A division bench of Delhi High Court has held that section 171 of the Central Goods and Services (CGST) Act, 2017 does not violate Article 19(1)(g) of the Constitution of India, as it is not a price-fixing mechanism. Section 171 of the CGST Act only relates to the indirect-tax component of the price of goods and services and does not impinge upon the freedom of suppliers to fix their own prices keeping in view relevant commercial and economic factors.
Assessee(s) contended the operation of Section 171 of the CGST Act amounted to price-fixing and is therefore violative of Articles 19(1)(g) and 300A of the Constitution of India. They argued that according to National Anti-profiteering Authority’s(NAA) interpretation of Section 171 of the CGST Act, once any of the events contemplated in Section 171 of the CGST Act 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. Assessee(s) contended 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.
Assessee(s) further contended that the time-frame for which an assessee could be subject to the discipline of Section 171 of the CGST Act, 2017 has been left undefined and open-ended. They contended that 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.
Revenue contended that there is no legal principle on the basis of which the petitioners can contend that the mere absence of a time period, up to which reduced prices are required to be maintained, would render the provision unconstitutional. Revenue further contended that even if Section 171 of the CGST Act is presumed to be a price-fixing legislation, it would not render the section violative of Article 19(1)(g) of the Constitution of India.
The division bench comprising Acting Chief Justice Manmohan and Justice Dinesh Kumar Sharma observed “section 171 of the CGST Act, 2017 only relates to the indirect-tax component of the price of goods and services and does not impinge upon the freedom of suppliers to fix their own prices keeping in view relevant commercial and economic factors. This Court is in agreement with the learned Amicus Curiae that Section 171 of the CGST Actis solely focused on ensuring that the consequential benefit of reduction of the rate of tax by the Government reaches the recipient.”
The assessee(s) were represented by P. Chidambaram, R. Jawahar Lal, Anuj Garg, Mohit Sharma and Harshita.
Revenue was represented by S. Ganesh, Tarun Gulati, Chinmoy Pradip Sharma, Pritesh Kapoor, V. Lakshmikumaran, Monish Panda, Rohan Shah,Abhishek A. Rastogi, Tushar Jarwal, Sparsh Bhargava, Puneet Aggarwal, Sujit Ghosh, S. Suresh, Nikhil Gupta, Shashank Shekhar and Priyadarshi Manish.
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