2021 (8) TMI 1007 - HC - GST

High Court grants interim relief in challenge to CGST Rule 31A(3) validity, stays order pending next hearing.

The High Court of Karnataka granted interim relief in a writ appeal challenging the constitutional validity of Rule 31A(3) of the CGST Rules, 2017. The ... Constitutional validity of subordinate legislation - ultra vires - value of supply in betting, gambling and horse racing - Rule 31A(3) of the CGST Rules, 2017 - interim stay - prima facie case for interim reliefRule 31A(3) of the CGST Rules, 2017 - ultra vires - value of supply in betting, gambling and horse racing - Whether the operation of the Single Judge's order declaring Rule 31A(3) of the CGST Rules, 2017 ultra vires should be stayed pending hearing of the appeal. - HELD THAT: - The High Court, after hearing counsel, found that the appellants had made out a prima facie case warranting interim relief in respect of the challenge to Rule 31A(3) which prescribes the value of supply of actionable claim in betting, gambling or horse racing. The court noted earlier authority placed before it and, balancing the limited interim considerations, concluded that maintaining the status quo by staying the operation of the impugned Single Judge order was appropriate until the appeal is finally heard. The order grants only an interim stay and does not determine the substantive question of the constitutional validity of the Rule on merits.Operation of the Single Judge's order declaring Rule 31A(3) ultra vires is stayed until the next date of hearing.Admission for final hearing - procedural maintainability of appeal - Whether the writ appeal should be admitted for final hearing. - HELD THAT: - On consideration of the question of admission, the High Court admitted the appeal for final hearing. This is an interlocutory procedural determination permitting full adjudication of the substantive challenge to Rule 31A(3) at a subsequent hearing.The appeal is admitted for final hearing.Final Conclusion: The High Court admitted the writ appeal for final hearing and granted an interim stay on the operation of the Single Judge's order declaring Rule 31A(3) of the CGST Rules, 2017 ultra vires; the stay to continue until the next listed date. Issues:Challenge to the constitutional validity of Rule 31A(3) of the CGST Rules, 2017.Analysis:The High Court of Karnataka heard the present writ appeal arising from an order dated 02.06.2021 passed in W.P.No.11168/2018. The appeal was admitted for final hearing after considering the arguments of the learned counsel for the parties. The respondents had challenged the constitutional validity of Rule 31A(3) of the CGST Rules, 2017, and the Single Judge had declared the rule as ultra vires. Rule 31A pertains to the value of supply in the case of lottery, betting, gambling, and horse racing. It specifies the determination of the value of supply in these specific cases, including lotteries run by the State Government and actionable claims in the form of chance to win in betting, gambling, or horse racing in a race club.The Court took note of the arguments presented by the learned Additional Advocate General and the counsel for the parties. Reference was made to the judgment in Skill Lotto Solutions Pvt. Ltd. vs. Union of India and Others reported in 2020 SCC Online SC 990. After hearing all parties, the Court was of the opinion that the appellants had made out a prima facie case for the grant of interim relief. Consequently, the operation of the impugned order declaring Rule 31A(3) as ultra vires was stayed until the next date of hearing, which was listed for 07.10.2021. The judgment provided a detailed analysis of the legal provisions and arguments put forth by the parties, leading to the decision to grant interim relief and stay the operation of the impugned order.