The Delhi High Court’s recent stay on anti-profiteering proceedings against AbbottNSE -0.27 % Healthcare opening a window for other firms to become party to the case that challenges constitutional validity of the provision in the GST law.
Besides, the court has also questioned the practice of anti-profiteering authorities to expand the scope of investigation to multiple products of the same company after completing probe on one. “It is directed that there shall be a stay of further proceedings against the petitioners,” the order said.
Delhi High Court noted that there are other pending petitions that have similarly challenged the constitutional validity of the provisions apart from challenging the orders of the National Anti-Profiteering Authority (NAA). Petitioners include Hindustan Unilever and Jubilant Foodworks.
Experts say this could prompt firms to seek a stay on anti-profiteering proceedings till the time the issue surrounding constitutional validity is settled by high courts.
“With this ruling, there is an opportunity for all dealers to consider filing a letter with anti-profiteering authorities pleading that their proceedings should be stayed till the time the issue surrounding constitutional validity is settled by courts,” said Harpreet Singh, partner, KPMG.
They also point at the court’s observation on not extending the anti-profiteering case to entity as a whole. “This is another case where courts have indicated that ambit of anti-profiteering should be limited to the product under question and not extended to entity as a whole,” said Pratik Jain, national leader, indirect taxes, PwC.
Jain said it will be interesting to see how courts would look at the challenge to constitutional validity of the provision itself.
“There is merit in having these provisions in the law, but still there is a lot of subjectivity in the investigation process, in absence of concrete guidelines as to how the profiteering has to be computed given the frequent changes in business dynamics,” he said.
NAA order on March 5 held Abbott guilty under anti-profiteering provisions. Abbott was directed to pay Rs 96.59 lakh along with applicable penalty.
Abbott filed a petition before Delhi High Court challenging the order. One of the key grounds for the challenge was the constitution validity of anti-profiteering provisions under section 171 of the Central GST Act and chapter 15 of the CGST rules.