2020 (8) TMI 376 - HC - GST

High Court upholds denial of Essential Commodities Act extension and GST rate reduction on sanitizers & masks

Gaurav Yadav And Anr. Versus Union of India And ors.

The High Court dismissed the petition seeking an extension of the Essential Commodities Act classification for masks and sanitizers and a reduction in the ... Classification of goods - masks and sanitizers - classified as ‘Essential Commodity’ under the Essential Commodity Act, 1955 or not - seeking reduction of rate of GST from 18% to either 5% or 12% - benefit of Notifications dated 12/03/2020 and 21/03/2020 - HELD THAT:- The petitioners have placed on record an Office Memorandum dated 1st July, 2020 issued by the respondents (Annexure P-5 to the memo of writ petition) wherein it has been stated that inclusion of masks and sanitisers under the Act is not being continued as there were no longer any adverse reports from States and Union Territories regarding availability and price of these commodities. There are no reason to issue mandamus and direct the respondents to extend the notification dated 13th March, 2020 or to include the masks and sanitizers as ‘Essential Commodities’ under the Essential Commodities Act, 1955. However, the learned Additional Solicitor General, appearing for the Union of India, assures us that the respondents will monitor the situation carefully and take remedial action if required. Reduction of rate of GST on masks and sanitizers - HELD THAT:- It ought to be kept in mind that the rate of tax cannot be challenged in a Court of law unless it is abundantly confiscatory in nature - In the facts of the present case, nothing has been argued out about how the present rate of GST is confiscatory in law. Merely, because this petitioner feels that the GST rate applied on masks and sanitizers is excessive, this cannot be a reason for issuing a writ of mandamus and direct the respondents to reduce tax on the said commodities. Petition dismissed. Issues:1. Extension of Essential Commodities Act classification for masks and sanitizers.2. Reduction of GST rate on alcohol-based sanitizers.Extension of Essential Commodities Act Classification:The petition sought a writ to extend the classification of masks and sanitizers as 'Essential Commodities' under the Essential Commodities Act, 1955, along with fixing retail prices and reducing the GST rate on alcohol-based sanitizers. The High Court noted that initially, these items were classified as essential commodities and their prices regulated through notifications. However, the government decided not to extend the classification beyond the specified period, citing availability and pricing stability. The Court emphasized that the inclusion of items under the Act is a policy decision, and interference is warranted only if the decision is manifestly unreasonable or arbitrary. The petitioners failed to demonstrate any error in the government's decision, and the Court rejected the notion that manufacturers might exploit the situation without regulation. The Court highlighted that during the coverage period, only pricing was regulated, and quality control was not a relevant issue for the relief sought. Consequently, the Court dismissed the petition, stating that there was no need for a mandamus to extend the classification or regulate prices further.Reduction of GST Rate on Alcohol-Based Sanitizers:Regarding the plea for reducing the GST rate on masks and sanitizers, the Court reiterated that challenging tax rates requires a showing of confiscatory nature, which was not argued in this case. The Court emphasized that personal opinions about tax rates being excessive do not warrant a writ of mandamus to lower taxes. As the petitioner did not establish that the GST rate was confiscatory, the Court found no grounds to entertain the petition and subsequently dismissed it. The Additional Solicitor General assured the Court that the government would monitor the situation and take corrective measures if necessary, but the Court did not find the need to intervene based on the arguments presented.In conclusion, the High Court of Delhi dismissed the petition seeking an extension of the Essential Commodities Act classification for masks and sanitizers, as well as a reduction in the GST rate on alcohol-based sanitizers. The Court upheld the government's decision not to extend the classification, citing availability and pricing stability. Additionally, the Court emphasized that challenging tax rates requires a showing of confiscatory nature, which was not demonstrated in this case. The Court found no grounds to issue a mandamus for tax reduction and dismissed the petition accordingly.