Yesterday,  the Delhi High Court affirmed the constitutionality of the anti-profiteering provisions within the Central Goods and Services Tax Act, as well as the creation of the National Anti-Profiteering Authority (NAA).

A Division Bench, consisting of Acting Chief Justice Manmohan and Justice Dinesh Kumar Sharma, upheld the validity of Section 171 of the Central Goods and Services Tax Act, 2017 (CGST Act), along with Rules 122, 124, 126, 127, 129, 133, and 134 of the Central Goods and Services Tax Rules, 2017 (CGST Rules).

Section 171 of the CGST Act requires that any reduction in the tax rate on the supply of goods or services must result in a corresponding decrease in the prices passed on to consumers.

The Court, in its judgment, concluded that Section 171 of the CGST Act, which obliges the passing on of any tax rate reduction on the supply of goods or services as a proportionate reduction in consumer prices and establishes the National Anti-Profiteering Authority (NAA), falls within the legislative authority of the Parliament as outlined in Article 246A of the Constitution.

The bench emphasized that Section 171 articulates a distinct legislative policy, is devoid of any delegation of essential legislative functions, and does not function as a mechanism for fixing prices.

The Court dismissed the petitions lodged by more than 100 companies operating in various sectors such as hospitality, fast-moving consumer goods (FMCG), and real estate. Among these companies were Philips, Nestle India, Gillette, Patanjali, Whirlpool, Emaar MGF, and others.

The Court acknowledged the possibility of instances where the anti-profiteering mechanism could be subject to arbitrary use of power. However, it stated that the appropriate remedy in such cases is to challenge and overturn such orders on their merits.

While rejecting the petitions, the Court also dealt with grounds raised by the petitioner companies.

Senior Advocates P Chidambaram, S Ganesh, Tarun Gulati, Chinmoy Pradip Sharma and Pritesh Kapoor along with advocates V Lakshmikumaran, Monish Panda, Rohan Shah, Abhishek A Rastogi, Tushar Jarwal, Sparsh Bhargava, Puneet Aggarwal, Sujit Ghosh, KS Suresh, Nikhil Gupta, Shashank Shekhar and Priyadarshi Manish addressed arguments for the petitioners.