A Critical Analysis of National Anti Profiteering Authority and its Constitutional Validity

Introduction:

National Anti-profiteering Authority (NAA) was constituted by the Central Government to find whether extra input tax credits used by any registered person or the depletion in the tax rate have actually resulted in a corresponding depletion in prices to the recipients. In the 22nd meeting of GST Council at Guwahati, the development of NAA comes in the framework of rate-cutting of a huge number of items.

Article 265 of the Constitution of India

As per Article 265 of the Constitution of India, no tax shall be levied or collected unless it is explicitly and clearly authorised by way of legislation. The Income-tax Act, 1961 (ITA) was passed to provide for imposing and collection of tax on income received by a person.¹ ( Rupesh Jain and Puneeta Kundra, 2016)

CGST – Central Goods and Services Tax

The full form of CGST is Central Goods and Services Tax. All the taxes that were already appropriated as central indirect taxes are included in CGST. They are collected by the central government for the movement of goods and services within the state. The Central Goods and Services Tax Act 2017 asserts that CGS applies to the whole of India except Jammu and Kashmir.

Literally, on movement within a state, both Central Goods and Service Tax and State GST are relevant. In the case of revenues of CGST, it moves to the central government and revenues of SGST it moves to the concerned state government.² (Groww, 2016)

Constitutional Validity of Service Tax – Constitution (88^th Amendment) Act, 2003

The Constitution (88th Amendment) Bill has since been approved by both the Houses of Parliament. The constitutional amendment would empower the centre to levy tax on service as specific items of taxation on account of a new entry in the union list of the seventh schedule of Indian constitution.³ (Dr Sanjiv Agarwal, 2013)

The Constitution (One Hundred and First Amendment) Act, 2016

The One Hundred and First Amendment of the Constitution of India, formally known as The Constitution (One Hundred and First Amendment) Act, 2016, established a national Goods and Service Tax (GST) in India from 1st April 2017. GST Constitutional (101st Amendment) Act’ 2016 subsumes the provisos which are needed for the execution of GST Regime. The current amendments would contain a number of indirect taxes currently being imposed by Central and State Governments into GST, therefore, doing away the passing of taxes and giving a common nationwide market for Goods and Services.⁴ (Sakshi Raje, 2019)

National Anti-profiteering Authority ( NAA )

Section 171 of the Central Goods and Services Tax Act, 2017 accepts NAA. The NAA was organised to observe and examine whether the devaluation or advantage of the input tax credit is outstretching the recipient in the mode of apt depletion in prices. The NAA consists of a five-member committee,

• Chairman – equal to the position of secretary in the government
• Four mechanical members – present/previous commissioners of State tax or central tax departments.

 So, National Anti-profiteering Authority (NAA) is fundamentally formed by the central government to evaluate if the input tax credits used by any registered person or the devaluation in the tax is moved onto the consumer and he/she is safeguarded from the odd price increase for self-interests through GST.⁵ (Cleartax, 2018)

NAA – A Censorious or Critical Examination

While executing the important and notable tax improvements in India, it made huge advantages and disputes in the company world in India, which has followed ignorance with the important law concerning ‘NAA’. This topic has been entrenched in Section 171, CGST, which has shown to be both unsure and interesting simultaneously. After proceeding with the third-order “NAA” is to be noticed the manner in which the GST Acts would function upon in the later concerning the ‘communist’ view. By this, it is meant to elaborate in the beginning the essence and personality or menacing provisos. Goods and Services Acts has also been notably pretentious with the execution of Goods and Services Acts of NAA. The main goal of the proviso is to reduce and restrict the rise in accumulation due to the execution of the important improvements in the area of tax.

Through several incidents and casting the light upon how the proviso can be shown to be blunt from numerous states it can be concluded and accomplished that execution of any improvements in the tax system a short term period of accumulation sticks to. Hence, the legislatures studying from the various events have pronounced to issue a proviso to safeguard in the act itself.

In spite of such circumstances, the section gives that the distributor has to reduce the cost of a good in a comparative way in subsequent situations such as,

 (i) a profit of tax has issued to the distributor

 (ii) a devaluation in the amount of tax on any distribution of goods. 

The provisions stated above can be contemplated to be an infringement of Article 14 and 19 of the Indian Constitution. No exact precision of ‘equivalent depletion’ has been given in the act. So, no regulations have to be stick on to as because the principle of equality has been infringed with the unrestricted option of the executive and aimless discretion, which is capricious in essence. No exact definition of ‘equivalent depletion’ has been given in the act. So, no regulation has to be stick on to. In this respect giving such unconstrained powers of framing plans leads to unrestricted assignment as framing a plan is the top crucial function of the law-makers which cannot be assigned. The Preamble of the act is also inaudible as to the correctness of the power. Because of the intrinsic benefit aim of the dealers in erode, Article 19 (1) (g) is being infringed. The sensible limitations for the curiosity of society are also not clear.

The inferior lawmaking is obviously capricious so the CGST Rules formulated herein are also unlawful in essence. No caution and awareness is found. Therefore, Article 14 is infringed. The price-cutting is also being inflicted on the dealers who infringes Article 19 (1) (g). Even the test of ratio that has been developed by the judicature for inflicting rationale limitations is being not satisfied. The adequacy with regard to significance is not reducible too.⁶ (Harshal Sareen, 2020)

Constitutional Accuracy/Validity Of NAA

1. Section 171 of CGST Act violates Article 14 of the Constitution- Unconstitutional

Section 171 of CGST Act states for the ‘Anti- Profiteering Plans’, accordingly the reasoning as given in the online government brochure is formed on the ‘skills of many countries’ were noticeable rice in the costs has been noticed by the state on the establishment of Goods and Services Tax appropriately. Such execution of provision in India infringes the constitutional rights assured in the Constitution. Because it leads to an endowment of unguided circumspection in the administrative authorities and a capricious act from the state. Besides, this section can be considered as a breach of Section 171 as it gives unguided circumspection being endowed in the administrative authorities. 

“Commensurate depletion in costs”, which has been decided compulsorily by the supplier is stated in Section 171 (1) of the CGST Act. Powers and functions which are not restricted in the Act are given to the officials so formed under the sub-section 2 of the alike proviso. No instruction or standard is being provided in the act by the legislature so as to decide what is ‘commensurate’, the CGST Rules, 18 Rule 126 governs the aspect of ‘commensurate’ reduction. The manner and course of action is left to the authority so formed. This shows boundless discretion being granted in an administrative authority through the law-making proviso that gives unclear and unsure terminologies. Human Rights and exact choice to permit or refuse for the goodness of the law are directly against each other and cant co-occur. Therefore, human right is invalidated with the said proviso and the same should be decided as unconstitutional.

2. Section 171 of CGST Act violates Article 19 (1) (g)- Unconstitutional

By virtue of Article 19(1) (g) of the Constitution, a citizen has a right to carry on any occupation, trade or business which is a fundamental right in India. It has been decided that a corporation is not a national, therefore it cannot carry on an appeal for the imposition of fundamental right under Article 19, even so, a stockholder is given the authority to call on the fundamental rights if they are infringed. Therefore, though a cooperative as a non-citizen cannot have any fundamental right under Article 19 (1), it can satisfy that the challenged provisos violate the fundamental rights of a national and thus void.

3. The Constitution of NAA as determined by the CGST Rules, 2017 is not lawful and is forbidden

The composition of the NAA as stipulated under the Central Goods and Services Act is unlawful and unconstitutional. NAA is a lawful body formed as per section 171 of CGST Act to inspect if the input tax credits used by any recorded individual or the depletion in the tax amount have literally ended in an equivalent depletion in the cost of the goods or services or both provided by him. In addition, the constitution of the body by the NAA involves the below-mentioned members. The NAA shall comprise of,-

(a) a Chairman who has either holds or held a position equal to a position as that of a Secretary in the state; and

(b) Four Technical Members who are or have been Commissioners of either State tax or central tax for at least one year or have held an equal position under the prevailing law, to be suggested by the board.

The provisos of CGST Act and CGST Rules in connection to the composition of NAA are not lawful and forbidden. These provisos affected the source of the freedom of the Judicial system and the Doctrine of Partition of authority. NAA is an authority having partly a judicial character and being such authority its conflict has to follow with some theories consigned by the Supreme Court and the same breaks to obey by them.

4. NAA is also an authority having partly judicial character as it meets for all the essentials stated under, 

• The lawful authority is authorized by law to do any action,
• The decision of such authority would unfavourably affect the issue and,
• Even though the list is absent or two arguing parties, and the competition is among the authority and the issue, and
• The lawful authority is needed to perform lawfully by the law, the conclusion of such an authority will be a partly judicial decision.

NAA is a lawful body whose decisions affect the persons and it is burdened to hold the subjects lawfully. In reality, as per Rule 132 of CGST and Rule 36 of NAA is authorized to call persons to provide proof and to generate records. The authority of tribunal is endowed with NAA to draw proof and provisos of CPC are also made suitable, which understandably shows towards the reality that NAA is executing judicial functions.⁷ (ibid)

Landmark Case Laws

• In the lawsuit of Sudhir Chandra v. Tata Iron & Steel Co. Ltd,⁸ the court held that human rights and total circumspection to permit or refuse goodness of the law are directly against each other and cant co-occur.

• In the lawsuit of Suman Gupta v. State of Jammu & Kashmir,⁹ the court abided that Unguided circumspection and unrestrained alternatives of the administrative is opposite to the directives of fairness being given in the Constitution.¹⁰ (Harshal Sareen, 2020)

• In the lawsuit of Sh. Dinesh Mohan Bhardwaj Proprietor, M/S U.P. Sales Vs Services Versus M/S Vrandavaneshwree,¹¹ Director General of Safeguards, i.e, DGSG found that the respondent has not violated the provisions of section 171 of the CGST Act, 2017 and correspondingly no merit was found in the application and dismissed the petition file by the petitioner.¹² (CMA Susanta Kumar Saha, 2018)

Conclusion

The provisos concerning anti-profiteering are unsure and not clear and need the real insertions due to such obscurities in the act. Moreover, endowing of indecisive circumspection in the administrative powers and a capricious role of the government infringes the fundamental right under Article 14. And it has been completely accepted by the courts that indecisive circumspection and unrestricted options of the administrative is opposite to the directives of equality being given in the Constitution. Furthermore, the section also infringes Article 19 of the Indian Constitution. It can be absolutely said that Section 171 can be contemplated to be violative of article 14 and article 19, as it infringes the rule of equality with the unrestricted alternatives of administrative and frivolous circumspection, which is capricious in nature. Hence, such obscurity in NAA’s law can be demonstrated as menacing equipment or an ineffective proviso.

References:

1. Rupesh Jain and Puneeta Kundra. (2016, January 11). India: Indian Income Tax Law – A Brief Guide . https://www.mondaq.com/india/income-tax/457368/indian-income-tax-law–a-brief-guide. www.mondaq.com.
2. Groww. 2016. “CGST – Central Goods and Services Tax .” https://groww.in/p/tax/cgst/. www.groww.in.
3. Dr. Sanjiv Agarwal. (2013, June 26). CONSTITUTIONAL VALIDITY OF SERVICE TAX . https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=5171#:~:text=The%20Constitution%20(88th%20Amendment)%20Bill,seventh%20schedule%20of%20Indian%20constitution. www.taxmanagementindia.com.
4. Sakshi Raje. (2019, January 1). The Constitution (One Hundred and First Amendment) Act, 2016: A Review . http://lawtimesjournal.in/the-constitution-one-hundred-and-first-amendment-act-2016-a-review/. www.lawtimesjournal.in
5. Cleartax . 5 Sep 2018. ” National Anti-profiteering Authority ( NAA ) – Special Powers & Online Complaint Facility .” https://cleartax.in/s/national-anti-profiteering-authority. www.cleartax.com.
6. Harshal Sareen. 2020.” A Critical Analysis Of National Anti-Profiteering Authority And Its Constitutional Validity .” https://www.indialawjournal.org/a-critical-analysis-of-national-anti-profiteering-authority-and-its-constitutional-validity.php. www.indialawjournal.com.
7. Ibid
8. AIR 1984 SC 1064.
9. 1983 AIR 1235, 1983 SCR (3) 985
10. Supranote 6
11. 2018 (4) Tmi 1377
12. CMA Susanta Kumar Saha. “GST.” RECENT ORDERS PASSED BY NATIONAL ANTI- PROFITEERING AUTHORITY (NAA) – AN ANALYSIS, vol. 27, 2018, p. 5, www.icmai.in.