Supreme Court upholds validity of Goods and Services Tax (Compensation to States) Act, 2017

The Supreme Court today upheld the validity of the Goods and Service Tax (Compensation to States) Act, 2017 and the Goods and Services Tax Compensation Cess Rules, 2017.

The judgment was delivered by a Bench of Justices AK Sikri and Ashok Bhushan.

The petitioner Mohit Mineral Pvt. Ltd. a Company incorporated under the Companies Act was a trader of imported and Indian coal and was engaged in importing coal from Indonesia and South Africa.

The Finance Act, 2010 levied Clean Energy Cess which was in the nature of a duty of excise on the production of coal and was being collected at the time of removal of raw coal, raw lignite and raw peat from the mine to the factory.

The Constitution (One Hundred and First Amendment) Act, 2016 was passed to levy Goods and Services tax. Section 18 of the Amendment Act enabled the Parliament to levy a cess for five years to compensate the States for the loss of revenue on account of GST. On April 12, 2017, Parliament enacted three Acts, namely, (1) The Central Goods and Services Tax Act, 2017; (2) The Integrated Goods and Services Tax Act, 2017; and (3) The Goods and Services Tax (Compensation to States)   Act, 2017.

On May 4, 2017, the Taxation Laws Amendment Act was enacted whereunder several cesses including Clean Energy Cess repealed. The writ petitioner, Mohit Mineral Pvt. Ltd. submitted a representation to the GST Council seeking set off of Clean Energy Cess against GST Compensation Cess.

The petitioner then moved the Delhi High Court praying that the Goods and Service Tax (Compensation to States) Act, 2017 be declared unconstitutional.

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