2020 (9) TMI 929 - HC - GST

GST Council's 12% Rate for Specialized Fabrics Upheld, Petition for Uniform 5% Rate Dismissed

The court upheld the GST Council's recommendation of a 12% GST rate for specialized fabrics under Chapters 56 to 59 and dismissed the petition seeking a ... Validity of Notifications - N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 issued by Respondent No. 1 under Section 9(1) of the CGST Act, 2017 - N/N.1/2017Integrated Tax (Rate) dated 28.06.2017 also issued by Respondent No. 1 under Section 5(1) of the IGST Act, 2017 - N/N. 1/2017-State Tax (Rate) dated 30.06.2017 issued by Respondent No.2 under Section 9(1) of the DGST Act, 2017 -conflict with the recommendations made by Respondent No. 3 in its 15th Meeting held on 03.06.2017 - HELD THAT:- This Court referred the matter to Respondent No. 3 in view of the seeming ambiguity in the minutes of the 15th GST Council Meeting, as portrayed by the learned counsel for the Petitioner. The Court prima facie comprehended that the affidavit filed on behalf of Respondent No. 3 was only a proposal of the Joint Secretary (TRU-1), CBEC that was not agreed to or approved by the Council. In these circumstances, in order to have certainty in the matter, the Court deemed that the best course of action would be to have the opinion of the GST Council. Now, the Council in its 38th meeting on 18.12.2019 has deliberated on the matter and has unequivocally confirmed that it had indeed recommended the GST rate of 12% for the fabrics falling under Chapters 56 to 59 of the Customs Tariff. The learned counsel for the Petitioners is not satisfied and persists that the Respondent No. 3 has recommended tax at the rate of 5% for all fabrics. To buttress his contention, he relies upon the reply given by the Union Minister for Finance in response to a starred question raised on 18.07.2017 in the Rajya Sabha. We find the aforesaid contention to be unconvincing and meritless. A perusal of the response reveals that the Union Minister for Finance while responding to a question raised in connection with organized traders and unorganized sellers in textile sectors, stated that the GST rate structure for textile sector was discussed in detail in the GST Council Meeting held on 03.06.2017, and that the Council recommended the detailed rate structure for textile sector. The tabulation which form part of the response reflects the notified GST rates as 5%. This response of the Union Minister for Finance to a query, cannot prevail over the decision of the GST Council. The rate of taxes is jointly decided by the centre and states on the recommendations of the Council. The Council has the power and prerogative to issue recommendations on issues in terms of Article 279A (4) of the Constitution. The composition of Respondent No. 3 and the constitutional scheme of taxation is a clear indication that the functioning of the GST Council is based on collaborative efforts that embody the spirit of cooperative federalism. The coming together of the stakeholders has given rise to a unified system of taxation for the entire country. The impression of contradiction that appeared on comparison between the counter affidavit of Respondent No. 3 and the minutes of meeting has been resolved and conclusively settled. The matter has been deliberated by the body whose decision were called in question. - We cannot sit in appeal and postulate that the decision of the Council is not what they have unwaveringly held it to be - petition dismissed. Issues Involved:1. Early hearing of the petition through video conferencing.2. Notification of GST rate of 5% for all varieties of fabrics under Chapters 50 to 63 of the Customs Tariff.3. Alleged conflict between GST notifications and GST Council recommendations.4. Examination of GST Council’s decision on tax rates for fabrics.Detailed Analysis:1. Early Hearing of the Petition through Video Conferencing:The petitioners sought an early hearing of the petition via video conferencing. The court allowed the application as there was no objection from the respondents. The application was disposed of accordingly, and the court proceeded to hear the main petition for final disposal.2. Notification of GST Rate of 5% for All Varieties of Fabrics:The petitioners, a society of fabric manufacturers, invoked the writ jurisdiction under Article 226 of the Constitution of India, seeking a writ of mandamus to direct the Central Government and the Government of NCT of Delhi to notify the GST rate of 5% for all varieties of fabrics under Chapters 50 to 63 of the Customs Tariff, as recommended by the GST Council.3. Alleged Conflict Between GST Notifications and GST Council Recommendations:The petitioners contended that three GST notifications issued by the Central and State Governments conflicted with the GST Council’s recommendations. They argued that the Council had decided on a uniform GST rate of 5% for all fabrics, but the notifications set different rates, including 12% for certain fabrics under Chapters 56 to 59.4. Examination of GST Council’s Decision on Tax Rates for Fabrics:During preliminary hearings, the court referred the matter to the GST Council to clarify its stance. The GST Council, in its 38th meeting, confirmed that it had recommended a 12% GST rate for specialized and industrial fabrics under Chapters 56 to 59, while a 5% rate was recommended for other fabrics.The court noted that the GST Council’s minutes from its 15th meeting indicated a discussion on tax rates, but the final decision included a 12% rate for certain specialized fabrics. The Council reiterated this in its 38th meeting, confirming that the 12% rate was correctly notified.The petitioners argued that the Council’s recommendation was for a uniform 5% rate, but the court found no merit in this contention. The court emphasized that the GST Council, a constitutional body, had the authority to recommend tax rates and that its decisions were based on collaborative efforts embodying cooperative federalism.The court concluded that the GST Council’s recommendation of a 12% rate for specialized fabrics was valid and that the notifications were in line with these recommendations. The petition was dismissed, and the pending application was disposed of.Conclusion:The court upheld the GST Council’s recommendation of a 12% GST rate for specialized fabrics under Chapters 56 to 59 and dismissed the petition seeking a uniform 5% rate for all fabrics. The decision emphasized the authority of the GST Council in determining tax rates and the collaborative nature of its functioning.