Kay Pan Fragrances (P) Ltd VS Union Of India

Act, 2017 (CGST Act) and the U.P. Goods and Services Tax Act, 2017 (UPGST Act), which include the transaction of sale within the scope of supply and levy tax on such sales, is beyond the legislative competence of the Parliament and the State Legislature respectively. 

The impugned provisions violate the principles of federalism enshrined in the Constitution as they encroach upon the exclusive domain of the States to levy taxes on the sale of goods under Entry 54 of List II of the Seventh Schedule. 

The inclusion of the transaction of sale within the scope of supply and the levy of tax on such sales under the impugned provisions is against the settled principles of interpretation of taxing statutes, where transactions specifically mentioned in a statute cannot be taxed by implication. 

The impugned provisions create an artificial distinction between goods and services, which is impermissible under the constitutional scheme. This results in undue hardship and confusion for taxpayers. 

The impugned order dated 07.02.2022 passed by the respondent no.4 (Annexure nos. 29) is arbitrary and without jurisdiction as it seeks to enforce provisions that are unconstitutional. 

The requirement of a mandatory 10% deposit for filing an Appeal under Section 107 of the U.P. GST Act, 2017, is onerous and unjust, particularly when challenging orders that are prima facie illegal and unconstitutional. 

Therefore, the petitioner prays for the issuance of writs of declaration, mandamus, and certiorari as mentioned in the reliefs sought, along with costs.

1. Sri S.P. Singh, learned Additional Solicitor General of India, assisted by Sri Sanjay Kumar Om, learned Central Government Standing Counsel for respondent No.1, submits in opposition as follows:

(i) Article 246-A confers concurrent powers on the Parliament and the State Legislatures to make laws with respect to goods and services tax (GST), including taxes on the supply of goods or services or both. Therefore, the impugned provisions fall squarely within the legislative competence of the Parliament and the State Legislature.

(ii) The impugned provisions are essential for the effective implementation of the GST regime, which aims to create a uniform tax structure across the country, eliminating the cascading effect of taxes and promoting ease of doing business.

(iii) The impugned order dated 07.02.2022 passed by respondent no.4 is a valid exercise of administrative authority in accordance with the provisions of the GST Acts and cannot be termed as arbitrary or without jurisdiction.

(iv) The requirement of a 10% deposit for filing an Appeal under Section 107 of the U.P. GST Act, 2017, is a procedural requirement aimed at curbing frivolous litigation and cannot be considered onerous.

(v) Therefore, the respondent authorities pray for the dismissal of the writ petition with costs.

2.Sri M.C. Chaturvedi, learned Additional Advocate General, assisted by Sri B.P. Singh Kachhwah, learned Standing Counsel for respondent Nos.2 to 5, adopt the submissions made by the learned Additional Solicitor General and submit that the writ petition lacks merit and should be dismissed with costs.

The court has reserved its judgment after hearing the arguments from all parties involved.

The proceedings involved a writ petition presented by the petitioner, with Sri Dhruv Agarwal, a learned Senior Advocate, assisted by Pooja Talwar, presenting the petitioner’s case. On the respondent’s side, Sri S.P. Singh, a learned Additional Solicitor General of India, with assistance from Sri Sanjay Kumar Om, served as counsel for respondent No.1. Sri M.C. Chaturvedi, a learned Additional Advocate General, supported by Sri B.P. Singh Kachhwah, served as counsel for respondent Nos.2 to 5.

The petitioner sought various reliefs through the writ petition, including challenging the validity of Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act), and the U.P. Goods and Services Tax Act, 2017 (UPGST Act), concerning the taxation of sales transactions. Additionally, they sought directives against coercive actions by the respondent authorities, quashing of an impugned order, and waiver of the mandatory deposit for filing an appeal.

In their submissions, Sri Dhruv Agarwal argued several points. Firstly, he contended that Article 246-A does not grant the power to impose taxes on the sale of goods, thus questioning the legislative competence of Section 7 of both the CGST Act and UPGST Act. Secondly, he argued that the term ‘supply’ does not inherently encompass ‘sale’, citing judgments from the Supreme Court. Thirdly, he referenced Article 366(29A) and Entry 54 of List-II of the Constitution, emphasizing that the power to tax sales is limited to specific goods, implying that laws cannot levy taxes on general sales of goods. Furthermore, he pointed out procedural irregularities such as lack of opportunity for hearing and incomplete document disclosure, alleging violations of principles of natural justice.

In contrast, the Additional Solicitor General and the Additional Advocate General supported the validity of Section 7, contending that the impugned provisions were within the legislative competence and constitutionally sound.

Sri M.C. Chaturvedi further argued that challenges to statutory provisions’ constitutionality must demonstrate a lack of legislative competence as a prerequisite for consideration.

The hearing encompassed a thorough examination of constitutional provisions, legislative competence, and procedural fairness, highlighting the complexities of tax legislation and administrative procedures.

The writ petition in question was heard by a bench comprising Sri Dhruv Agarwal, a senior advocate representing the petitioner, assisted by Pooja Talwar, and Sri S.P. Singh, the Additional Solicitor General of India, assisted by Sri Sanjay Kumar Om, representing the respondent No.1. Additionally, Sri M.C. Chaturvedi, assisted by Sri B.P. Singh Kachhwah, appeared as the learned Additional Advocate General representing the respondent Nos.2 to 5.

The petitioner sought several reliefs through the writ petition, including declarations of certain sections of the Central Goods and Service Tax Act, 2017 and the U.P. Goods and Service Tax Act, 2017 as ultra vires the Constitution, null, and void. They also requested directions to refrain from coercive action based on an impugned order, and the quashing of said order among others.

Sri Dhruv Agarwal, representing the petitioner, argued that the enactment of Section 7 of the CGST Act and UPGST Act lacked legislative competence as it doesn’t confer power to impose tax on the sale of goods. He contended that the term ‘supply’ does not inherently include ‘sale,’ citing precedents to support his argument. Additionally, he invoked constitutional provisions and case law to assert that the legislative power to tax sales of goods is limited, and therefore, the impugned sections were unconstitutional. Agarwal further highlighted procedural deficiencies in the assessment process, alleging a breach of natural justice.

On the contrary, the learned Additional Solicitor General and the learned Additional Advocate General defended the validity of Section 7, arguing that both Parliament and the State Legislature had the requisite legislative competence. They contended that the impugned provision did not infringe any fundamental rights of the petitioner and emphasized the presumption of validity attached to statutory provisions.

After hearing the arguments and examining the records, the bench deliberated on the matter. They scrutinized the contentions presented by both sides.

In the end, the court was tasked with determining whether Section 7 of the CGST Act/UPGST Act was constitutionally valid. They weighed the arguments put forth by the petitioner and the respondents, considering relevant constitutional provisions, legal precedents, and the principles of natural justice.

The summary captures the essence of the proceedings, including the arguments raised by the parties and the court’s task of evaluating the constitutional validity of the impugned statutory provisions.

Download PDF:

For Reference Visit:

Read Another Case Law:

GST Case Law: