Challenges to Clauses in Section 17(5) of CGST Act Dismissed; Petitioners Allowed to Seek Relief from Adjudicating Authority Based on Functionality Test
In a significant decision, the Delhi High Court has dismissed the challenges against the constitutional validity of certain clauses within Section 17(5) of the Central Goods and Services Tax Act, 2017 (CGST Act), brought forth by Riveria Commercial Developers Limited and Delhi International Airport Ltd. The court's ruling aligns with the Supreme Court's previous decision in the case of Chief Commissioner of Central Goods and Service Tax v. M/s Safari Retreats Private Ltd., which upheld the validity of these provisions.
The bench, comprising Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, heard two connected writ petitions that primarily sought to invalidate Clauses (c) and (d) of Section 17(5) of the CGST Act. The petitioners argued that these clauses were unconstitutional. However, the Supreme Court's earlier ruling had already settled the matter by affirming their validity.
The court noted that the Supreme Court emphasized the need for a "functionality test" to determine whether a proposed structure constitutes a plant, which would depend on the specific facts of each case. Consequently, the Delhi High Court granted the petitioners the liberty to approach the Adjudicating Authority for relief based on this test.
In addition to the main challenge, the petition filed by Delhi International Airport Ltd. also contested the validity of Circular No.28 dated January 1, 2018. This circular was issued prior to the Supreme Court's judgment in the Safari Retreats case. The High Court directed that this circular must be interpreted in light of the Supreme Court's decision, and any assessment of its applicability should be conducted by the Adjudicating Authority, considering the specific circumstances of the case.
The ruling also addressed the issue of delays encountered by the petitioners in pursuing their proceedings. The court referenced Section 14 of the Limitation Act, 1963, which allows for the exclusion of time spent in bona fide proceedings before a court. Consequently, the petitioners were granted the option to file appropriate applications before the Adjudicating Authority for pragmatic consideration.
The court's decision concludes the petitions along with any pending applications, while allowing the petitioners to seek recourse from the Adjudicating Authority in accordance with the law.
Bottom line:-
Challenge to constitutional validity of certain clauses of Section 17(5) of CGST Act, 2017 dismissed in light of Supreme Court's ruling. Petitioners granted liberty to approach Adjudicating Authority for relief in accordance with law.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Section 17(5), Limitation Act, 1963 Section 14, Circular No.28 dated 01.01.2018
Riveria Commercial Developers Limited v. Union of India, (Delhi)(DB) : Law Finder Doc id # 2960887
