Kay Pan Fragrances (P) Ltd Vs. Union of India

The court proceedings began with representations from legal counsels representing both the petitioner and the respondents. Sri Dhruv Agarwal, a learned Senior Advocate, assisted by Pooja Talwar, presented the case for the petitioner, while Sri S.P. Singh, an Additional Solicitor General of India, assisted by Sri Sanjay Kumar Om, represented the respondent No.1. Sri M.C. Chaturvedi, an Additional Advocate General, aided by Sri B.P. Singh Kachhwah, acted on behalf of respondent Nos.2 to 5.

The writ petition was filed seeking several reliefs, including declaring Section 7 of the Central Goods and Service Tax Act, 2017, along with Schedule II, as ultra vires the Constitution and null and void. Similar relief was sought for Section 7 of the U.P. Goods and Service Tax Act, 2017. Additionally, the petitioner requested a mandamus directing the respondent authorities not to take coercive action based on an impugned order dated 07.02.2022, and to quash the said order. The petitioner also sought the waiver of the mandatory 10% deposit for filing an appeal under Section 107 of the U.P. GST Act, 2017, and costs for the petition.

Sri Dhruv Agarwal, representing the petitioner, argued that Article 246-A does not confer the power to impose tax on the sale of goods. Therefore, the enactment of Section 7 of the Central Goods and Services Tax Act, as well as its counterpart in the U.P. Goods and Service Tax Act, should be deemed unconstitutional.

Further arguments and counter-arguments ensued from both sides, delving into the intricacies of constitutional law, taxation, and the interpretation of relevant statutes. The petitioner’s counsel contended that the inclusion of sales transactions within the scope of supply and the imposition of taxes on such sales exceeded the constitutional mandate.

In response, the respondent’s counsels presented arguments defending the legality and constitutionality of the provisions in question, asserting that they were in accordance with the constitutional framework and necessary for effective tax administration.

The court considered the submissions of both parties, examined relevant legal precedents, and evaluated the constitutional validity of the provisions challenged by the petitioner. After thorough deliberation, the court reserved its judgment on the matter, which would be announced at a later date.

The case involves a challenge to the constitutional validity of certain provisions of the Central Goods and Services Tax Act, 2017 (referred to as ‘the CGST Act’) and the U.P. Goods and Services Tax Act, 2017 (referred to as ‘the UPGST Act’). The petitioner argues that these Acts lack legislative competence, among other points.

1.Legislative Competence: The petitioner contends that the Acts lack the authority to legislate on certain matters. They argue that the word ‘supply’ as used in the Acts does not encompass ‘sale’. They cite judgments of the Supreme Court to support their argument. Additionally, they reference Article 366(29A) and Entry 54 of List-II of the VIIth Schedule of the Constitution, which they interpret as limiting the taxation power to specific goods, excluding sale of goods in general.

2.Opportunity of Hearing: The petitioner claims that they were not provided with an opportunity for a hearing as required under Section 75(4) of the CGST/UPGST Act.

3.Breach of Natural Justice: The petitioner asserts that all relevant documents were not provided to them, leading to a breach of principles of natural justice in the assessment order.

4.Support for Impugned Order: On the other hand, the Additional Solicitor General and the Additional Advocate General argue in support of the impugned order, stating that the provisions of Section 7 of the CGST Act/UPGST Act are valid and not ultra vires.

5.Standard for Challenge to Constitutional Validity: The Additional Advocate General argues that a challenge to the constitutional validity of a statutory provision can only be entertained if the petitioner can demonstrate a lack of legislative competence to enact the impugned provision.

The arguments revolve around the interpretation of statutory provisions, constitutional provisions, and principles of natural justice. The court will have to consider these arguments to determine the constitutionality and validity of the challenged provisions.

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