The Supreme Court issued a notice to the central government on Monday, seeking a response in a case challenging the constitutional validity of anti-profiteering provisions under the GST Act.
A three-judge bench, led by Chief Justice of India DY Chandrachud, has agreed to hear the appeal arising out of an order of the Delhi High Court that upheld the constitutional validity of these provisions.
Last month, the Delhi High Court upheld the constitutional validity of Section 171 of the GST Act, which says that the suppliers of goods and services should pass on the benefit of any reduction in the rate of tax or the benefit of input tax credit to the recipients by way of a commensurate reduction in prices.
If the benefit is not passed on to the recipients of the goods or services, it is known as 'profiteering'.
This provision is a consumer welfare measure introduced in the public interest, the high court said.
"It is possible that there may be cases of arbitrary exercise of power under the anti-profiteering mechanism, by enlarging the scope of the proceedings beyond the jurisdiction or on account of not considering the genuine basis of variations in other factors, such as cost escalations on account of which the reduction stands offset, skewed input credit situations, etc.," the high court said.
The court had clarified that such an erroneous application of this mechanism can be set aside, considering each case on its merits. However, the provision itself cannot be struck down, it said.
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