HC Admits Plea challenging the Constitutional Validity of GST Compensation Cess: Directs Dept to Not to take Coercive Steps for Non-payment [Read Order]

GST Cess

A division bench of the Delhi High Court in recently admitted a writ petition challenging the constitutionl validity of the GST Compensation Cess on coal under the new indirect tax regime, rolled out on last July in the country.

while admitting the plea, a bench comprising  Justices S Muralidhar and Prathibha M Singh have noted that there is prima facia case in the contentions of the petitioners.

The Petitioner, a trader of imported and Indian coal have challenged the Constitutional validity of levy of the  Goods and Services Tax (GST) Compensation Cess. Advocate J.K Mittal, counsel appeared on behalf of the petitioners contended that the Parliament did not propose or intend to use the GST regime to impose new cesses.

He contended that Section 18 of the COI 101st Amendment Act does not enable the Parliament to levy any cess which stood abolished in terms of the Third Schedule of the TLA Act.

After hearing the petitioners version, the bench found that there is a prima facie merit in the contention of the Petitioner, based on the history of the abolition of the Clean Energy Cess and the introduction of the GST regime, that the power of Parliament to enact the impugned Act cannot be traced to Section 18 of the COI 101″ Amendment Act. “There is therefore a prima facie case made out as regards the legislative competence of the Parliament to enact the impugned Act.”

“Another aspect of the matter is that Section 8 of the impugned Act contemplates levy of “a cess on such intra-State supplies of goods or services or both”, the same that is provided in Section 9 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and such “inter-State supply of goods and services or both” as provided for in Section 5 of the Integrated Goods and Scrvices Tax Act, 2017 (‘IGST Act’). Therefore, it is clear that cess is being levied on the same taxable event that is the subjecl matter of the levy under the CGST and lGST Acts, viz., supply of goods and services.”

Granting a major relief to the petitioners, the bench said that since they have already paid the Clean Energy Cess in terms of FA Act, 2010, they should not be required to make any further payment. “However, on stocks of coal on which no Clean Energy Cess under the FA, 2010 was paid, any payment made in terms of the impugned Act would be subject to the result of this petition,” the bench added.

The bench further said that in the event of the Petitioner succeeding in the present petition, the Petitioner would be entitled to a refund of amounts of Clean Energy Cess paid under the Act.

“To facilitate the implementation of this interim order, it is necessary for the officers of the concerned Department, charged with the responsibility of levying and collecting Clean Energy Cess on coal to depute a team to the Petitioner’s business premises to verify on how much of the stock of coal Clean Energy Cess under the FA, 2010 already stands paid. Subject to the Petitioner furnishing to the satisfaction of the officers proof of such payment, the Petitioner will be given credit for such payment and will not be required to make any further payment under the impugned Act for effecting sales and clearances. Till such time the said exercise is completed, no coercive steps will be taken against the Petitioner to recover the levy under the impugned Act.”

Read the Full Text of the Order Below