Delhi High Court Upholds Constitutional Validity of GST Anti-Profiteering Mechanism
Tata Play Ltd's Allegations of Profiteering to Be Re-examined by GST Appellate Tribunal
In a significant judgment, the Delhi High Court has upheld the constitutional validity of Section 171 of the Central Goods and Services Tax Act, 2017, and its corresponding rules, which govern the anti-profiteering measures under the GST regime. The judgment was delivered by a division bench comprising Justices Prathiba M. Singh and Shail Jain in response to petitions filed by Tata Play Ltd, a major player in the Direct-to-Home (DTH) service sector, challenging the legitimacy of the anti-profiteering provisions.
The court's ruling comes amidst Tata Play Ltd's allegations that it was unfairly targeted for profiteering by not passing the benefits of Input Tax Credit (ITC) to its consumers. The company argued that the increase in GST rates from 15% to 18% for DTH services negated any potential profiteering, as the additional tax cost was absorbed without altering the maximum retail price (MRP) of its packages.
In the detailed judgment, the Delhi High Court reiterated the stance taken in the earlier case of Reckitt Benckiser India Pvt. Ltd. v. Union of India, where the constitutional validity of the anti-profiteering provisions was upheld. The court emphasized that these measures are essential consumer welfare regulatory mechanisms designed to prevent unjust enrichment by businesses at the expense of consumers.
The judgment highlighted that while the provisions themselves are valid, individual orders under the anti-profiteering mechanism could still be challenged based on their merits. This offers a pathway for entities like Tata Play Ltd to contest specific findings of profiteering if they believe them to be erroneous.
The court also noted the procedural changes in the handling of anti-profiteering complaints. With the disbanding of the National Anti-Profiteering Authority (NAPA), these cases will now be handled by the Principal Bench of the GST Appellate Tribunal. The tribunal, empowered under recent notifications, will reassess Tata Play Ltd's case, initially reported by the Director General of Anti-Profiteering.
The court set aside the impugned order dated August 29, 2022, by NAPA, which claimed Tata Play Ltd had profiteered by over Rs 450 crores. The matter is remanded to the GST Appellate Tribunal for fresh consideration, with a hearing scheduled for October 14, 2025. The court clarified that its judgment does not reflect on the merits of the profiteering allegations but focuses on procedural fairness and adherence to statutory provisions.
This decision underscores the judiciary's role in balancing regulatory oversight with fair adjudication processes, ensuring that businesses can operate within a framework that is both robust and just.
Bottom Line:
The constitutional validity of Section 171 of the Central Goods and Services Tax Act, 2017, and related Rules upheld; however, individual orders under anti-profiteering mechanism may be challenged on merits.
Statutory provision(s): Central Goods and Services Tax Act, 2017 - Section 171, Rules 122, 124, 126, 127, 129, 133, 134 of the Central Goods and Services Tax Rules, 2017.
Tata Play Ltd v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2790340
