U.P. Medical Supplies Corporation Ltd. Vs Union of India (Allahabad High Court)
The Allahabad High Court has stayed a substantial GST demand of ₹209.33 crores imposed on U.P. Medical Supplies Corporation Ltd., a state-owned entity that procures and supplies medicines exclusively to government hospitals. The corporation challenged the GST authorities’ claim that such transactions constitute a “supply” under Section 7(1)(a) of the CGST Act, 2017. The petitioner argued that it does not earn profit but merely receives centage (a service charge) from the government to cover operational expenses. While the corporation has paid GST on the centage, it disputes the broader liability imposed on the total value of medicines and liquidated damages received.
The key legal issue in the case revolves around the interpretation of “supply” under Section 7(1)(a). The corporation contends that its transactions do not fall within the definitions of sale, transfer, barter, or exchange as mentioned in the law. The High Court acknowledged the complexity of this issue, emphasizing that constitutional courts must decide such fundamental taxability questions, rather than relying solely on statutory appeals. Given the significant financial implications and legal uncertainty, the court stayed the enforcement of the GST demand and invited further arguments from both parties. It held: (i) whether there is a “supply” in terms of section 7 of the Act is a legal issue to be considered by the court; (ii) the said issue has not been considered by the adjudicating authority; (iii) alternate remedy is not a bar in entertaining the writ petition when legal issue is involved having far reaching consequences; (iv) considering the issue involved stays the operation of the impugned order; directs the department to file counter affidavits. The case is scheduled for hearing in February 2025.
The matter was argued by Ld. counsel Bharat Raichandani
