Union Of INDIA & Anr. vs. Mohit Mineral PVT. LTD.

Held

The Court held that the Goods and Services Tax (Compensation to States) Act, 2017, is constitutionally valid and within the legislative competence of Parliament. It reasoned that Article 270 of the Constitution empowers Parliament to levy any cess for specific purposes by law, and Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, explicitly grants Parliament the power to provide for compensation to states for revenue loss arising from GST implementation through law, which can include levying a cess. The Court found no violation of the Constitution (One Hundred and First Amendment) Act, 2016, or its objectives, and rejected the contention of colourable legislation. Regarding the permissibility of levying both GST and GST Compensation Cess on the same taxable event, the Court held that these are separate and distinct imposts levied on different aspects of a transaction and are permissible in law, citing precedents on the concept of distinct aspects and the absence of inherent invalidity in levying taxes twice over. Finally, the Court ruled that the petitioner is not entitled to set off the Clean Energy Cess paid on coal stocks against the GST Compensation Cess, as both cesses are collected for wholly different purposes (clean energy initiatives versus state revenue compensation) and the Compensation to States Act, 2017, or its rules do not provide for such a set-off. The Court found no legislative policy reflected for such a credit.

Facts

The petitioner, Mohit Mineral Pvt. Ltd., challenged the constitutional validity of the Goods and Services Tax (Compensation to States) Act, 2017, and the levy of GST Compensation Cess. The petitioner argued that the Act was beyond the legislative competence of Parliament and violated the spirit of the Constitution (One Hundred and First Amendment) Act, 2016. Furthermore, the petitioner sought to set off the Clean Energy Cess paid on coal stocks till June 30, 2017, against the GST Compensation Cess payable. The Union of India and other revenue authorities defended the validity of the Act and the levy, and opposed the set-off claim, asserting distinct purposes for the two cesses.

Key Issues

1. Whether the Goods and Services Tax (Compensation to States) Act, 2017, is beyond the legislative competence of Parliament, particularly in light of Article 246A of the Constitution and the Constitution (One Hundred and First Amendment) Act, 2016? The petitioner argued that the Act was not covered by any specific entry and that the power to levy GST did not inherently include the power to levy a compensation cess. The revenue contended that Parliament has the residuary power and that the Constitution (One Hundred and First Amendment) Act, 2016, expressly empowers Parliament to provide for compensation to states by law, which includes levying a cess. 2. Whether the levy of GST Compensation Cess on the same taxable event as GST is permissible, or if it amounts to unconstitutional double taxation? The petitioner argued that levying two taxes on the same transaction is invalid. The revenue contended that the two imposts are distinct and levied on different aspects of the transaction, thus not violating any prohibition against double taxation. 3. Whether the petitioner is entitled to set off the Clean Energy Cess paid on coal stocks till June 30, 2017, against the GST Compensation Cess payable? The petitioner claimed a right to set off based on prior payment. The revenue argued that the Clean Energy Cess and the GST Compensation Cess are collected for entirely different purposes and that there is no legislative provision for such a set-off.