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Gujarat High Court rejected the writ petition challanging the legal validity of Rule 142(1)(a) of CGST Rules and denied to declare the same as ultra vires.

M/S. MAHAVIR ENTERPRISE vs. ASSISTANT COMMISSIONER OF STATE TAX
(Gujarat High Court)

 
The applicant filed this writ petition for seeking reliefs on following grounds.

(a) Quash and set aside the show cause notice in Form GST DRC 01.

(b) declare the Rule 142(1)(a) of CGST Rules ultra vires being in excessive delegation of the powers.

2. The facts giving rise to this writ application may be summarised as under:

a) The applicant seeks to challenge the legality and validity of the show cause notice dated 30th November 2019 issued by the respondent No.1 under Section 122(1) of the CGST Act, 2017 calling upon the writ applicant to show cause why an amount of Rs. 6,87,68,821/- should not be recovered for the alleged contravention of the provisions of the Act and the Rules.

b) Prima facie, it appears on plain reading of the impugned show cause notice that it is the case of the department that the writ applicant is involved in bogus billing transactions without any physical movement of the goods.

c) The applicant has come up before this Court seeking to get the impugned show cause notice quashed and set aside.

d) There is also a challenge to the constitutional validity of Rule 142(1)(a) of the CGST Rules on the ground that the same travels beyond the provisions of the Act and is a result of excessive delegation of powers.

Held by High Court

Rule 142 is specifically with respect to “notice and order for demand of amounts payable under the Act”. We find no merit in the contention of Mr. Poddar that Rule 142(1)(a) is invalid in any manner.

A rule under delegated legislation can be held to be ultra vires the statutory provisions of the Act if it is shown :

(i) that it is beyond the scope of or in excess of the rule­making power of the delegate conferred under the Act, or

(ii) that it is in conflict with or repugnant to any enactment in the Act.

The question whether any particular legislation suffers from excessive delegation has to be decided having regard to the subject matter, the scheme, the provisions of the Statutes including its preamble and the facts and circumstances in the background of which the Statute is enacted. (See Registrar, Co­operative Societies vs. K. Kunjabmu, AIR 1980 SC 350 and State of Nagaland v. Ratan Singh, AIR 1967 SC 212). It is also well settled that in considering the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the Courts must adopt that construction which makes it valid and the legislation can also be read down to avoid its being declared ultra vires [See St. Johns Teachers Training Institute vs. Regional Director, National Council for Teacher Education reported in AIR 2003 SC 1522].

In the case of Ajay Canu vs. Union of India, AIR 1988 SC 2027, the Supreme Court held that it was well established proposition of law that where a specific power is conferred without prejudice to the generality of the power already specified, the particular power is only illustrative and it did not in any way restrict the general power.

It may be noted that Section 164 of the Act confers power on the Central Government to frame the rules. Under Section 164 of the Act, the Central Government has the power to make rules generally to carry out all or any of the purposes of the Act.

In our opinion, Rule 142(1)(a) of the Rules, 2017 is valid and is no manner conflict with any of the provisions of the Act.

The challenge to the legality and validity of the show cause should fail having regard to the scope of judicial review and the challenge to the validity of Rule 142(1)(a) of the Rules should also fail.

In the result, this writ application fails and is hereby rejected.


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Published by

TaxReply

on Jul 2, 2020


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