) 15169/2022, W.P.(C) 15172/2022, W.P.(C) 15240/2022, CM APPLs. 47193-47195/2022, 42515/2023, W.P.(C) 16890/2022 CM APPLs. 53510-53512/2022, W.P.(C) 17073/2022 CM APPL. 54098/2022, W.P.(C) 15289/2022 CM APPL. Nos. 47442-47443/2022, W.P.(C) 16178/2022 CM APPL. 38836/2023, W.P.(C) 16266/2022 . C.M. Nos. 50925-50926/2022, W.P.(C) 16734/2022 CM APPLs. 52794-52795/2022, W.P.(C) 16935/2022 CM APPL. 53667/2022 W.P.(C) 17010/2022 CM APPL. 53925/2022, W.P.(C) 246/2023 CM APPL. Nos.939-940/2023, W.P.(C) 3866/2023 CM APPL. 15035/2023 W.P.(C) 11180/2023 CM APPLs. 43445-43446/2023, W.P.(C) 11910/2023, W.P.(C) 14681/2023 C.M. No. 58468/2023, Reckitt Benckiser India Private Limited, M/s. Pyramid Infratech Private Limited, Mascot Buildcon Private Limited, Lifestyle International Pvt. Ltd., Sharma Trading Company, Hindustan Unilever Limited, M/s. J.P. Sons Through: Shri Ankit Khandelwal, Prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Healthcare India Pvt. Ltd., Anutone Acoustics Limited, Arihant Superstructures Ltd., Prasu Infrabuild Pvt. Ltd., M/s. Nandi Infratech Pvt. Ltd., New World Realty LLP, Wadhwa Realty Pvt Ltd. M/s. Bhartiya Urban Pvt Ltd. (Formerly, Bhartiya City Developers Pvt Ltd.) ATS Homes Pvt. Ltd., M/s. ATS Township Pvt. Ltd. Pareena Infrastructure Pvt. Ltd., M/s. Adhiraj Constructions Pvt. Ltd., Versus Union of India Through: Its Secretary Ors. National Anti-Profiteering Authority Ors. JUDGMENT MANMOHAN, ACJ: THE CHALLENGE 1. Present writ petitions have been filed challenging the constitutional validity of Section 171 of the Central Good and Services Tax Act, 2017 (for short Act, 2017 ) and Rules 122, 124, 126, 127, 129, 133 and 134 of the Central Good and Services Tax Rules, 2017 (for short Rules, 2017 ) as well as legality of the notices proposing imposition or orders imposing penalty issued by the National Anti-Profiteering Authority ( NAA ) under Section 122 of the Act, 2017 read with Rule 133(3)(d) of the Rules, 2017 and the final orders passed by NAA, whereby the petitioners, who are companies running diverse businesses ranging from hospitality, Fast-Moving Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both.] Rule 122 122. Constitution of the Authority.- The Authority shall consist of,- (a) a Chairman who holds or has held a post equivalent in rank to a Secretary to the Government of India; and (b) four Technical Members 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, to be nominated by the Council. Rule 124 124. Appointment, salary, allowances and other terms and conditions of service of the Chairman and Members of the Authority:- (1) The Chairman and Members of the Authority shall be appointed by the Central Government on the recommendations of a Selection Committee to be constituted for the purpose by the Council. (2) The Chairman shall be paid a monthly salary of Rs. 2,25,000 (fixed) and other allowances and benefits as are admissible to a Central Government officer holding posts carrying the same pay: Provided that where a retired officer is selected as a Chairman, he shall be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices; (iii) to order,-- (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Fund referred to in section 57; (c) imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act. [(iv) to furnish a performance report to the Council by the tenth [day] of the close of each quarter.] Rule 129 129. Initiation and conduct of proceedings.-( 1)Where the Standing Committee is satisfied that there is a prima-facie evidence to show that the supplier has not passed on the benefit of reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived in writing from such interested parties. [(2A) The Authority may seek the clarification, if any, from the Director General of Anti Profiteering on the report submitted under sub-rule (6) of rule 129 during the process of determination under sub-rule (1).] [(3) Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen per cent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be; (c) the deposit of an amount equivalent to fifty per cent. of the amount determined under the above clause [along with interest at the rate of eighteen per cent. from the date of collection of the higher amount till the date of deposit of such amount] in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond or casting vote. ARGUMENTS ON BEHALF OF THE PETITIONERS 4. Mr. P. Chidambaram, Mr. S. Ganesh, Mr. Tarun Gulati, Mr. Chinmoy Pradip Sharma and Mr. Pritesh Kapoor, learned Senior counsel as well as Mr. V. Lakshmikumaran, Mr. Monish Panda, Mr. Rohan Shah, Mr. Abhishek A. Rastogi, Mr. Tushar Jarwal, Mr. Sparsh Bhargava, Mr. Puneet Aggarwal, Mr. Sujit Ghosh, Mr. K. S. Suresh, Mr. Nikhil Gupta, Mr. Shashank Shekhar and Mr. Priyadarshi Manish, learned counsel addressed arguments on behalf of the petitioners. 5. Learned counsel for the petitioners submitted that Section 171(1) of the Act, 2017 and the Rules 126, 127 and 133 of the Rules, 2017 framed thereunder are unconstitutional as they are beyond the legislative competence of Parliament. They submitted that the impugned provisions do not fall within the law-making power of Parliament under Article 246A of the Constitution of India. 6. Some of the learned counsel for the petitioners submitted that the anti- profiteering provision, as provided under Section 171 of the Act, 2017, is in the nature of a tax or financial exaction. They submitted that a tax can be levied from a subject only if there is a specific and une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iteering. In support of their submission, they relied on the judgment of the Supreme Court in Barium Chemicals Ltd. Ors. v Company Law Board Ors. [AIR 1967 SC 295]. 9. They submitted that the term commensurate is not defined in the Act, 2017 and the expression profiteering in Section 171 is dependent upon the scope and meaning of the phrase commensurate reduction in the price . According to them, as a result of this circular reasoning, NAA had complete and unfettered discretion to determine the extent of profiteering. They pointed out that the definition of profiteering inserted by way of amendment (that came into force only on 01st January, 2020) is vague and uncertain as to how the amount of profiteering or commensurate reduction in price has to be determined and therefore, the same is ex facie arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution of India. They pointed out that even NAA, in the orders passed by it, had not been consistent in its interpretation of the term commensurate reduction . 10. They stated that without stipulating the specifics of the methodology to be adopted to determine profiteering, the petitioners could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. According to the petitioners, if the methodology adopted by NAA /DGAP is to be accepted, Developer A would be required to pass on 15% benefit to the flat- buyers and Developer B who received 80% of the payment/amount post-Goods and Services Tax receive would be required to pass no benefit to the flat-buyers. A graphical representation of the same, as furnished by the petitioners, is as follows: 12. They stated that it is for this reason, the percentage of credit to turnover ratio (in Goods and Services Tax regime) had varied from 0.2% (in Vatika Limited, Case No. 64/2019 ) to 20.98% (in Emaar MGF Land Ltd, Case No. 26/2020 ) in the orders passed by NAA. 13. Learned counsel for the petitioners in Writ Petition No. 13657/2022 pointed out that DLF calculated the total savings on account of introduction of Goods and Services Tax for each project. He stated that the total savings/benefits were then divided by total area to arrive at the per square feet benefit to be passed on to each flat buyer. He stated that as a result the flat-buyers with equal area received equal benefit. In contrast to this, he pointed out that the NAA/DGAP calculated the benefit by compariso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Sanjeev Aggarwal CM819B 9419 Sq.Ft. 1.18% 10,01,928 6,25,139 11. Mohan Agarwal CM804B 9419 Sq.Ft. 1.18% 20,66,050 6,25,139 12. Deep Kalra CM818B 9419 Sq.Ft. 1.18% 33,72,998 6,25,139 13. Action Construction Equipment Ltd. CM602A 9419 Sq.Ft. 1.18% 34,356 6,25,139 14. They also submitted that determination of profiteering can be made at different levels such as entity level, Stock Keeping Unit (hereinafter referred to as SKU ) level, product level, customer level etc. Hence, an assessee intending to comply with the law has no way of ensuring whether its methodology is in compliance with Section 171(1) of the Act, 2017 or not. 15. Learned counsel for the petitioners also submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the fundamental principle laid down in the aforesaid guidelines was based on a net dollar margin rule . According to them, the said guidelines enumerated all the relevant factors to be taken into consideration for price adjustments and provided for considering the increase in procurement cost and additional costs due to the tax change. They stated that it also allowed averaging the impact of taxes and costs across goods or services under specific circumstances. 18. While referring to the Goods and Services Tax system introduced in Malaysia, they stated that the Anti- Profiteering measures had been incorporated under the Price Control and Anti-Profiteering Act, 2011 to control prices of goods, charges of services and to prohibit unreasonably high profiteering by suppliers. They stated that making unreasonably high profit was an offence under Section 14 of the said Act. They further stated that Section 15 of the said Act provided that the Minister shall prescribe the mechanism to determine whether the profit is unreasonably high considering different conditions and taking into consideration factors such as: tax imposition, suppliers cost, supply and demand conditions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.5625/- 0.28125/- 1.84375/- 2/- 22. Therefore, according to him, there is a legal impossibility in reducing the Maximum Retail Price ( MRP ). As a result he stated that some of the companies had passed on the commensurate benefit by way of increasing the grammage. He pointed out that NAA vide order dated 24th December, 2018 passed in Ankit Kumar Bajoria vs. M/s Hindustan Unilever Ltd., Case No. 20/2018, had accepted the practice of increasing grammage. However, this practice had not been accepted as a mode of passing on commensurate benefit by NAA in subsequent orders. 23. Learned counsel for the petitioners pointed out that there is no provision of appeal against the orders passed by NAA. They submitted that the absence of a provision to appeal means that there is no judicial oversight over the decisions of NAA and indicates that there is a presumption that the findings of NAA are infallible. They submitted that Tribunals and Authorities which exercise functions similar to NAA have a robust appellate mechanism. They submitted that lack of a provision to appeal against the findings of NAA mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is beyond the prescribed limitation period and thus, the same was without jurisdiction. He submitted that at the time the proceedings were initiated by NAA, Rule 129(6) of the Rules, 2017 mandated that the DGAP shall submit its report to NAA within three months which could be further extended to six months. Such time period was subsequently extended to six months vide Notification No. 31/2019 dated 28th June, 2019 which could be further extended to nine months. However, the impugned order is barred by limitation even if period is taken as six months as applicable from 28th June, 2019. 28. Learned counsel for the petitioners submitted that under Rule 133(3) of the Rules, 2017, NAA does not have any power or authority in law to pass an order in relation to any product, other than the product against which complaint has been received by the authorities. They submitted that till 28th June, 2019 (when Rule 133(5) was enacted), NAA had no powers to direct investigation in respect of any product, other than the product complained of. However, with effect from 28th June, 2019, Rule 133(5) was introduced, whereby for the first time, NAA was statutorily empowered in the course of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Act, 2017 with a basket of distinct indirect taxes applicable on goods and services before the operation of the Act. He stated that the indirect taxes levied on goods and services prior to July, 2017 by the States such as the VAT/Sales-tax, Octroi duty and Entry tax varied widely from State to State and often from area to area within a State. He stated that as a result, it is impossible to make any meaningful comparison between the rates of the pre- Goods and Services Tax taxes with the rates of tax levied under the Goods and Services Tax regime. 32. According to him, Section 171 of the Act, 2017 only permits a comparison between two single rates and not a comparison between one single tax rate (Goods and Services Tax) and a basket or combination of several other tax rates (pre-Goods and Services Tax indirect taxes). He submitted that Sections 2(62) and 2(63) of the Act, 2017 make it clear that the benefit of Input Tax Credits referred to in Section 171(1) are the Input Tax Credit granted under the Act, 2017 and not the Input Tax Credits granted under the Central Excise Act, the Service- Tax statute or the Sales-tax Acts. He further submitted that Section 9 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etted notification and as per Section 166 of the Act, 2017, such notification has to be laid before the Parliament. He stated that contrary to these requirements, NAA had been constituted vide an administrative order No. 343/2017 dated 28th November, 2017. He stated that Rule 122 of the Rules, 2017 has been notified and gazetted vide Notification No. 10/2017-Central Tax dated 28th June, 2017, which, at first blush, suggests that NAA had been constituted thereunder. However, on a closer analysis, it is clear that the said Rule cannot be said to be the fountainhead of constitution of NAA as Rule 122 essentially provides for composition of NAA and not for the constitution of NAA, even though the heading of the Rule is couched to suggest that the same apparently constitutes NAA. He submitted that if the said Rule (which was notified on 28th June, 2017) was indeed the fountainhead of constitution of NAA, the same would go against the very understanding of the respondents as recorded in the 35th and 45th Goods and Services Tax Council Minutes of Meeting as well as the Memo dated 09th September, 2019 of the Department of Revenue, Ministry of Finance, wherein it has been specifically obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice contained in the Directive Principles of State policy in Articles 38, 39(b) and 39(c) of the Constitution of India. The relevant portion of Articles 38, 39(b) and 39(c) are reproduced hereinbelow:- Article 38 - State to secure a social order for the promotion of welfare of the people (1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice , social, economic and political, shall inform all the institutions of the national life. Article 39 - Certain principles of policy to be followed by the State The State shall, in particular, direct its policy towards securing-- . . . (b) that the ownership and control of the material resources of the community are so distributed as best to sub serve the common good; (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment; (emphasis supplied) 39. He submitted that the scope of judicial review in a fiscal statute is fairly limited as laid down by the Supreme Court in multiple judgments such as State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l legislative function has been delegated by the Legislature to NAA by way of Section 171 of the Act, 2017. He stated that Section 171 of the Act, 2017 is very clear when it states that any reduction in the rate of tax or the benefit of input tax credit has to be passed on to the recipient by way of commensurate reduction in prices, that is to say that every person who is a recipient of goods or services has to get the benefit. He further stated that it cannot be said that Section 171 of the Act, 2017 does not provide method and procedure for determining profiteering as it clearly stipulates that any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices . 44. He emphatically denied that the word commensurate as used in Section 171 of the Act, 2017 has no clear and definite meaning. He referred to the Cambridge Dictionary where the word commensurate is defined as in a correct and suitable amount compared to something else; suitable in amount or quality compared to something else; matching in degree . Thus, according to him, Section 171 lays d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , constitutional body, comprising all the Finance Ministers of all the States and UTs and the Union Finance Minister, in its due wisdom, and the Central and the State Governments have framed Rules 127 and 133 which prescribe the functions and powers of the Authority. He pointed out that these rules have been framed under the provisions of Section 164 of the Act, 2017 which also has sanction of the Parliament and the State Legislatures. Therefore, since the functions and powers to be exercised by the Authority have been approved by competent legislatures, the same are legal and binding on the Petitioners. In support of his submissions, he relied on the decision of the Supreme Court in M.K. Papiah vs. Excise Commr. (1975) 1 SCC 492. 47. Mr. Zoheb Hossain, learned counsel stated that even if the petitioners contention that no methodology for calculating the profiteered amount had been prescribed is accepted, then also the said Section will not be rendered unconstitutional because as per Rule 126 of the Rules, 2017, NAA has been empowered to determine the said methodology. He pointed out that the Rule does not stipulate that NAA must necessarily determine the methodology and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These benefits, he stated cannot be passed on at the entity/organization/branch/invoice/ product/business vertical level as they have to be passed on to each and every buyer at each SKU/unit/service level by treating them equally. Additionally, he stated that the language of the impugned provisions does not provide flexibility to adopt any other mode for transferring benefit of reduction in tax rate and benefit of Input Tax Credit. He, thus, stated that the Methodology Procedure for passing on the benefits and for computation of the profiteered amount has been duly prescribed in Section 171 of the Act, 2017 itself and hence, it is not required to be prescribed separately. 51. He stated that in the case of reduction in the rate of tax, the quantum of benefit would depend upon the pre reduction base price of the product which is required to be maintained during the post rate reduction period on which the reduced rate of tax is required to be charged which would result in reduction in the price. According to him, the new MRP is required to be declared by affixing additional sticker or stamping or online printing in terms of letter No. WM/10(31)/2017 dated 16th November, 2017 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le price of the package; , the following words and figures shall be inserted, namely:- shall clearly indicate that it is the maximum retail price inclusive of all taxes and the price in rupees and paise be rounded off to the nearest rupee or 50 paise; 53. He agreed with the contention of the petitioners that in some cases, commercial factors might necessitate an increase in price despite reduction in rate of tax or availability of benefit of Input Tax Credits. However, he stated that the prices must not be increased to appropriate the benefit of the reduced tax rate or benefit of additional Input Tax Credit that accrues to the Petitioners. According to him, if the supplier never passed on the benefit of such reduced tax rate or Input Tax Credit by way of a commensurate reduction in prices of the goods or services, by increasing the base price of such goods or services, he would be depriving the recipients of the benefits of the reduction of tax rates or Input Tax Credits. Hence, he stated that if the supplier when increasing the base prices of the goods or services does not account for the (commensurate) reduction of prices as a result of the reduction of the tax rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that Section 171 of the Act, 2017 only concerns itself with the indirect-tax component of the price of goods and services and does not impinge upon the freedom of suppliers to fix prices of their goods and services keeping in view relevant commercial and economic factors. He stated that the impugned section in pith and substance is a provision pertaining to the Goods and Services Tax and through its enactment the Parliament sought to ensure that the businesses pass on the benefits granted by the Government in term of reduction of tax rate and availability of Input Tax Credit to the consumers and does not seek to interfere with the right to trade by fixing the price at which the goods and services ought to be supplied. He pointed out that the impugned provision applies irrespective of the price of the goods or services. He stated that it cannot be said that a law which forbids recovery of Goods and Services Tax at a rate higher than that applicable on the goods and services and which forbids suppliers from recovering Input Taxes from the recipients where credits are obtained on such Input Taxes, amounts to price- control or price-fixing. 57. He further submitted that even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed by any registered person and/or the reduction in tax rates have actually resulted in a commensurate reduction in the price of goods or services supplied by him and the duties of NAA have been further elaborated upon in Rule 127 of the Rules, 2017. He further stated that from a perusal of the aforesaid provision, it is clear that the functions of NAA are in the nature of a fact-finding exercise. He submitted that even if it is assumed that the Authority undertakes an exercise which determines the rights and liabilities of registered persons under the Act, the contention of the Petitioners that the absence of a judicial member in NAA renders the authority unconstitutional is not tenable as there is no universal principle that every quasi- judicial authority at every level must have a judicial member. According to him, such a requirement would not only be wholly impractical but also be legally suspect. He stated that the judgments which have been relied upon by the petitioners follow a uniform principle that whenever a judicial tribunal is intended to replace or supplant the High Court with respect to judicial power which was hitherto vested in or exercised by Courts, such Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been duly constituted by a Notification as required under Section 171(2) of the Act, 2017. The above notification dated 19th June, 2017 was laid before the Lok Sabha on 11th August, 2017 and before the Rajya Sabha on 08th August, 2017 as required by Section 166 of the Act, 2017. 65. He submitted that in the absence of an express provision to the effect that anti-profiteering proceedings would abate if time-lines are not strictly adhered to, and if the time-lines are read to be mandatory, it would result in gross injustice to the consumers who would be left remediless on account of no fault of theirs. 66. Further, in the absence of anything to the contrary in the amendment or the amended provision, on a plain reading of the provision, the amended/extended time-period for passing of an order would apply to all pending and future proceedings before NAA. He submitted that the time-frames provided in the anti- profiteering provisions are merely directory in nature and not mandatory. 67. Mr. Zoheb Hossain, learned counsel, stated that Section 171 of the Act, 2017 is widely worded and does not limit the scope of examination to only the goods and services in respect of which a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to ensure that the Input Tax Credits availed by any registered person or the reduction in tax rate result in a commensurate reduction in the price of goods or services or both supplied by him and as a result, the benefit of the same passed on to the recipients. He stated that the profiteered amount includes the benefit of reduction in taxes or Input Tax Credits which was required to be passed on by way of reduction in prices as well as the tax thereon which the consumer is forced to pay as a result of the non-reduction of prices as required under Section 171(1) of the Act, 2017. He emphasised that had the supplier passed on the benefit of reduction in tax rates or Input Tax Credit by way of reduction in prices, the consumer would not have been required to pay the additional Goods and Services Tax. 72. Mr. Zoheb Hossain submitted that without prejudice to the fact that each and every Act of NAA is well reasoned and justified and can be defended to the satisfaction of this Court as and when the same are taken up case-wise, the case- specific submissions of the petitioners have no bearing whatsoever while considering the constitutional vires of Section 171 of the Act, 2017 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect tax system both at the Central and the State level included high import tariffs, excise duties and turnover tax on domestic goods and services having cascading effects, leading to a distorted structure of production, consumption and exports and this problem could be effectively addressed by shifting the tax burden from production and trade to final consumption. The report highlighted the implications of the switchover to Goods and Services Tax and the benefits that would entail from such a switchover. He pointed out that para 7.22 of the said report specifically recorded that the benefit to the poor from the implementation of Goods and Services Tax would flow from two sources, first through increase in the income levels and second through reduction in prices of goods consumed by them. It was specifically observed that the proposed switchover to the flawless Goods and Services Tax system should therefore be viewed as a pro-poor system and not regressive. The report further specifically went into the implications of the proposed switchover to Goods and Services Tax on various products and sectors including prices of the goods. 77. He further stated that the Report of the Selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2017 is based on consumer welfare and equity. He contended that it is also the spirit of the constitutional provisions that no entity can be permitted to collect any tax (in any direct or indirect manner or by any implicit representation to that effect) except by the authority of law. Hence, when in spite of the reduction in the applicable tax rate, consequential reduction of the actual price does not take place and the amount is retained by the supplier, it would qualify as an unjust enrichment at the cost of the recipient who is the otherwise beneficiary of the reduction of the tax rate. 82. He stated that any indirect manner of passing on the benefit like Diwali Dhamaka or cross-subsidisation would be interfering with the right of the recipient to get the direct benefit. According to him, such an indirect method to pass the benefit is not contemplated under the express provisions and is also not in sync with the right of the recipient to get the actual benefit of the change in the tax rate. He stated that no such indirect method to pass on the benefit can be read-into the provision when the same is consciously not provided for therein thereby establishing/cementing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent levels culminating in the final determination of the matter by the Authority. 84. He submitted that in view of the purely fact-based nature of the exercise and the different levels contemplated for such findings under the Rules the contention that there is lack of appropriate redressal measures under the Scheme of Anti-Profiteering measures in the Goods and Services Tax framework is clearly negated. 85. Learned Amicus Curiae submitted that there is no question of any unbridled powers being conferred on the authority which is entrusted with the obligation of ensuring the compliance of the said provision as enough guidance emanates from the parent provision itself. He contended that all the factors such as the nature of the exercise to be carried out; the objective sought to be achieved by the said exercise; the incorporation of all critical elements which are to guide any such exercise in the section itself; the nature of the authority contemplated and tasked to carry out the functions; the period monitoring of the same by the Goods and Services Tax Council etc. are to be considered when dealing with the subject matter. COURT S REASONING PRINCIPLES FOR A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier judgment Govt. of A.P. v. P. Laxmi Devi [(2008) 4 SCC 720] , introduced a rule for exercise of such jurisdiction by the courts stating that the court should exercise judicial restraint while judging the constitutional validity of the statute or even that of a delegated legislation and it is only when there is clear violation of a constitutional provision beyond reasonable doubt that the court should declare a provision to be unconstitutional .. (emphasis supplied) COURTS APPROACH WHILE DEALING WITH TAX OR ECONOMIC LAWS 89. Further, the Courts have consistently held that the laws relating to economic activities have to be viewed with greater latitude than laws touching civil rights and that the Legislature has to be allowed some play in the joints because it has to deal with complex problems. The Supreme Court in its recent judgment in Union of India vs. VKC Footsteps India (P) Ltd., 2021 SCC OnLine SC 706 has reiterated the approach that the Courts have to adopt while dealing with tax or economic regulations. The relevant portion of the said judgment is reproduced hereinbelow:- 135. While we are alive to the anomalies of the formula, an anomaly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry ; that exact wisdom and nice adaption of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience . Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secy. of Agriculture v. Central Roig Refining Co. [Secy. of Agriculture v. Central Roig Refining Co., 1950 SCC OnLine US SC 14 : 94 L Ed 381 : 338 US 604 (1950)] be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing levied by the State Governments; (ii) certain taxes levied by State Governments are not allowed as set off for payment of other taxes being levied by them; (iii) the variety of Value Added Tax Laws in the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres; and (iv) the creation of tariff and non-tariff barriers such as octroi, entry tax, check posts, etc., hinder the free flow of trade throughout the country. Besides that, the large number of taxes create high compliance cost for the taxpayers in the form of number of returns, payments, etc. 3. In view of the aforesaid difficulties, all the above mentioned taxes are proposed to be subsumed in a single tax called the goods and services tax which will be levied on supply of goods or services or both at each stage of supply chain starting from manufacture or import and till the last retail level. So, any tax that is presently being levied by the Central Government or the State Governments on the supply of goods or services is going to be converged in goods and services tax which is proposed to be a dual levy where the Central Government will levy and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r powers of inspection, search, seizure and arrest to the officers; (h) to establish the Goods and Services Tax Appellate Tribunal by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority; (i) to make provision for penalties for contravention of the provisions of the proposed Legislation; (j) to provide for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers; and (k) to provide for elaborate transitional provisions for smooth transition of existing taxpayers to goods and services tax regime. 6. The Notes on clauses explain in detail the various provisions contained in the Central Goods and Services Tax Bill, 2017. 7. The Bill seeks to achieve the above objectives. 92. From the aforesaid, it is apparent that the Act, 2017 levies a single tax on the supply of goods or services on the value addition at each stage of the supply chain from purchase of raw materials, manufacture of product or import, till the finished good reaches the hands of the consumer. This is best illustrated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 COST TO CUSTOMER 3,63,000 300,000 ADD: GOODS And SERVICES TAX @ 20% 60000 COST TO CUSTOMER 3,60,000 94. Consequently, the intent of the Act, 2017 is to provide a common national market, boost productivity, increase competitiveness, broaden the tax base and make India a manufacturing hub. SECTION 171 MANDATES THAT TAX FOREGONE HAS TO BE PASSED ON AS A COMMENSURATE REDUCTION IN PRICE. 95. As rightly pointed out by the learned Amicus Curiae, the introduction of the system of Goods and Services Tax was preceded by a comprehensive examination of the subject by different committees and the reports of such committees had been factored in while finalizing the framework of the Goods and Services Tax. 96. An area of concern identified in the said reports was that though with the doing away of multiplicity and cascading of taxes, the prices of goods and services would come down, yet would this benefit, if any, be passed on to the consumer by the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 605; Dinesh v. State of Rajasthan, (2006) 3 SCC 771; Vimala (K.) v. Veeraswamy (K.), (1991) 2 SCC 375]. 99. The obligation of effecting/making a commensurate reduction in prices, as mentioned hereinabove, is relevant to the underlying objective of the Goods and Services Tax regime which is to ensure that suppliers pass on the benefits of reduction in the rate of tax and Input Tax Credit to the consumers, especially since the Goods and Services Tax is a consumption-based tax (as adopted in India) and the recipient (consumer) practically pays the taxes which are included in the final price. Section 171 of the Act, 2017, therefore, is not to be looked at as a price control measure but is to be seen to be directly connected with the objectives of the Goods and Services Tax regime. Consequently, the word commensurate in Section 171 of the Act, 2017 means that whatever actual saving arises due to the reduction in rates of tax or the benefit of the Input Tax Credit, in rupee and paisa terms, must be reflected as equal or near about reduction in price . In other words, tax foregone by the authorities has to be passed on to the consumer as commensurate reduction in price. 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SECTION 171 FALLS WITHIN THE LAW-MAKING POWER OF THE PARLIAMENT UNDER ARTICLE 246A 103. Article 246A of the Constitution of India defines the source of power as well as the field of legislation (with respect to goods and services tax) obviating the need to refer to the Seventh Schedule of the Constitution. Article 246A is available to both the Parliament and the State Legislatures. The said Article embodies the constitutional principle of simultaneous levy as distinct from the principle of concurrence. However, the Parliament has the exclusive power to enact Goods and Services Tax legislation where the supply of goods or services takes place in the course of inter-State trade or commerce. The Supreme Court in Union of India vs. VKC Footsteps India (P) Ltd. (supra) has held, The One Hundred and First Amendment to the Constitution is a watershed moment in the evolution of cooperative federalism . 104. Article 246A of the Constitution of India empowers the Parliament and Legislatures to make laws with respect to goods and services tax. This expression is similar to that used in Article 246 which empowers the Parliament and State Legislatures to make laws with respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true nature and character and the pith and substance of the legislation are to be focused at. It is a fundamental principle of constitutional law that everything necessary to the exercise of a power is included in the grant of the power (see the Constitution Bench decision in Chaturbhai M. Patel v. Union of India [AIR 1960 SC 424 : (1960) 2 SCR 362] ). (emphasis supplied) 105. In R.S. Joshi, Sales Tax Officer, Gujarat Ors. vs. Ajit Mills Limited Anr., (1977) 4 SCC 98, a Seven-Judge Bench of the Supreme Court clearly held that providing for measures dealing with aspects of unjustly retained amounts as tax in the concerned statute were necessary / ancillary aspects connected with the subject of taxation. The relevant portion of the said judgment is reproduced hereinbelow:- 13. Bearing in mind the quintessential aspects of the rival contentions, let us stop and take stock. The facts of the case are plain. The professed object of the law is clear. The motive of the legislature is irrelevant to castigate an Act as a colourable device. The interdict on public mischief and the insurance of consumer interests against likely, albeit, unwitting or ex abundanti caut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the thought that Parliament and the State legislatures will make haste to inaugurate viable public interest litigation procedures cutting costs and delays. After all, the reality of rights is their actual enjoyment by the citizen and not a theoretical set of magnificent grants. An acre in Middlesex', said Macaulay, is better than a principality in Utopia'. Added Prof. Schwartz : A legal system that works to serve the community is better than the academic conceptions of a bevy of Platonic guardians unresponsive to public needs. (emphasis supplied) 106. Keeping in view the aforesaid, this Court is of the view that the anti- profiteering mechanism as incorporated in Section 171 of the Act, 2017 is in the exercise of the Parliament s power to legislate on ancillary and necessary aspects/matters of Goods and Services Tax apart from being a social welfare measure as it amplifies and extends the earlier concept of barring persons to undertake exercise of collecting monies from the consumers by false representation. 107. Consequently, this Court is of the view that Section 171 of the Act, 2017 falls within the law-making power of the Parliament under Article 246A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle or as much details as it thinks proper and it may delegate the rest of the legislative work to a subordinate authority who will work out the details within the framework of that policy. 110. Keeping in view the aforesaid mandate of law, it is apparent that Section 171 of the Act, 2017 lays out a clear legislative policy. This Court is of the view that the necessary navigational tools, guidelines as well as checks and balances have been incorporated in the provision itself to guide any authority tasked with ensuring its workability. Consequently, Section 171 of the Act 2017 neither delegates any essential legislative function nor violates Article 14 of the Constitution of India. 111. As per Section 171(2), the Central Government may, on recommendations of the Council, by notification, constitute an Authority to examine whether Input Tax Credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services. Section 171(3) of the Act, 2017 stipulates that the Authority i.e. NAA shall exercise such powers and discharge such function as may be prescribed. It is in exercise of this po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keeping strict vigilance and control over its delegate. (emphasis supplied) 115. Consequently, the Executive by framing Rule 126 of the Rules, 2017 has in no manner encroached upon the jurisdiction of the Parliament. The Petitioners, throughout the hearing of the case, have repeatedly pointed out that the NAA has adopted varied approaches with regard to entities dealing with similar products in identical circumstances. If that is the case, then, it may make the orders passed by NAA bad, but would not invalidate either Section 171 or the Rules framed thereunder. Further, as the substantive mandate under Section 171(1) is itself a sound guiding principle for the framing of Rules and the functioning of NAA, the argument that Rule 126 suffers from excessive delegation is untenable in law. IMPUGNED PROVISIONS ARE NOT A PRICE FIXING MECHANISM. THEY DO NOT VIOLATE EITHER ARTICLE 19(1)(g) OR ARTICLE 300A OF THE CONSTITUTION 116. Section 171 of the Act, 2017 does not violate Article 19(1)(g) of the Constitution of India, as it is not a price-fixing mechanism. As rightly pointed out by the learned counsel for the Respondents, Section 171 of the Act, 2017 only relates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same needs to be justified by the supplier. The inherent presumption that these must necessarily be a reduction in prices of the goods and services is a rebuttable presumption. It is clarified that if the supplier is to assert reasons for offsetting the reduction, it must establish the same on cogent basis and must not use it merely as a device to circumvent the statutory obligation of reducing the prices in a commensurate manner contemplated under Section 171 of the Act, 2017. 120. This Court is further of the view that the present batch of matters deals with amounts that the Revenue had foregone in favour of the consumers which however had been either wrongfully appropriated by the petitioners/suppliers and/or used in their business and/or used for cross-subsidisation and/or passed off as a special discount to the dealer or the consumer. Therefore, there cannot be any proprietary interest of the suppliers in such amount which the Government has foregone in favour of consumers by way of reduction in taxes and no legal or constitutional right can be asserted thereunder. 121. Clearly, Section 171 of the Act, 2017 has been incorporated with the intent of creating a framewo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppliers. Consequently, the reference to Anti-Profiteering provisions of Australia and Malaysia is misconceived. NO FIXED/UNIFORM METHOD OR MATHEMATICAL FORMULA CAN BE LAID DOWN FOR DETERMINING PROFITEERING 124. This Court is of the view that no fixed/uniform method or mathematical formula can be laid down for determining profiteering as the facts of each case and each industry may be different. The determination of the profiteered amount has to be computed by taking into account the relevant and peculiar facts of each case. There is no one size that fits all formula or method that can be prescribed in the present batch of matters. Consequently, NAA has to determine the appropriate methodology on a case to case basis keeping in view the peculiar facts and circumstances of each case. 125. It is also well-established that where a power exists to prescribe a procedure and such power has not been exercised, the implementing authorities are at liberty to determine and adopt such procedure as they may deem fit subject to the same being fair and reasonable. In Dhanjibhai Ramjibhai vs. State of Gujarat (1985) 2 SCC 5, the Supreme Court has held, Merely because proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was completely constructed in the pre-Goods and Services Tax period i.e. before 01st July, 2017 and if it was purchased by making upfront payment of the whole price in the pre-Goods and Services Tax period no benefit of Input Tax Credit would be required to be passed on as the price will include the cost of taxes on which Input Tax Credit was not available in the pre-Goods and Services Tax period viz. Central Excise Duty, Entry Tax etc. b. If the construction of the flat had started in the pre-Goods and Services Tax period and continued/completed in the post-Goods and Services Tax period and a buyer purchased the flat by making full upfront payment in the post-Goods and Services Tax period he is entitled to the benefit of Input Tax Credit on the material which has been purchased in respect of this flat during the post-Goods and Services Tax period and on which benefit of Input Tax Credit has been availed by the builder. The builder has to reduce the price commensurately and pass on the benefit. c. If the construction of the flat is started in the pre-Goods and Services Tax period and its construction was continued in the post-Goods and Services Tax period and it was pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at-buyers with equal square feet area received equal benefit. The Court, while hearing the present batch of matters on merits, shall take the aforesaid direction/interpretation into account. IT IS THE PREROGATIVE OF THE LEGISLATURE TO DECIDE HOW THE BENEFIT IS TO BE PASSED ON TO THE CONSUMERS 130. It is settled law that it is the prerogative of the Legislature to decide the manner as to how the reduction in rate of tax or the benefit of Input Tax Credit is to be passed on to the consumer. In Dr.Ashwani Kumar vs. Union of India, (2020) 13 SCC 585 , the Supreme court has held as under:- 11. The legislature as an elected and representative body enacts laws to give effect to and fulfil democratic aspirations of the people. The procedures applied are designed to give careful thought and consideration to wide and divergent interests, voices and all shades of opinion from different social and political groups. Legislature functions as a deliberative and representative body. It is directly accountable and answerable to the electorate and citizens of this country. This representativeness and principle of accountability is what gives legitimacy to the legislations and la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall clearly indicate that it is the MRP inclusive of all taxes and the price in rupees and paise be rounded off to the nearest rupee or 50 paise would be applicable. Consequently, there would be no legal impossibility in reducing the MRP even in such cases. There is nothing inconsistent in Section 171 with such rounding off. ACT 2017 RIGHTLY DOES NOT FIX A TIME PERIOD DURING WHICH PRICE-REDUCTION HAS TO BE OFFERED 135. This Court is in agreement with the submissions of the respondents and the learned Amicus Curiae that bearing in mind the very nature of the Act, 2017, it is not proper or feasible to contemplate any specific period of time for application of the reduced price, as the same has to take effect so long as the direct relation between the reduction of tax rate or the benefit of Input Tax Credits exists and there is no other factor effecting/countering the same. If, conceptually, the reduction of tax rate has taken place on a specified date and there are no justified variations in the cost price or other factors for offsetting such reduction in the prices for a particular period of time, clearly for that period a reduced price must govern the transaction. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant Supreme Court judgments are reproduced hereinbelow:- A. In Maganlal Chhaganlal (P) Ltd. Vs. Municipal Corporation of Greater Bombay Ors., (1974) 2 SCC 402 it has been held as under:- 15 ..The statute itself in the two classes of cases before us clearly lays down the purpose behind them, that is that premises belonging to the Corporation and the Government should be subject to speedy procedure in the matter of evicting unauthorized persons occupying them. This is a sufficient guidance for the authorities on whom the power has been conferred. With such an indication clearly given in the statutes one expects the officers concerned to avail themselves of the procedures prescribed by the Acts and not resort to the dilatory procedure of the ordinary civil court. Even normally one cannot imagine an officer having the choice of two procedures, one which enables him to get possession of the property quickly and the other which would be a prolonged one, to resort to the latter. Administrative officers, no less than the courts, do not function in a vacuum. It would be extremely unreal to hold that an administrative officer would in taking proceedings for eviction of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Part III of the Constitution does not pass the test it cannot be pronounced valid merely because it is administered in a manner which might not conflict with the constitutional requirements. In saying this we are not to be understood as laying down that a law which might operate, harshly but still be constitutionally valid should be operated always with harshness or that reasonableness and justness ought not to guide the actual administration of such laws. (emphasis supplied) C. In Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536, a nine Judge Bench of the Supreme Court while considering the validity of provisions of the Central Excise and Customs Law (Amendment) Act, 1991 has held as under:- 88 ..It is equally well-settled that mere possibility of abuse of a provision by those in charge of administering it cannot be a ground for holding the provision procedurally or substantively unreasonable. In Collector of Customs v. Nathella Sampathu Chetty [(1962) 3 SCR 786 : AIR 1962 SC 316], this Court observed: The possibility of abuse of a statute otherwise valid does not impart to it any element of invalidity. It was said in State of Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IS NO VESTED RIGHT OF APPEAL AND AN APPEAL IS A CREATURE OF THE STATUTE 141. As discussed earlier, Rule 129 of the Rules, 2017 provides for a comprehensive mechanism for initiation and conduct of proceedings relating to anti-profiteering. The conscious provisioning of different layers of examination which, in the first place, is purely fact-based clearly demonstrates that appropriate precautions and redressal measures are provided for in the Scheme of the Act, 2017 read with the Rules, 2017 in connection therewith on the subject of Anti- Profiteering. Consequently, there is no basis for contending that unbrindled powers have been given to the Authority or that there is a lack of appropriate redressal mechanism under the Scheme. 142. In any event, it is well settled that there is no vested right of appeal and an appeal is a creature of the Statute. Right of appeal is neither a natural nor an inherent right vested in a party. It is a substantive statutory right regulated by the Statute creating it. To provide for an appeal or not under a Statute is a pure question of legislative policy (See: Kondiba Dagadu Kadam v. Savitribai Sopan Gujar (1999) 3 SCC 722 and Kashmir Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to investigate whether suppliers have passed on the benefit to their recipients by way of reduced prices as mandated by Section 171 of the Act, 2017. On examining the role and duties of NAA under Section 171(2) of the Act, 2017 and Rule 127 of the Rules, 2017, it is apparent that NAA performs functions that are to be discharged by domain experts. 147. Even otherwise NAA has not assumed any jurisdiction which was hitherto being exercised by the High Court or any other judicial body, and so, the principle that there must be a judicial member in quasi-judicial entities as laid down in the decisions relied upon by the petitioners does not apply in the present batch of matters. 148. In the case of Namit Sharma vs. Union of India (2013) 1 SCC 745, the Supreme Court considered the question of the requirement of a judicial member for performing the functions and exercising the powers of the Chief Information Commissioner. The Supreme Court initially held that the Information Commission and the Central Information Commissioners perform judicial functions possessing the essential attributes and trappings of a court and hence, it must have judicial members. However, while deciding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Services Tax Council. Consequently, the members of NAA are free to carry out their function as they deem fit and there is no scope whatsoever for any Governmental interference in the functions exercised by NAA. RULE 133 TO THE EXTENT IT PROVIDES FOR LEVY OF INTEREST AND PENALTY IS WITHIN THE RULE MAKING POWER OF THE CENTRAL GOVERNMENT 153. This Court is of the view that Section 171 of the Act, 2017 is broad enough to empower the Central Government to prescribe penalty and interest to ensure that the suppliers are deterred from pocketing the benefits meant for the consumers when taxes are foregone by the Government. Merely empowering NAA to direct returning of the amounts so pocketed by the supplier/registered person would not have a sufficient deterrent effect on deviant behavior unless interest and penalty are levied to prevent such actions from taking place in the first place. The width and amplitude of Section 171 by which the authority is empowered to ensure that reduction in tax rate or the Input Tax Credit availed results in commensurate reduction in the price of goods or services clearly encompasses within it the power to ensure that such conduct which leads t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly been included in the profiteered amount. TIME LIMIT FOR FURNISHING OF REPORT BY DGAP IS DIRECTORY AND NOT MANDATORY 158. In some cases, the Petitioners have pointed out that the timelines as provided in the Rules, 2017 have not been followed. They further contended that as a result, the proceedings are vitiated. However, it is important to note that the Rules, 2017 do not provide any consequences in case the time limits provided thereunder lapse. As held earlier, the anti-profiteering provisions in the Act, 2017 and the Rules, 2017 are in the nature of a beneficial legislation as they promote consumer welfare. The Courts have consistently held that beneficial legislation must receive liberal construction that favors the consumer and promotes the intent and objective of the Act. That being the scenario, it cannot be said that the proceedings as a whole abate on lapse of time limit of furnishing of report by DGAP. The Supreme Court in P.T. Rajan Vs. T.P.M. Sahir and Ors. (2003) 8 SCC 498 has held that It is well-settled principle of law that where a statutory functionary is asked to perform a statutory duty within the time prescribed therefore, the same would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord its appreciation for the assistance rendered by all the learned counsel, who appeared, in particular, Mr. Amar Dave, learned Amicus Curiae, Mr. V. Lakshmikumaran and Mr. Zoheb Hossain, Advocates as they filed not only multiple written submissions but also ensured that hearing in the present batch of matters (exceeding 100 cases) was conducted in an orderly and proper manner. TO SUM UP 163. Keeping in view the aforesaid conclusions, the constitutional validity of Section 171 of Act, 2017 as well as Rules 122, 124, 126, 127, 129, 133 and 134 of the Rules, 2017 is upheld. This Court clarifies that it is possible that there may be cases of arbitrary exercise of power under the anti-profiteering mechanism by enlarging the scope of the proceedings beyond the jurisdiction or on account of not considering the genuine basis of variations in other factors such as cost escalations on account of which the reduction stands offset, skewed input credit situations etc. However, the remedy for the same is to set aside such orders on merits. What will be struck down in such cases will not be the provision itself which invests such power on the concerned authority but the erroneous ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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