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TMI Blog2024 (1) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Singh. Advs. Mr. Aseem Mehrotra, Adv. Mr. Tarun Gulati, Sr. Advocate with Mr. Sparsh Bhargava with Ms. Ishita Farsaiya, Advocate. Mr. Naresh Thacker, Mr. Kumar Visalaksh, Mr. Udit Jain, Mr. Arihant Tater, Mr. Saurabh Dugar and Mr. Ajitesh Dayal Singh, Advocates. Mr. Ajay Bhargava, Ms. Vanita Bhargava and Mr. Nikitha Shenoy, Advs. Mr. Aseem Chaturvedi and Mr. Sahil Siddiqui, Advs. Mr. V. Lakshmikumaran, Mr. Karan Sachdev, Mr. Yogendra Aldak with Mr. Agrim Arora, Advocates Mr. Aseem Mehrotra, Adv. Mr. Rupender Sinhmar, Mr. Prahlad Singh, Mr. K. Gurumurthy, Advs., Mr. R. Jawahar Lal, Mr. Siddharth Bawa Mr. Anuj Garg, Mr. Mohit Sharma and Ms. Harshita, Advocates. Mr. Sumit K Batra and Mr. Manish Khurana, Advocates. Mr. Abhishek Choudhary, Advocate, Mr. Puneet Agrawal, Advocate with Mr. Prem Kandpal, Mr. Ketan Jain and Mr. Chetan Kumar Shukla Advocates., Mr. S. Ganesh, Senior Advocate with Mr. U.A. Rana and Mr. Himanshu Mehta, Advocates, Mr. Prateek Bansal, Advocate. Mr. Shashank Shekhar with Mr. Siddharth Rajkonwar, Advs. Mr. Kamal Sawhney, Mr. Deepak Thackur and Ms. Aakansha Wadhwani, Advocates., Mr. Rohan Shah, Adv. Mr. Priyadarshi Manish, Mrs. Anjali Jha Manish, Mr. Saksham Garg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rishan Kumar, Advocates for R-2 & 3 Mr. Kartik Sabharwal and Ms. Manisha Dubey, Advocates for NAA and DGAP. Mr. Aditya Singla, SSC with Ms. Charu Sharma, Advocate for R-4. Ms. Pratima N. Lakra, CGSC with Ms. Vanya Bajaj and Mr. Kashish G. Baweja, Advocates for UOI. Mr. Vinod Diwakar, CGSC with Mr. Olson Nair, Advocate for UOI. Mr. Farman Ali, SPC with Mr. Athar Raza Farooqui, Advocate for UOI. Mr. Anurag Ahluwalia, CGSC with Mr. Milind Nagpal Advocate for UOI. Mr. Kavish Garach, Ms. Sejal Aneja Ms. Aakanksha Kaul, Advocate with Ms. Versha Singh and Mr. Aman Sahani & Ms. Rhea, Advocates for UOI. Mr. Vikrant N. Goyal, Advocate with Mr. Nitin Chandra and Mr. Jeet Chakravarti, Advocates for UOI. Mr. Harish Vaidyanathan Shankar, CGSC with Mr. Srish Kumar Mishra, Mr. Sagar Mehlawat and Mr. Alexander Mathai Paikaday, Advocates. Mr. Kamal Sawhney, Mr. Deepak Thackur, Ms. Aakansha Wadhwani, Advocates for R-4. Mr. Ravi Prakash, CGSC with Ms. Astu Khandelwal, Advocates for UOI. Mr. Gyanendra Singh, Advocate. Mr. Bhagvan Swarup Shukla, CGSC with Mr. 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Mr. S. Rajan, Advocates for UOI Ms. Amrita Prakash, CGSC with Mr. Vishal Ashwani Mehta, Advocate for UOI Mr. Rishabh Sahu with Mr. Sameer Sharma Advs. for UOI. Mr. Satya Ranjan Swain, Sr. PC, Mr. Kautilya Birat, Adv. for R-1/UOI Mr. Anshuman, Sr.Panel Counsel with Mr. Piyush Ahluwalia, Advocate for R-1. Mr. Aditya Dewan, Advs. for R-3/NAPA. Ms. Talish Ray, Adv. Mr. Rony John, Mr. Piyush Swami, Mr. Arshdeep Singh and Mr. Anuj Dubey, Advocates for R-2 and 3. Mr. Parangat Pandey and Ms. Alpana Singh, Advocates for R-3. Mr. Yunus Malik, Adv. NAA and DGAP. Ms. Archana Surve, Advcoate for R-1 to 4 Mr. Ravi Prakash, CGSC with Mr. Archana Surve, Mr. Vinod Kumar Ahlawat, Advocates for UOI. Mr. Kamal Kant Jha, SPC with Mr. Avinash Singh, Advocate for R-1/UOI. Mr. Abhishek Saket, Advocate for UOI. Mr. K.K. Jha, SPC for R-1. Mr. Varun Sharma, Advocate for the complainant. Ms. Sharmila Upadhyay, Ms. Supriya R. Pandey and Mr. Pawan Upadhyay, Advs. for R-4. Ms. Uma Prasuna Bachu, Sr.PC with Ms. Poonam, GP for R-1. Mr. Sandeep Vishnu, Advocate for UOI. Ms. Suruchi Suri, Advocate with Mr. Mayur, Advocate for R-4. Mr. Jatin, Sr.Panel Counsel with Ms. Chetanaya Puri, Advocate for UOI. Mr. Vipul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .(C) 1765/2021, W.P.(C) 1766/2021, W.P.(C) 1852/2021 & CM Nos. 5359/2021, 29026-29027/2021, W.P.(C) 1951/2021 & CM APPL. Nos. 5705-06/2021, W.P.(C) 2440/2021, W.P.(C) 2676/2021 & CM APPL. 7906-07/2021, W.P.(C) 2785/2021 & CM APPL. 8368/2021, W.P.(C) 2897/2021, W.P.(C) 2970/2021, W.P.(C) 3254/2021, W.P.(C) 3306/2021, W.P.(C) 3327/2021, W.P.(C) 3508/2021 & CM APPL. Nos. 25152-53/2021, W.P.(C) 3867/2021, W.P.(C) 4600/2021, W.P.(C) 4789/2021, W.P.(C) 4794/2021 & CM APPL. 14802/2021, W.P.(C) 6337/2021 & CM APPL. 19960/2021, W.P.(C) 12471/2021 & CM APPL. No. 39234/2021, W.P.(C) 14666/2021 & CM APPL. 46201-46203/2021, W.P.(C) 6983/2022 & CM APPL. 21405/2022, W.P.(C) 7781/2022 & CM APPL. 23831/2022, W.P.(C) 8705/2022 & CM APPLs. 26239-26240/2022, W.P.(C) 12533/2022 & CM APPL. Nos. 37949-37950/2022, W.P.(C) 12557/2022 & CM APPL. Nos. 38027-38028/2022, W.P.(C) 12573/2022 & CM APPLs. 38062-38063/2022, W.P.(C) 12639/2022 & 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., M/s. Sub West Restaurants LLP, Bonne Sante, Horizon Projects Private Limited, ITC Limited & Anr., M/s Dra Aadithya Projects Pvt. Ltd., Gillette India Ltd., Procter And Gamble Home Products Pvt Ltd., M/s Alton Buildtech India Pvt. Ltd. M/s. Electronics Mart India Ltd., Inox Leisure Limited, M/s. Manas Vihar Sahakari Awas Samiti Ltd. Yellow Sun Restaurants Private Limited, M/s. Puri Construction Pvt. Ltd., Southwinds Projects LLP, Anand Rathi, WTC Noida Development Company Private Limited, M/s Tata Play Limited, Lichfl Care Homes Limited. L Oreal India Private Limited, M/s. Swati Realty, M/s. Perfect Buildwell Pvt Ltd., Vasavi And GP Infra LLP, M/s. DLF Limited, NY Cinemas LLP, M/s. Airmid Real Estate Ltd., Gelenmark Pharmaceutical Limited And Anr. Barbeque Nation Hospitality Ltd., Prescon Realtors And Infrastructures Private Limited Bhagwati Infra, Allergan 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 Infr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces or both supplied by him. (3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. [(3A) Where the Authority referred to in sub-section (2), after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered: Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. Explanation. -- For the purposes of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply 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 Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he methodology and procedure The Authority may determine the methodology and procedure for determination as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices. Rule 127 127. Duties of the Authority. It shall be the duty of the Authority,- (i) to determine whether any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices; (ii) to identify the registered person who has not passed on the benefit of reduction in the rate 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the investigation, furnish to the Authority, a report of its findings along with the relevant records. Rule 133 133. Order of the Authority. (1) The Authority shall, within a period of [six] months from the date of the receipt of the report from the Director General of [Anti-profiteering] determine whether a registered person has 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. (2) An opportunity of hearing shall be granted to the interested parties by the Authority where any request is received 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 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The investigation or enquiry under clause (a) shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry.]" Rule 134 134. Decision to be taken by the majority.- (1) A minimum of three members of the Authority shall constitute quorum at its meetings. (2) If the Members of the Authority differ in their opinion on any point, the point shall be decided according to the opinion of the majority of the members present and voting, and in the event of equality of votes, the Chairman shall have the second 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2017 delegated the authority to determine/prescribe powers and functions of NAA to the Executive i.e. the Government of India. They submitted that the Government of India by way of Rule 126 of the Rules, 2017, contrary to the legislative mandate contained in Section 171 of the Act, 2017, further delegated the power to NAA to determine the methodology and procedure for determining whether the reduction in taxes or the benefit of Input Tax Credit had been passed on to the recipients. They stated that even NAA did not issue any guidelines as to how to determine profiteering. 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he projects were executed at an identical pace with identical inputs and with Developer A receiving sixty per cent of the amount (total sale price of the project) as advance during the pre-Goods and Services Tax period, Developer B receiving only twenty per cent as advance during that period, with all other factors being identical (like the credit availed/available during the pre-Goods and Services Tax period), the credit to turnover ratio for the two projects would vary drastically depending on the time when the payments from the customers were received. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the operation of Section 171 of the Act, 2017 amounted to price-fixing and is therefore violative of Articles 19(1)(g) and 300A of the Constitution. They submitted that according to NAA's interpretation of Section 171 of the Act, 2017, once any of the events contemplated in Section 171 of the Act, 2017 occurs, i.e. either there is reduction in tax rate or benefit of Input Tax Credit is availed, then the price of the product must be adjusted to (a) the extent of the tax reduced and/or (b) the extent of increase in the credit availability. They stated that there is no clarity on adjustments allowed on account of rise either in input costs or in customs duty on import of inputs, supply and demand conditions and other factors which impact pricing. They submitted that Section 171 of the Act, 2017, to the extent it eliminates all factors from consideration in price fixation, other than the rate of tax and credit availability, was clearly excessive, disproportionate and unwarranted. 16. They pointed out that similar anti-profiteering provisions had been introduced in Australia (in 2000) and in Malaysia (in 2015) to ensure that the benefit of reduction of tax rate was passed on to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other relevant matters in relation or price of goods and services etc. It was pointed out that detailed guidelines were laid down under the Regulations issued in 2014 and 2016. 19. Learned counsel for the petitioners further submitted that Section 171 of the Act, 2017 is manifestly arbitrary and unreasonable, as it does not fix a period of time during which the reduced prices of the goods and services had to be maintained. They emphasised that the time-frame for which an assessee could be subject to the discipline of Section 171 of the Act, 2017 has been left undefined and open-ended. According to them, this indefinite obligation hinders the petitioners' right to trade and commerce and hence, the same is violative of Articles 14 and 19(1)(g) of the Constitution of India. 20. They further stated that price reduction is not the only method by which commensurate benefit can be passed on to the recipient. They stated that an increase in the volume or weight of the product being sold for the same price is an equally effective and legal way of commensurately reducing the price of the product. They stated that mandating price reduction as the only way to pass the commensurate benefit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermines liabilities of the tax assessees against whom such an application/complaint is made / received. Therefore, according to them, since the exercise of power by NAA is a quasi-judicial function, the absence of a judicial member in the constitution of NAA renders Section 171 of the Act, 2017 and Rule 122 of the Rules, 2017 illegal and void. In support of their submissions, they relied on the decision of the Supreme Court in Madras Bar Association v. Union of India, (2015) 8 SCC 583, Madras Bar Association v. Union of India, (2010) 11 SCC 1 and L. Chandra Kumar v. Union of India, (1997) 3 SCC 261. 26. They further submitted that in case of equality of votes amongst the members of NAA, the Chairperson has a second or casting vote, which renders Rule 134(2) illegal and unconstitutional. 27. Learned counsel for the petitioner in W.P.(C) 12647/2018 stated that the report issued by DGAP and the order passed by NAA in its case were barred by limitation as provided under Rule 133 of the Rules, 2017. He submitted that Rule 133 uses the word "shall" and thus mandates that NAA must determine and pass an order within a period of three months (prior to amendment dated 28th June, 2019) from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 2017. 29. Learned counsel for the petitioners submitted that the levy of penalty and interest cannot be ordered in the absence of corresponding specific substantive provisions under the Act, 2017. They submitted that the consequences of the breach of Section 171 of Act, 2017 should have been provided for in the first instance in the Act, 2017 itself and such wide and uncontrolled powers could not have been conferred on NAA under Rules 127 and 133 of Rules, 2017. In support of their submission, they relied upon the judgments of the Supreme Court in Indian Carbon Limited v. State of Assam (1997) 6 SCC 479 and Shree Bhagwati Steel Rolling Mills v. CCE 2015 (326) E.L.T. 209 (SC). 30. They stated that the petitioners have been issued show cause notices directing them to explain why penalty prescribed under Section 171(3A) of the Act, 2017 read with Rule 133 (3) (d) of the Rules, 2017 should not be imposed upon them. They, however, submitted that Section 171 (3A) has been inserted in the Act, 2017 under Section 112 of the Finance Act, 2019 which came into force only from 01st January, 2020 and so penalty under the aforesaid Section could not have been imposed on the petitioners re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any price. In support of his submission, he relied on Section 64-A of the Sale of Goods Act, which reads as under:- "64A. In contracts of sale, amount of increased or decreased taxes to be added or deducted.- (1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time,- (a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and (b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofiteering" measures were introduced in the Goods and Services Tax regime in order to provide for a mechanism to ensure that the full benefits of input tax credits and reduced Goods and Services Tax rates flow to the consumers who bear the burden of tax and to prevent the suppliers from appropriating these benefits for themselves. He contended that anti-profiteering provisions under the Act, 2017 and the Rules, 2017 have been brought into force in the interest of consumer welfare and so any interpretation of the same must be in favour of the consumer. 37. He stated that the provisions essentially create a substantive restriction on the suppliers from appropriating the benefits of the Goods and Services Tax regime which may either be in the form of reduction in the tax rate effected pursuant to a decision of the Goods and Services Tax Council or in the form of benefit of Input Tax Credit which was unavailable under the earlier regime. He stated that correspondingly a substantive right has been created in favour of consumers to receive the benefit of reduction in rates and benefit of Input Tax Credit. He stated that in considering the constitutional vires of such a provision, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.-The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council." 41. He submitted that the impugned Section 171 of the Act, 2017 does not violate Article 246A of the Constitution of India as the said Section is not a taxing provision but is only meant to ensure that the sacrifice of tax revenue by the Central and State Governments for the welfare of the consumer is passed on to them by the supplier. 42. He stated that the reduction of the tax burden and elimination of the cascading effect of taxes were important objectives behind the introduction of the Goods and Services Tax and so the impugned Section 171 of the Act, 2017 is very much a provision 'with respect to' Goods and Services Tax and, therefore, Section 171 of the Act, 2017 falls well within the ambit of law-making powers of the Parliament and the State legislatures. He further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving regard to the subject matter, the scheme, the provisions of the statute including its preamble and the background on which the statute is enacted. In support of his contentions, he relied upon the decision of the Supreme Court in Bhatnagars & Co. Ltd. vs. Union of India, AIR 1957 SC 478 and Mohmedalli and Ors. vs. Union of India and Ors., AIR 1964 SC 980. 45. He further submitted that power of NAA to determine procedure and methodology flows from Section 171 of the Act, 2017 itself which empowers the Authority to examine whether Input Tax Credits availed by any registered person or the reduction in the tax rate on the goods or services had actually resulted in commensurate reduction in the price of such goods or services. He stated that the rule-making powers of the Central Government as prescribed in sub section (2) of Section 171 of the Act, 2017 as well as Section 164 of the Act, 2017 empower the Central Government to prescribe the powers and functions of the authority as well as to prescribe a Rule conferring the Authority with the power to determine the methodology for determining whether the benefits of Goods and Services Tax rate reductions and Input Tax Credits have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the quantum of benefit as the extent of profiteering has to be arrived at on a case to case basis, by adopting suitable method based on the nature and facts of each case. He further stated that NAA in exercise of the powers conferred under Rule 126 of the Central Goods and Services Tax has notified the "National Anti-Profiteering Authority: Methodology and Procedure, 2018" dated 28th March, 2018 which contains the methodology and procedure for determination as to whether the reduction in the rate of tax on supply of goods or services or the benefit of Input Tax Credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices. 49. In the context of the real estate sector, he stated that in cases where completion certificate had not been issued prior to 01st July, 2017 and the supply of service by the developer continued past 01st July, 2017, the supplier got the benefit of Input Tax Credits under the Goods and Services Tax regime. That being the case, there is no reason why a supplier ought not to be required to pass on the benefit of Input Tax Credits under the Goods and Services Tax regime, with respect to the remaining su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 7th March, 2011 as enacted with effect from 1st April, 2011: "2. Definitions:- ..... (m) "retail sale price" means the maximum price at which the commodity in packaged form may be sold to the consumer and the price shall be printed on the package in the manner given below; 'Maximum or Max. retail price Rs/.......inclusive of all taxes or in the form MRP Rs/ .........incl., of all taxes after taking into account the fraction of less than fifty paisa to be rounded off to the preceding rupees and fraction of above 50 paise and up to 95 paise to the rounded off to fifty paise; xxx xxx xxx 6. Declarations to be made on every package. - (1) Every package shall bear thereon or on the label securely affixed thereto, a definite, plain and conspicuous declaration made in accordance with the provisions of this chapter as, to - .... (e) the retail sale price of the package; Provided that for packages containing alcoholic beverages or spirituous liquor, the State Excise Laws and the rules made there under shall be applicable within the State in which it is manufactured and where the state excise laws and rules made there under do not provide for declaration of retail sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it" and that "it is up to the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of "emerging" techniques of interpretation." He submitted that although the aforesaid findings were made in the context of tax avoidance, they would apply with equal force in the context of any beneficial legislation. 54. Mr. Zoheb Hossain, learned counsel further stated that reference made by the petitioners to guidelines under other laws and to certain foreign laws, is irrelevant to the issue of the constitutional validity of Section 171 of the Act, 2017 as validity has to be determined on its own merits. 55. He further stated that according to petitioners' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision unconstitutional. 59. He submitted that recently, a three-Judge Bench of the Supreme Court in Madras Bar Association v. Union of India & Anr., (2021) SCC OnLine SC 463, while considering the challenge to the vires of Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 and Sections 184 and 186(2) of the Finance Act, 2017 as amended by the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021, held that "the apprehensions of misuse of a statutory provision is not a ground to declare the provisions of a statute as void." 60. Mr. Zoheb Hossain, learned counsel, submitted that for an appeal to be maintainable, it must have its genesis in the authority of law [See: M. Ramnarain (P) Ltd. v. State Trading Corpn. of India Ltd. [(1983) 3 SCC 75 and Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad (1999) 4 SCC 468]. He submitted that the principle of "appeal being a statutory right and no party having a right to file appeal except in accordance with the prescribed procedure" is now well settled as held by the Supreme Court in CCI v. SAIL, (2010) 10 SCC 744. According to him, the right to appeal is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or legally invalid. 62. He further stated that there are several statutory bodies that exercise quasi- judicial functions, but are not required to have judicial members. For example, Section 4(1) of the Securities and Exchange Board of India Act, 1992 which provides for the composition of the Securities and Exchange Board of India ('SEBI'), does not necessarily require the presence of Judicial Members in SEBI. He pointed out that the fact that the SEBI inter-alia performs judicial functions has been recognized by the Supreme Court in Clariant International Ltd. & Anr. vs. Securities and Exchange Board of India (2004) 8 SCC 524. Similarly, he stated that Telecom Regulatory Authority of India, Medical Council of India, Institute of Chartered Accountants of India and the Assessing Officers, CIT (Appeals), Dispute Resolution Panel under the Income Tax Act perform quasi- judicial functions but there is no requirement that such members must possess either a law degree or have had judicial experience. 63. He submitted that a casting vote in the hands of the chairperson is a fair and reasonable manner of deciding a tie in votes and is commonly provided for in several laws. 64. He stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch amount or recovery of the amount not returned including interest, as the case may be. 69. Mr. Zoheb Hossain, learned counsel, submitted that the judgments of Supreme Court in Indian Carbon Ltd. Vs. State of Assam, (1997) 6 SCC 479 and Shree Bhagwati Steel Rolling Mills vs. CCE (2016) 3 SCC 643 etc. relied upon by the petitioners were delivered in the context of considering the question of whether interest can be levied for delayed payment of tax and whether penalty can be imposed for non-payment of tax under a Rule where the Statute does not authorize the same. 70. He submitted that by virtue of Rule 133(3)(d) of the Rules, 2017, NAA was already vested with the powers to impose penalties even before Section 171(3A) came into force. According to him, Section 171(3A) of the Act, 2017 is therefore merely clarificatory in nature. He further submitted that in the absence of a power to impose penalties, there would be no consequence arising out of the violation of Section 171(1) of the Act, 2017 by suppliers and consequently, there would be no deterrence against non-compliance. 71. Even otherwise, he stated that show cause notices initiating penalty proceedings in relation to viol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly threw light on the lessons for transition to Goods and Services Tax. One of the elements covered in the said report was the impact that VAT had on prices of goods. The report found that the white paper at the time of introduction of VAT was sanguine that implementation of VAT would bring down the prices of goods due to rationalisation of tax rates and abolition of cascading effect of tax in the legacy systems. However, on the examination and analysis of a small data survey, the CAG found that the manufacturers did not reduce the maximum retail prices after introduction of VAT even when there had been a substantial reduction in tax rates. It was, therefore, found that despite introduction of VAT and reduction in the tax rates, the benefits ensuing from such reduction were not passed on to the consumers by the manufacturers and the dealer networks across the VAT chain had enriched themselves at the cost of the common man. The report highlighted these aspects as those to be borne in mind at the time of considering the shift over to the Goods and Services Tax regime and to ensure mechanism for the purposes of passing on the benefit of tax rationalisation to the ultimate com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and-alone provision and provides for all the parameters which act as navigational tools while applying the said provision. He submitted that the pre-requisites for triggering the provision are specifically provided therein and the consequence of the section is also specifically provided for. He submitted that the beneficiary of the contemplated benefit provided under the provision is clearly specified, and therefore, all critical aspects of its applicability and workability stand embedded in the section itself. 80. Learned Amicus Curiae stated that by its very nature, Section 171 of the Act, 2017 provides for an inherent assumption that the reduction of tax rate or the benefit of Input Tax Credit under the Goods and Services Tax mechanism specifically requires, as a consequence thereof, a commensurate reduction in price. He stated that the contention that Section 171 of the Act, 2017 amounts to price regulation is not correct as the provision has been inserted to ensure specifically that the consequential effect of the tax rate must enure to the benefit of the consumer. The very foundation of the same is based on the concept that when the tax rate undergoes a reduction under the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assing of benefit contemplated under Section 171 of the Act, 2017. According to him, it is clear from the said Rules that the same contemplates constitution of Standing Committee and Screening Committee at different levels. Further, under the scheme of the Rules, it is provided that the Standing Committee shall within a stipulated time frame after following the process prescribed therein determine whether there is any prima facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax or the benefit of Input Tax Credit or the benefit of Input Tax Credit has, in fact, not been passed on to the recipient. He stated that the scheme of the Rules therefore contemplates that such application(s) from the interested parties shall be first examined by the State level Screening Committee if they pertain to issues local in nature and subsequently be forwarded to the Standing Committee for action. Further, when the Standing Committee reaches a prima facie conclusion, it shall refer the matter to the DGAP for a detailed investigation. Rule 129 of the Rules, 2017 provides for a comprehensive mechanism which the DGAP is required to follow once the matter is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. Article 301. (iv) In the case of a State law, it will be invalid insofar as it seeks to operate beyond the boundaries of the State. (v) That the legislature concerned has abdicated its essential legislative function as assigned to it by the Constitution or has made an excessive delegation of that power to some other body. 88. It must also be kept in mind that there is always a presumption in favour of constitutionality of an enactment and the burden to show that there has been a clear transgression of constitutional principles is upon the person who attacks such an enactment. Whenever constitutionality of a provision is challenged on the ground that it infringes a fundamental right, the direct and inevitable effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octrinaire or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud [Morey v. Doud, 1957 SCC OnLine US SC 105 : 1 L Ed 2d 1485 : 354 US 457 (1957)] where Frankfurter, J., said in his inimitable style: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the Judges have been overruled by events - self-limitation can be seen to be the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017 not only simplifies and harmonises the indirect tax regime in the country, but it also marks a paradigm shift in the manner in which they are enacted, levied and collected in India. 91. The Act, 2017 primarily intends to provide a common national market for Goods and Services as reflected in its moto 'One Nation One Tax'. It is a consumer-centric Act, as it eliminates the levy of multiple taxes, avoids any cascading tax effect, streamlines the credit mechanism by weeding out distortions in the supply chains and ensures a smooth pass-through and transparent mechanism for levying tax. This is apparent from the Statement of Objects and Reasons of the Act, 2017. The same is reproduced hereinbelow:- "Presently, the Central Government levies tax on, manufacture of certain goods in the form of Central Excise duty, provision of certain services in the form of service tax, inter-State sale of goods in the form of Central Sales tax. Similarly, the State Governments levy tax on and on retail sales in the form of value added tax, entry of goods in the State in the form of entry tax, luxury tax and purchase tax, etc. Accordingly, there is multiplicity of taxes which are being levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax that would incentivise tax compliance by taxpayers. The proposed goods and services tax will broaden the tax base, and result in better tax compliance due to a robust information technology infrastructure. 5. The Central Goods and Services Tax Bill, 2017, inter alia, provides for the following, namely:- (a) to levy tax on all intra-State supplies of goods or services or both except supply of alcoholic liquor for human consumption at a rate to be notified, not exceeding twenty per cent. as recommended by the Goods and Services Tax Council (the Council); (b) to broad base the input tax credit by making it available in respect of taxes paid on any supply of goods or services or both used or intended to be used in the course or furtherance of business; (c) to impose obligation on electronic commerce operators to collect tax at source, at such rate not exceeding one per cent. of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals; (d) to provide for self-assessment of the taxes payable by the registered person; (e) to provide for conduct of audit of registered persons in order to verify compliance with the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ROFIT @20% 50,000 TOTAL COST 300,000 TOTAL COST 300,000 ADD: EXCISE DUTY @10% 30,000 ADD: EXCISE DUTY @10% NA 0 COST AFTER TAX 3,30,000 COST AFTER TAX 3,00,000 ADD : VAT @10% 33000 ADD : VAT @10% NA 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the rightfulness of the posting of a public servant, to assessing the correctness of criminal sentencing and calculating maintenance amounts indicating that the Courts too have a clear and definite understanding of this word. [See: P.K. Chinnasamy v. Govt. of T.N., (1987) 4 SCC 601; Centre for PIL v. Housing & Urban Development Corpn. Ltd., (2017) 3 SCC 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), Indian Carbon Limited (supra), V.V.S. Sugars (supra) and Shree Bhagwati Steel Rolling Mills v. CCE (supra), relied on by the Petitioners, are not applicable as they deal with the validity of delegated authority imposing tax/fee or charging interest on delayed payment of tax in the absence of empowering provision in the statute. 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 mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and substance of the Act and to find out if the matter comes substantially within an item in the list. The express words employed in an entry would necessarily include incidental and ancillary matters so as to make the legislation effective. The scheme of the Act under scrutiny, its object and purpose, its 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 stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and back. So, we largely disagree with Ashoka while we generally agree with Abdul Quader. We must mention that the question as to whether an amount which is illegally collected as sales tax can be forfeited did not arise for consideration in Ashoka. 25. We may conclude with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e essential legislative function consists in the determination or choosing of the legislative policy and of formally enacting that policy into a binding rule of conduct. It is open to the legislature to formulate the policy as broadly and with as little 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 resulte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to modification, whether by way of repeal or amendment on a motion made by Parliament during the session in which they are so laid. This makes it perfectly clear that Parliament has in no way abdicated its authority, but is 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court is in agreement with the submission of learned Amicus Curiae that if there is any variation on account of other factors, such as any costs necessitating the setting off of such reduction of price, 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 consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By its very nature, the Malaysian Act controls pricing unlike Section 171 of the Act, 2017 which does not seek to regulate the pricing of the goods and services or the profits of the suppliers. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be collected from the consumers. 128. There is no dispute with regard to the methodology to be adopted in the following four scenarios:- a. If the flat 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 citizen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 2017 with effect from 01st January, 2018 to 31st March, 2022 provides that the retail price of the package 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular law would be done "not with an evil eye and unequal hand". Some of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and tested in the light of the requirements set out 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 invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THERE 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave 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 the review petition filed by the Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to profiteering does not take place. 154. Section 164 of the Act, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 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 be directory and not mandatory." and that "a provision in a statute which is procedural in nature although employs the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 application of the power.
164. List the matters before the Division Bench-I for appropriate directions on 8th February, 2024. X X X X Extracts X X X X X X X X Extracts X X X X
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