Case Law Details
Huda Urban Estate And Town And Country Planning Employees Welfare Organization Vs Union of India And Others (Punjab and Haryana High Court)
The HUDA Urban Estate and Town and Country Planning Employees Welfare Organization (HUETCPEWO) have filed Civil Writ Petition No. 8065-2024 contesting the validity of Section 7(1)(aa) of the GST Act. This provision alters the definition of ‘person’ under Section 2(84) of the GST Act and eliminates the concept of mutuality retrospectively from 2017. The Punjab and Haryana High Court, Chandigarh, has taken cognizance of the petitioner’s arguments and issued notice to the respondents. Additionally, the court has temporarily halted the effect and operation of the show cause notice.
The petitioner has raised objections to Section 7(1)(aa) of the Goods and Services Tax Act, introduced via notification dated 21.12.2021 under the Finance Act, 2021. This provision amends the definition of ‘person’ in Section 2(84) of the GST Act. While Section 2(84) originally encompassed associations of persons or bodies of individuals, incorporated or not, within or outside India, Section 7(1)(aa) clarifies that, regardless of any other law or judicial pronouncements, a person and its members or constituents are to be treated as separate entities. Consequently, transactions among them are to be regarded as exchanges between distinct persons.
The petitioner contends that this amendment undermines the principle of mutuality and disrupts mutual transactions within associations, bodies, or companies. Furthermore, the retrospective application of this clause from 2017 is challenged.
The issuance of a demand notice under Section 73(1) of the HGST/CGST Act, 2017 for various fiscal years against the petitioner serves as a consequence of this clause.
In response to the petitioner’s contentions, the Punjab and Haryana High Court has issued notice to the concerned parties, directing them to file replies within a stipulated timeframe. Pending further orders, the court has stayed the effect and operation of the show cause notice dated 18.12.2023.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
Learned counsel for the petitioner has assailed the provisions of Section 108 of Finance Act, 2021 whereby Section 7(1)(aa) has been introduced vide notification dated 21.12.2021 under the Goods and Services Tax Act, 2017 w.e.f. 01.07.2017.
Learned counsel submits that by introducing Section 7(1)(aa), the very definition of person as provided in Section 2(84) of the GST Act, 2017 stands modified, without there being any modification made therein.
It is submitted that as per Section 2(84) of the Act, a person includes an association of persons or a body of individuals, whether incorporated or not in India or outside India, whereas by introducing Section 7(1)(aa), it has been explained that for the purposes of the said clause, it is clarified that notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another.
Learned counsel submits that such explanation and definition of person would result in the very clause of mutuality being done away with and would create a disturbance of mutual transaction between the members of an association, body of individuals or a company. It is submitted that the same has also been made retrospective wrongfully from 2017.
Learned counsel submits that based on the said clause, the notice for demand under Section 73(1) of the HGST/CGST Act, 2017 has been issued for FYs: 2019-20, 2020-21, 2021-22 and 2022-23 against the petitioner.
Notice of motion.
Mr. Gagandeep Singh Malhotra, Jr. Standing Counsel accepts notice on behalf of respondents No.1 and 2; and Ms. Tanisha Peshawaria, DAG, Haryana accepts notice on behalf of respondents No.3 to 5. They seek time to file reply. May do so, on or before the next date of hearing with a copy in advance to the counsel opposite.
In the meanwhile, until further orders, the effect and operation of the show cause notice dated 18.12.2023 (Annexure P-8) shall remain stayed. List again on 03.09.2024.
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