The Evening Wrap: Supreme Court says GST Council recommendations not binding on Centre and States

The Supreme Court on Thursday, in a judgment championing the importance of “cooperative federalism” for the well-being of democracy, held that Union and State legislatures have “equal, simultaneous and unique powers” to make laws on Goods and Services Tax (GST) and the recommendations of the GST Council are not binding on them. The apex court’s decision came while confirming a Gujarat High Court ruling that the Centre cannot levy Integrated Goods and Services Tax (IGST) on ocean freight from Indian importers. “The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and the states. They are recommendatory in nature… The recommendations only have a persuasive value. To regard them as binding would disrupt fiscal federalism when both the Union and the states are conferred equal power to legislate on GST,” a Bench led by Justice D.Y. Chandrachud held. The court emphasised that Article 246A (which gives the States power to make laws with respect to GST) of the Constitution treat the Union and the States as “equal units”. “It confers a simultaneous power (on Union and States) for enacting laws on GST… Article 279A, in constituting the GST Council, envisions that neither the Centre nor the states are actually dependent on the other,” Justice Chandrachud interpreted. He said the Centre and the States were “autonomous, independent and even competing units” while making GST laws. “Cooperative federalism is treated like a marble cake federalism due to the integrated approach of the federal units,” he compared. The judgment said that though the Centre may have a larger share of power in certain instances to prevent chaos and provide security, the States still wielded power. “India is a multi-party system. It is possible that the party in power in the Centre may or may not be in power in other States… Even if the States have been given lesser power [in certain situations], they can still resist the mandates of the Union by using different forms of political contestations permitted by the Constitution… It is not imperative that one of the federal units [Centre or the States] must always possess a higher share of power over the other units,” the court stated. “The federal system is a means to accommodate the needs of a frugalistic society... Democracy and federalism are interdependent to each other. Federalism would only be stable in a well functioning democracy. Additionally, the constituent units of a federal polity checks the exercise of powers of one another to prevent one group from exercising dominant power,” the court stated. In the GST Council, the States and the Centre have to function in a “harmonious” manner. The discussions in the GST Council cut across party lines and impacted federalism and democracy as a whole. But harmony, necessary for the well-being of the nation, and its fiscal security could be achieved not just by collaboration but also “contestations” between the Centre and the States. Contesting discussions between the Centre and the States could also further the cause of federalism and democracy, the Bench reasoned. After all, the court said, “Indian federalism is a dialogue between cooperative and un-cooperative federalism where the federal units are at liberty to use different means of persuasion, ranging from collaboration to contestation”. The judgment also resolved a prolonged battle the government has been raging against companies to implement its IGST on ocean freight on reverse charge basis. The issue had gained significance following news reports of fresh tax queries raised on ocean freight even as the dispute was pending in the top court. Ending the controversy in favour of the importers and providing them great relief, Justice Chandrachud held that since “the Indian importer is liable to pay IGST on composite supply comprising of the supply of goods and supply of services of transportation, insurance, etc, in a Cost Insurance Freight [CIF] contract, a separate levy on Indian importers for the supply of services by the shipping line would be in violation of the Central GST Act”. At the centre of the controversy were two notifications issued on June 28, 2017, levying the IGST on ocean freight. The Gujarat High Court declared the levy ultra vires to the IGST Act in January 2020. It said they lacked “legislative competency”. It had concluded that the IGST on ocean freight under the provisions of the notifications was “not permissible in law”. ‘Ocean freight’ is the cost of moving goods internationally to India. An agreement is entered into between two foreign parties in this regard. The agreement is usually between an exporter, a foreign entity, and a shipping line to transport goods to India. The importers had complained that the IGST was being levied on them twice on the very same transaction by segregating portions of it. “This judgment may change the landscape of those provisions under GST which are subject to judicial review,” said Abhishek A. Rastogi, partner at Khaitan & Co, who argued for the petitioners before Gujarat High Court and the Supreme Court. “As the court has gone ahead to categorically hold that the GST Council recommendations have only persuasive value, there will be pragmatic approach to the provisions which are subject to judicial review by way of challenge to the constitutionality of such provisions based on GST Council recommendations” he noted. Supreme Court sentences Sidhu to one year rigorous imprisonment in fatal road rage case The Supreme Court on Thursday awarded one year’s rigorous imprisonment to Punjab Congress leader Navjot Singh Sidhu in a 34-year-old fatal road rage case. A Special Bench of Justices A.M. Khanwilkar and Sanjay Kishan Kaul reviewed the apex court’s May 2018 judgment, which had let off Sidhu with a fine of ₹1,000 saying such roadside brawls were a “very common sight in this country”. The decision came in a review petition filed by the family of the victim, Gurnam Singh, who died in the road rage incident in 1988. The Punjab and Haryana High Court had found Sidhu guilty of committing culpable homicide not amounting to murder. In appeal, the apex court, four years ago, had set aside the High Court verdict. The top court had held him guilty of the lesser offence of causing voluntary hurt. Justice Kaul, reading out the judgment, said the court felt, on the basis of the facts placed before it, that it would have to review the judgment in terms of sentence. The Review Bench held that it would serve the ends of justice to sentence Sidhu to a period of one-year rigorous imprisonment in addition to the earlier award of a fine of ₹1,000. The case had returned to haunt Sidhu after over three decades, especially when the family of the victim upped the ante by filing an application contending that the facts of the case show he was responsible for causing more than hurt but was actually liable for far more grievous offences like culpable homicide or even murder. Singh’s family had filed for a review of the judgment in 2018 itself. The court had issued a formal notice to Sidhu, represented by senior advocate A.M. Singhvi and advocate Karthik Ashok, specifically on the quantum of sentence, in September 2018. During the hearing of the case, the court had observed that if the facts ultimately show a different offence, the punishment would also change. Senior advocate Siddarth Luthra, for Singh’s family, had said the apex court’s own judgment proved, “the fact of the injury caused to the victim, the fact that the injury was caused ante-mortem, and the fact that it was caused intentionally by the respondent [Mr. Sidhu]”. Luthra had argued that “when there is death of a human being, it may either be culpable homicide (amounting or not amounting to murder)... Offences affecting life are distinct from the offence of hurt. If hurt results in death, intended or unintended, the offence would fall within the category of an offence affecting life”. Countering, Singhvi and advocate A. Karthik had said the family’s application, on top of filing for a review petition against the May 2018 judgment, was a “review of a review”. Entertaining the application would give rise to a dangerous precedent. The senior lawyer had argued that the prosecution could not prove any personal enmity or motive behind the death. It was even “highly doubtful” whether the injury had eventually caused the death. Besides, Sidhu had never violated any conditions of bail and there was no lack of cooperation on his part at any time during the entire journey of 34 years of the case. Kashmiri separatist leader Yasin Malik convicted by Delhi court in terror funding case A Delhi court on May 19 convicted Kashmiri separatist leader Yasin Malik, who had earlier pleaded guilty to all charges, including those under the stringent Unlawful Activities Prevention Act (UAPA), in a terror funding case. Special Judge Praveen Singh directed the NIA authorities to assess Malik’s financial situation to determine the amount of fine to be imposed and posted the matter for arguments on the quantum of sentence on May 25. Malik had told the court that he was not contesting the charges levelled against him that included Section 16 (Terrorist Act), 17 (raising funds for terrorist act), 18 (conspiracy to commit terrorist act) and 20 (being member of terrorist gang or organisation) of the UAPA and Sections 120-B (criminal conspiracy) and 124-A (sedition) of the Indian Penal Code. The court had earlier also formally framed the charges against Kashmiri separatist leaders including Farooq Ahmed Dar alias Bitta Karate, Shabbir Shah, Masarat Alam, Md Yusuf Shah, Aftab Ahmad Shah, Altaf Ahmad Shah, Nayeem Khan, Md Akbar Khanday, Raja Mehrajuddin Kalwal, Bashir Ahmad Bhat, Zahoor Ahmad Shah Watali, Shabir Ahmad Shah, Abdul Rashid Sheikh and Naval Kishore Kapoor. The charge sheet was also filed against Lashkar-e-Taiba (LeT) founder Hafiz Saeed and Hizbul Mujahideen chief Syed Salahuddin, who have been declared proclaimed offenders (PO) in the case. Sensex tanks over 1,400 points amid global market rout Equity benchmarks fell sharply on Thursday, mirroring a sell-off in global markets, with the Sensex and Nifty tumbling over 2.60% on across-the-board selling. Persistent foreign fund outflows also continue to dampen sentiment. The 30-share BSE benchmark Sensex dived 1,416.30 points or 2.61% to settle at 52,792.23. During the day, it tumbled 1,539.02 points or 2.83% to 52,669.51. The broader NSE Nifty tanked 430.90 points or 2.65% to end at 15,809.40. From the Sensex firms, HCL Technologies, Wipro, Infosys, TCS, Tech Mahindra, Tata Steel, IndusInd Bank and Kotak Mahindra Bank were the major laggards. ITC and Dr. Reddy’s emerged as the gainers. Barring Shanghai, other Asian markets ended lower, with Seoul, Hong Kong and Tokyo settling in the red. Equity exchanges in Europe were also trading sharply lower in the afternoon session. Stock markets in the U.S. had ended deep in the red on Wednesday. “U.S. markets saw the worst sell-off since June 2020 as inflation fear looms,” said Mohit Nigam, Head-PMS, Hem Securities. Meanwhile, international oil benchmark Brent crude declined 1.29% to $107.7 per barrel. Foreign institutional investors offloaded shares worth a net ₹1,254.64 crore on Wednesday, as per stock exchange data. “Deteriorating macro sentiments such as soaring inflation, recession fears, and the prospect of the Federal Reserve getting even more hawkish will continue to keep benchmarks on the edge. “Another main reason for the pessimism can be attributed to relentless selling from the FII camp,” said Prashanth Tapse, Vice President (Research), Mehta Equities Limited. Devarsh Vakil, Deputy Head of Research, HDFC Securities, said, “Indian markets tumbled more than 2.5% on weekly derivative expiry day on weak global cues.” In Brief A Varanasi court hearing the Gyanvapi-Shringar Gauri case on May 19 posted the matter to May 23 for the next hearing. Both the parties filed their objections and counter-objections on May 19. In view of the Supreme Court’s order to the lower court not to proceed with the matter till Friday, it fixed May 23 for the next hearing, Madan Mohan Yadav, the lawyer representing the Hindu side, said. Evening Wrap will return tomorrow [logo] The Evening Wrap 19 MAY 2022 [The Hindu logo] Welcome to the Evening Wrap newsletter, your guide to the day’s biggest stories with concise analysis from The Hindu. [[Arrow]Open in browser]( [[Mail icon]More newsletters]( Recommendations of GST Council not binding on Centre, States: Supreme Court The Supreme Court on Thursday, in a judgment championing the importance of “cooperative federalism” for the well-being of democracy, held that Union and State legislatures have “equal, simultaneous and unique powers” to make laws on Goods and Services Tax (GST) and [the recommendations of the GST Council are not binding on them](. The apex court’s decision came while confirming a Gujarat High Court ruling that the Centre cannot levy Integrated Goods and Services Tax (IGST) on ocean freight from Indian importers. “The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and the states. They are recommendatory in nature… The recommendations only have a persuasive value. To regard them as binding would disrupt fiscal federalism when both the Union and the states are conferred equal power to legislate on GST,” a Bench led by Justice D.Y. Chandrachud held. The court emphasised that Article 246A (which gives the States power to make laws with respect to GST) of the Constitution treat the Union and the States as “equal units”. “It confers a simultaneous power (on Union and States) for enacting laws on GST… Article 279A, in constituting the GST Council, envisions that neither the Centre nor the states are actually dependent on the other,” Justice Chandrachud interpreted. He said the Centre and the States were “autonomous, independent and even competing units” while making GST laws. “Cooperative federalism is treated like a marble cake federalism due to the integrated approach of the federal units,” he compared. The judgment said that though the Centre may have a larger share of power in certain instances to prevent chaos and provide security, the States still wielded power. “India is a multi-party system. It is possible that the party in power in the Centre may or may not be in power in other States… Even if the States have been given lesser power [in certain situations], they can still resist the mandates of the Union by using different forms of political contestations permitted by the Constitution… It is not imperative that one of the federal units [Centre or the States] must always possess a higher share of power over the other units,” the court stated. “The federal system is a means to accommodate the needs of a frugalistic society... Democracy and federalism are interdependent to each other. Federalism would only be stable in a well functioning democracy. Additionally, the constituent units of a federal polity checks the exercise of powers of one another to prevent one group from exercising dominant power,” the court stated. In the GST Council, the States and the Centre have to function in a “harmonious” manner. The discussions in the GST Council cut across party lines and impacted federalism and democracy as a whole. But harmony, necessary for the well-being of the nation, and its fiscal security could be achieved not just by collaboration but also “contestations” between the Centre and the States. Contesting discussions between the Centre and the States could also further the cause of federalism and democracy, the Bench reasoned. After all, the court said, “Indian federalism is a dialogue between cooperative and un-cooperative federalism where the federal units are at liberty to use different means of persuasion, ranging from collaboration to contestation”. The judgment also resolved a prolonged battle the government has been raging against companies to implement its IGST on ocean freight on reverse charge basis. The issue had gained significance following news reports of fresh tax queries raised on ocean freight even as the dispute was pending in the top court. Ending the controversy in favour of the importers and providing them great relief, Justice Chandrachud held that since “the Indian importer is liable to pay IGST on composite supply comprising of the supply of goods and supply of services of transportation, insurance, etc, in a Cost Insurance Freight [CIF] contract, a separate levy on Indian importers for the supply of services by the shipping line would be in violation of the Central GST Act”. At the centre of the controversy were two notifications issued on June 28, 2017, levying the IGST on ocean freight. The Gujarat High Court declared the levy ultra vires to the IGST Act in January 2020. It said they lacked “legislative competency”. It had concluded that the IGST on ocean freight under the provisions of the notifications was “not permissible in law”. ‘Ocean freight’ is the cost of moving goods internationally to India. An agreement is entered into between two foreign parties in this regard. The agreement is usually between an exporter, a foreign entity, and a shipping line to transport goods to India. The importers had complained that the IGST was being levied on them twice on the very same transaction by segregating portions of it. “This judgment may change the landscape of those provisions under GST which are subject to judicial review,” said Abhishek A. Rastogi, partner at Khaitan & Co, who argued for the petitioners before Gujarat High Court and the Supreme Court. “As the court has gone ahead to categorically hold that the GST Council recommendations have only persuasive value, there will be pragmatic approach to the provisions which are subject to judicial review by way of challenge to the constitutionality of such provisions based on GST Council recommendations” he noted. Supreme Court sentences Sidhu to one year rigorous imprisonment in fatal road rage case The Supreme Court on Thursday [awarded one year’s rigorous imprisonment to Punjab Congress leader Navjot Singh Sidhu]( in a 34-year-old fatal road rage case. A Special Bench of Justices A.M. Khanwilkar and Sanjay Kishan Kaul reviewed the apex court’s May 2018 judgment, which had let off Sidhu with a fine of ₹1,000 saying such roadside brawls were a “very common sight in this country”. The decision came in a review petition filed by the family of the victim, Gurnam Singh, who died in the road rage incident in 1988. The Punjab and Haryana High Court had found Sidhu guilty of committing culpable homicide not amounting to murder. In appeal, the apex court, four years ago, had set aside the High Court verdict. The top court had held him guilty of the lesser offence of causing voluntary hurt. Justice Kaul, reading out the judgment, said the court felt, on the basis of the facts placed before it, that it would have to review the judgment in terms of sentence. The Review Bench held that it would serve the ends of justice to sentence Sidhu to a period of one-year rigorous imprisonment in addition to the earlier award of a fine of ₹1,000. The case had returned to haunt Sidhu after over three decades, especially when the family of the victim upped the ante by filing an application contending that the facts of the case show he was responsible for causing more than hurt but was actually liable for far more grievous offences like culpable homicide or even murder. Singh’s family had filed for a review of the judgment in 2018 itself. The court had issued a formal notice to Sidhu, represented by senior advocate A.M. Singhvi and advocate Karthik Ashok, specifically on the quantum of sentence, in September 2018. During the hearing of the case, the court had observed that if the facts ultimately show a different offence, the punishment would also change. Senior advocate Siddarth Luthra, for Singh’s family, had said the apex court’s own judgment proved, “the fact of the injury caused to the victim, the fact that the injury was caused ante-mortem, and the fact that it was caused intentionally by the respondent [Mr. Sidhu]”. Luthra had argued that “when there is death of a human being, it may either be culpable homicide (amounting or not amounting to murder)... Offences affecting life are distinct from the offence of hurt. If hurt results in death, intended or unintended, the offence would fall within the category of an offence affecting life”. Countering, Singhvi and advocate A. Karthik had said the family’s application, on top of filing for a review petition against the May 2018 judgment, was a “review of a review”. Entertaining the application would give rise to a dangerous precedent. The senior lawyer had argued that the prosecution could not prove any personal enmity or motive behind the death. It was even “highly doubtful” whether the injury had eventually caused the death. Besides, Sidhu had never violated any conditions of bail and there was no lack of cooperation on his part at any time during the entire journey of 34 years of the case. Kashmiri separatist leader Yasin Malik convicted by Delhi court in terror funding case A Delhi court on May 19 [convicted Kashmiri separatist leader Yasin Malik]( who had earlier pleaded guilty to all charges, including those under the stringent Unlawful Activities Prevention Act (UAPA), in a terror funding case. Special Judge Praveen Singh directed the NIA authorities to assess Malik’s financial situation to determine the amount of fine to be imposed and posted the matter for arguments on the quantum of sentence on May 25. Malik had told the court that he was not contesting the charges levelled against him that included Section 16 (Terrorist Act), 17 (raising funds for terrorist act), 18 (conspiracy to commit terrorist act) and 20 (being member of terrorist gang or organisation) of the UAPA and Sections 120-B (criminal conspiracy) and 124-A (sedition) of the Indian Penal Code. The court had earlier also formally framed the charges against Kashmiri separatist leaders including Farooq Ahmed Dar alias Bitta Karate, Shabbir Shah, Masarat Alam, Md Yusuf Shah, Aftab Ahmad Shah, Altaf Ahmad Shah, Nayeem Khan, Md Akbar Khanday, Raja Mehrajuddin Kalwal, Bashir Ahmad Bhat, Zahoor Ahmad Shah Watali, Shabir Ahmad Shah, Abdul Rashid Sheikh and Naval Kishore Kapoor. The charge sheet was also filed against Lashkar-e-Taiba (LeT) founder Hafiz Saeed and Hizbul Mujahideen chief Syed Salahuddin, who have been declared proclaimed offenders (PO) in the case. Sensex tanks over 1,400 points amid global market rout Equity benchmarks fell sharply on Thursday, mirroring a sell-off in global markets, with [the Sensex and Nifty tumbling over 2.60% on across-the-board selling](. Persistent foreign fund outflows also continue to dampen sentiment. The 30-share BSE benchmark Sensex dived 1,416.30 points or 2.61% to settle at 52,792.23. During the day, it tumbled 1,539.02 points or 2.83% to 52,669.51. The broader NSE Nifty tanked 430.90 points or 2.65% to end at 15,809.40. From the Sensex firms, HCL Technologies, Wipro, Infosys, TCS, Tech Mahindra, Tata Steel, IndusInd Bank and Kotak Mahindra Bank were the major laggards. ITC and Dr. Reddy’s emerged as the gainers. Barring Shanghai, other Asian markets ended lower, with Seoul, Hong Kong and Tokyo settling in the red. Equity exchanges in Europe were also trading sharply lower in the afternoon session. Stock markets in the U.S. had ended deep in the red on Wednesday. “U.S. markets saw the worst sell-off since June 2020 as inflation fear looms,” said Mohit Nigam, Head-PMS, Hem Securities. Meanwhile, international oil benchmark Brent crude declined 1.29% to $107.7 per barrel. Foreign institutional investors offloaded shares worth a net ₹1,254.64 crore on Wednesday, as per stock exchange data. “Deteriorating macro sentiments such as soaring inflation, recession fears, and the prospect of the Federal Reserve getting even more hawkish will continue to keep benchmarks on the edge. “Another main reason for the pessimism can be attributed to relentless selling from the FII camp,” said Prashanth Tapse, Vice President (Research), Mehta Equities Limited. Devarsh Vakil, Deputy Head of Research, HDFC Securities, said, “Indian markets tumbled more than 2.5% on weekly derivative expiry day on weak global cues.” In Brief A Varanasi court hearing the Gyanvapi-Shringar Gauri case on May 19 [posted the matter to May 23 for the next hearing](. Both the parties filed their objections and counter-objections on May 19. In view of the Supreme Court’s order to the lower court not to proceed with the matter till Friday, it fixed May 23 for the next hearing, Madan Mohan Yadav, the lawyer representing the Hindu side, said. Evening Wrap will return tomorrow  Today’s Top Picks [[Creating our own password manager] Creating our own password manager]( [[Data | Buffalo shooting latest in the rising hate crimes and firearm-related murders in U.S.] Data | Buffalo shooting latest in the rising hate crimes and firearm-related murders in U.S.]( [[Why has the Supreme Court mandated NRC not been implemented in Assam? | In Focus podcast] Why has the Supreme Court mandated NRC not been implemented in Assam? | In Focus podcast]( [[Sci-Five | The Hindu Science Quiz: On transplants] Sci-Five | The Hindu Science Quiz: On transplants]( Copyright @ 2021, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please [try here]( If you do not wish to receive such emails [go here](