A division bench of the Delhi High Court has held that Section 64A of Sale of Goods Act has no applicability to the obligation under Section 171 of the Central Goods and Services ( CGST ) Act.
The assessee(s) contended that the levy of penalty and interest cannot be ordered in the absence of corresponding specific substantive provisions under the CGST Act. They submitted that the consequences of the breach of Section 171 of CGST Act should have been provided for in the first instance in the CGST Act itself and such wide and uncontrolled powers could not have been conferred on National Anti-profiteering Authority(NAA) under Rules 127 and 133 of CGST Rules, 2017. The assessee further contended that they were deserving of tax exemption under provisions of section 64 A of Sale of Goods Act.
Revenue contended that there is provision for recovery of the profiteered amount under Section Rule 133(3)(b) of the CGST Rules, 2017 prescribed under Section 171(3) of the CGST Act which empowers NAA to order a supplier to 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 [18%] 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 including interest, as the case may be.
Revenue further contended that Section 64A of Sale of Goods Act has no applicability to the obligation under Section 171 of the CGST Act as the former only confers a discretion on the buyer to reduce the contract price to the extent of reduction in taxes, whereas Section 171 imposes a positive obligation on the supplier to make a commensurate reduction in the price when the Government reduces the rate of tax.
The division bench comprising Manmohan ( Chef Justice ) and Dinesh Kumar Sharma observed that as the section 64A of Sale of Goods Act only confers a discretion on the buyer to reduce the contract price to the extent of reduction in taxes, whereas Section 171 of CGST Act imposes a positive obligation on the supplier to make a commensurate reduction in the price when the Government reduces the rate of tax. The bench held that section 64A of Sale of Goods Act has no applicability to the obligation under Section 171 of the CGST Act
The bench further observed that tax reduction is given by sacrificing tax revenue and hence the Governments are legally competent to direct the suppliers to pass on the benefit of such tax reduction to the consumers after its notification. Any contract made in violation of public policy of passing on the benefit would be void.
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.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
