2018 (10) TMI 200 - SC - GST

Parliament has constitutional power to levy GST compensation cess alongside GST without violating double taxation principles

Union of India & Anr. Versus Mohit Mineral Pvt. Ltd. And Vice-Versa

Union of India & Anr. Versus Mohit Mineral Pvt. Ltd. And Vice-Versa - 2018 (17) G. S. T. L. 561 (SC) Issues Involved:1. Legislative competence of Parliament to enact the Compensation to States Act, 2017.2. Whether the Compensation to States Act, 2017 violates the Constitution (One Hundred and First Amendment) Act, 2016.3. Whether the Compensation to States Act, 2017 is a colorable legislation.4. Permissibility of levying Compensation to States Cess and GST on the same taxing event.5. Entitlement of the petitioner for set-off in payment of Compensation to States Cess based on Clean Energy Cess paid till 30th June 2017.Issue-wise Detailed Analysis:Issue 1: Legislative Competence of ParliamentThe petitioners challenged the legislative competence of Parliament to enact the Compensation to States Act, 2017, arguing it transgresses the limits of its power. The Court noted that the term 'cess' refers to a tax levied for a special purpose and that the Act levies a cess in respect to goods and services tax. The Court referenced the Constitution Bench judgment in Union of India Vs. Harbhajan Singh Dhillon, which established that the only question to be asked is whether the matter falls within List II or III. Since no entry in List II or III refers to the cess in question, the Parliament has the residuary power under Article 248. The Court concluded that the Parliament has the legislative competence to enact the Compensation to States Act, 2017.Issue 2: Violation of the Constitution (One Hundred and First Amendment) Act, 2016The petitioners argued that the Act transgresses the mandate of the Constitution (One Hundred and First Amendment) Act, 2016, which aimed to subsume various taxes and cesses into one GST. The Court held that the power to make laws with respect to GST includes the power to levy cess on GST. The Constitution (One Hundred and First Amendment) Act, 2016, does not indicate that no additional cess can be levied. The Court found that the Compensation to States Act, 2017, enacted under the express provision of the Constitution (One Hundred and First Amendment) Act, 2016, does not violate it.Issue 3: Colorable LegislationThe petitioners claimed that the Compensation to States Act, 2017, is a colorable legislation. The Court rejected this argument, stating that the Act was enacted to implement the Constitution (One Hundred and First Amendment) Act, 2016, and fulfill its objective. The Court found no substance in the claim that the Act is colorable legislation.Issue 4: Levying Compensation to States Cess and GST on the Same Taxing EventThe petitioners contended that levying both GST and Compensation to States Cess on the same transaction amounts to double taxation. The Court noted that two separate taxes on different aspects of the same transaction are permissible in law. The Court referenced the Constitution Bench judgment in Federation of Hotel & Restaurant Association of India, which held that overlapping in law does not detract from the distinctiveness of the aspects. The Court concluded that the levy of Compensation to States Cess is an increment to GST, which is permissible in law.Issue 5: Set-off Based on Clean Energy Cess PaidThe petitioners argued for a set-off in payment of Compensation to States Cess based on Clean Energy Cess paid till 30th June 2017. The Court noted that the Clean Energy Cess and the Compensation to States Cess are collected for entirely different purposes and have different distributions. The Court found no legislative indication for giving credit or set-off for Clean Energy Cess already paid. The Court concluded that the petitioner is not entitled to any set-off in payment of Compensation to States Cess.Conclusion:The Court dismissed the writ petition and the transferred case, upholding the legislative competence of Parliament to enact the Compensation to States Act, 2017, and finding no violation of the Constitution (One Hundred and First Amendment) Act, 2016. The Court also ruled that the Act is not a colorable legislation and that levying both GST and Compensation to States Cess on the same transaction is permissible. The petitioner is not entitled to any set-off based on Clean Energy Cess paid.