Date of the Judgement
21.05.2021
Bench
HON'BLE MR. JUSTICE RAJIV SHAKDHER
HON'BLE MR. JUSTICE TALWANT SINGH
Parties
Petitioner - Gurcharan Singh
Respondent - Union of India
Facts
● The applicant is an 85-year-old woman. He has petitioned this Court to have the IGST imposed on the import of an oxygen concentrator that was provided to him by his nephew.
● The petitioner claims that the tax is discriminatory, unjust, and irrational and that it infringes on his right to life and health. The payment of IGST at the rate of 12% was needed to clear the oxygen concentrator via customs.
● It's worth noting that, prior to 01.05.2021, an individual importer would have been required to pay IGST at a rate of 28% on an oxygen concentrator provided to him for personal use.
● Unlike oxygen concentrators, which were imported for commercial use, this was not the case. The IGST on oxygen concentrators manufactured for industrial use was and is levied at a rate of 12%.
● To address this inconsistency, the State claims to have released the impugned notice, in which the IGST on oxygen concentrators imported by individuals for personal use and supplied free of charge was reduced to 12%.
● The State claims that it went even further by issuing notification, which exempted oxygen concentrators imported for the purpose of COVID relief from the imposition of IGST in cases where the importer was the State Government or any entity, relief agency, or statutory body authorised in this regard by a court.
● However, the exemption is only valid until June 30, 2021. This is why, on May 5, 2021, it is suggested that, because the State has already gone too far, it should go even further and exempt even individual importers who had been given free oxygen concentrators from paying IGST.
Issues
1. Is the State's imposition of IGST on oxygen concentrators that were directly imported by individuals, albeit at no expense, without the assistance of a canalising agency, in violation of Article 14 of the Constitution?
2. If the State will have to show that levying and collecting the contested tax in times of pandemic, war, drought, floods, and other similar circumstances would serve the public interest under Article 21 of the Constitution, which includes the right to health and affordable treatment?
3. If Article 21 of the Constitution imposes a positive duty on the State to provide adequate services for the protection and preservation of the health and well-being of those who live within its jurisdiction?
4. What is remedy is available to the petitioner?
Analysis
● IGST has taken the position of countervailing duty, which was imposed under Section 3 of the CTA. CVD was historically imposed on manufactured products to ensure that domestic producers had a level playing field. As a result, the CVD imposed on imported products was the same as the basic excise duty imposed on a similar product produced or manufactured in India. With the passage of the GST Act, it is now possible to levy both Central and State GST at the same time.
● Article 246A(2) grants Parliament the exclusive authority to levy GST on goods and services supplied in the course of interstate trade and commerce. As previously stated, the clarification to Article 269A(1) establishes a deeming fiction qua imported products and services by treating those transactions as if they occurred in the course of interstate trade or commerce. As a result, as previously said, IGST is imposed on imported products.
● Although there is no legal right to tax exemption, if the state invokes the provisions of Section 25 of the Customs Act, such delegated legislation may be challenged in court. Article 14 of the Constitution is violated by the contested notice because it is manifestly unconstitutional.
● The challenged notification is irrational since there is no discernible difference between the two types of oxygen concentrator imports. One is provided by the state and its departments, and the other is provided by the citizen as a gift for personal use. As a result, there is no sufficient deciding principle.
● Despite the fact that the oxygen concentrator he imported was a gift and is for personal use, the applicant is unable to seek exemption from IGST due to the conditions set out in the notification dated 03.05.2021.
● It exempts from IGST only oxygen concentrators that are imported for COVID relief through a canalizing entity, which creates a manifestly arbitrary and unfair distinction between two identically situated consumers based on how the oxygen concentrator was imported, in our opinion. IGST is thus fully waived, i.e. exempted, if the oxygen concentrator is imported via a canalizing agency, as per notification dated 03.05.2021.
Judgement
● Issue 1 - Due to a lack of sufficient medical resources, people infected with the coronavirus, as well as their families and friends, were forced to fend for themselves and find other means of survival. Since there were insufficient beds in hospitals for critically ill patients, other patients were forced to search for alternative sources of supply that were a viable alternative to LMO. Oxygen concentrators seemed to be a viable option. In this sense, it is necessary to take judicial note of the fact that, since the production and availability of oxygen concentrators did not keep pace with demand, people searched for oxygen outside of our borders.
● Individuals, such as the applicant, being excluded from the benefits of the 03.05.2021 notification solely because they chose to receive the oxygen concentrators as a gift, though directly, rather than through a canalizing entity, is, in our view, a violation of Article 14 of the Constitution.
● Although it is permissible for the state to designate a class of people to whom tax exemption should be extended, it is not permissible for the state to exclude a group of people who might otherwise fall into the exempted category by drawing an artificial, unfair, and substantially unsustainable line.
● Issue 2 and 3 - Although it is acknowledged that the right to health, among other things, is a second-generation right that derives from the right to life enshrined in Article 21 of the Constitution, the right must be tempered because the State does not have limitless resources. This theory, as articulated by the courts, takes on a new dimension and hue in the face of a massive calamity (whether natural or man-made) that affects a wide range of people, crippling their ability to contribute to the State's capital in the form of duties, taxes, and rates, in our view.
● If the state wanted its intervention to be upheld, it should have shown that the revenue it will be able to raise as IGST on oxygen concentrators manufactured under the circumstances in which the applicant is placed will be far greater than the cost of administering the IGST collection on such transactions.
● These specifics did not need to be mathematically precise; a broad-brush approach would have sufficed to convince us that refusing relief to the applicant and others in similar situations was in the public interest. The State's counter-affidavit provides us with no information about this crucial subject.
● By citing his own circumstances, the complainant has shown that the IGST imposes a "distinct and visible burden" that is directly due to its imposition. The State could have discharged its onus, in our view, by referring to facts and figures that would have convinced us that levying and collecting IGST on individuals in similar circumstances to the petitioner would ensure the public's overall good in the fight against coronavirus.
● In times of war, drought, floods, epidemics, and pandemics, the state should relent, or at the very least lessen the burden of exactions in the form of taxes, duties, prices, and cess, because such an approach enables a person to live a life of dignity, which is a facet of Article 21 of the Constitution.
● The notification dated 03.05.2021 exempts oxygen concentrators from IGST if they are manufactured free of charge, but through a canalizing agency, until June 30, 2021. If the State had intended to handle people in similar situations to the petitioner on an equal footing with those who are subject to the notification dated 03.05.2021, it might have extended the exemption to them as well and then removed it once normalcy was restored.
● Issue 4 - On the basis that an artificial, unfair, and unreasonable distinction has been drawn between persons who are similarly situated as the petitioner and those who import oxygen concentrators, declaratory relief may be granted to the effect that the imposition of IGST on oxygen concentrators imported as gifts, i.e., free of charge, for personal use, is a violation of Article 14 of the Constitution.
● Persons in a similar situation to the applicant, i.e., those who receive imported oxygen concentrators as gifts for personal use, cannot be compared to those who import oxygen concentrators for commercial use.
● That said, the State may be correct in arguing that the Court cannot issue a writ of mandamus ordering the State to issue an exemption notice in favour of the petitioner or anyone in a similar situation. The State has the authority to submit an exemption notice under Section 25 of the Customs Act.
Conclusion
The Delhi High Court quashed a Central government notification levying 12 percent Integrated Goods and Service Tax (IGST) on Oxygen Generators imported as gifts for personal use amid the COVID-19 pandemic on Friday, calling it a "George Floyd moment" for the country's people.
It was decided that an arbitrary, unequal, and irrational distinction was made between people who import oxygen concentrators through a canalising organisation and people who receive imported oxygen concentrators as gifts for personal use. The imposition of the IGST in this manner violates Article 14 of the Constitution and is thus unconstitutional.
