Petitioner-

Your lordship the counsel seeks permission to state the third issue of the
case.

Much obliged your lordship!

Your lordship the third issue of the case is whether:

THE CONSTITUTIONAL (ONE HUNDRED AND FIRST

AMENDMENT) ACT IS AGAINST THE FEDERAL SETUP OF
EUTOPIA, AND IS ENTIRELY UNCONSTITUTIONAL-

The new Goods and Services Tax (GST) regime, introduced by way of the 101st
Constitutional Amendment, is based on a fundamental notion that there will be
an uniformity in tax administration across the country. But the GST, far from
being a case of “cooperative federalism”, is really an incursion into the
authority that India’s States have been permitted under the Constitution. The
resultant withering of the States’ fiscal independence strikes at the core of the
Constitution’s basic structure which the Supreme Court has held is inviolable in
the case of Kesavananda Bharati vs. Union of India.

Under the constitution of Eutopia the State is seen as an equal partner as the
Centre. Article- 246 provides for the categorical division of powers and the
fields are divided in the form of lists under the 7th Schedule.

The makers of the Constitution thought it was very much necessary that the
powers of taxation are allocated properly and that is why the Centre government
was given to tax other income other than agricultural income and levy indirect
taxes in the form of customs and excise duties, State governments were given
the sole power to tax the sale of goods and the entry of goods into a State.

However, there are several instances in the the Goods and Services Tax Act,
2017 that completely undermines the spirit of federalism the Constitution of
Eutopia embodies.

However, before proceeding to the same, the counsel finds it expedient to prove
that Eutopian Constitution is indeed federal in character.

Your lordship, the next sub issue of this case is that:

[III.I] The Eutopian Constitution envisages a federal setup for the country-
The Eutopian Constitution’s federal character, similar to the Indian Constitution
finds its roots in the Government of India Act, 1919 and the subsequent
Government of India Act, 1935.The Government of India Act, 1935 first
introduced the concept of separate legislative powers for the "Centre" and the
"Provinces", with a Federal Court empowered to adjudicate any disputes arising
out of situations in which the Centre or the Provinces exceed their powers.

In the specific context of taxation, the Supreme Court's judgment in State of

W.B. v. Kesoram Industries Ltd. is also relevant. Here, the Supreme Court re-
iterated the powers of the State Governments in imposing taxes on mineral
rights, even though the power to regulate and control such minerals was vested
with the Union.

It premised this harmonious interpretation on the federal structure of the

Constitution, acknowledging that there definitely was a bias in favour of the
Union in the federal structure. The Court nonetheless states that interpretation of
the Constitution should avoid "whittling down" the powers of the State.

The Supreme Court in Kesoram does not explicitly discuss whether federalism
is a basic feature of the Constitution (since no constitutional amendment was
involved), but nonetheless operates on the assumption that judicial
interpretation of the Constitution must work towards reinforcing rather than
weakening the federal structure of the Constitution.

The federal character of the Constitution being a basic feature of the

Constitution of India was hinted at by the Supreme Court in Kesavananda
Bharati v. State of Kerala, where the Supreme Court articulated what came to
be known as the "basic structure doctrine". The majority of the judges while
holding that a constitutional amendment can be struck down if it was in
violation of the basic structure of the constitution, the majority in Kesavananda
Bharati also enumerated the features of the Constitution that they considered
"basic". Of the majority in this case, CJI Sikri, Shelat Grover, and Jaganmohan
Reddy , explicitly identify the "federal character" of the Constitution as one of
the basic features of the Constitution.

The Supreme Court in S.R Bommai v. Union of India, dispelled scepticism on

both fronts - it asserted that the federal character of the Constitution was a basic
feature of the Constitution and that it could be used in contexts beyond testing
the constitutional validity of amendments.
All the judges in the majority acknowledged that the Indian constitution is a
federal one, and that the federal structure of the Constitution is a basic feature of
the Constitution. All of them agreed that within the constitutional spheres
allotted to them, States are sovereign and constrained only by the express
limitations imposed on them by the Constitution.

Sawant and Kuldip Singh, JJ. go on to identify fiscal independence (as pointed
out by Seervai) as one of the features of federal character of the Indian
Constitution,

While Reddy and Agrawal, JJ. noted that the Constitution couples the Union's
greater tax powers with an obligation to turn over some to the States. What
cannot be denied from examining the majority judgments in Bommai is the
conclusion that the core of the federal character of the Indian Constitution
is found in the fact that the legislative and executive powers of the States
are vested in them by the Constitution, limited only by the Constitution
itself and not the Union Government.

The aforementioned arguments aptly prove that the Constitution of Eutopia is

indeed federal in character.

[III.II.] The GST Council and its functioning strictly undermine the federal
structure of limitations imposed on them by the Constitution.

It has been aptly supplied by the counsel that the Constitution of Eutopia
envisages a federal setup in the Republic of Eutopia. However, the impugned
Goods and Services Tax Act, strictly undermines this spirit of federalism.

The 101st Amendment Act which creates the constitutional framework for the
GST creates a GST Council to resolve issues of implementation. It has the
power to issue "recommendations" on a range of matters outlined in Article
279A (4) of the Constitution.

Decisions of the GST Council are taken by super-majority of three fourths of

the weighted votes of members present and voting, but each State and the Union
don't necessarily have the same voting power. The Union alone has one-third of
the votes, while all the States together have two-thirds of the total votes. This
clearly gives the centre a virtual veto.

There are, necessarily, two major problems with the structure of the GST
Council. But before the Counsel gets into them, it is necessary to address one
issue - whether the "recommendations" of the GST Council are in fact binding
upon the Union and States.

There is scope for confusion over whether the "recommendations" of the

Council are binding, since legally, a "recommendation" (in contrast with the
word "prescription") would mean that it is non-binding on the parties
concerned. Explanation to Article 246A, Article 269A(1), clauses (4), (5) and
(11) of Article 279A(4), and Section 18 of the 101st Amendment Act use the
term "recommendations" or some variation of the same in the context of the
GST Council.

This would suggest that the Union and the States are still free to disregard the
recommendation of the GST Council if they so choose.

If the GST Council can't make binding recommendations, the entire structure of
the GST will collapse, as each State will have a different and possibly
conflicting tax levy and collection mechanism. The GST, as envisioned, is
supposed to be uniform, with second order benefits to flow out from such
uniformity

Second, the supremacy of the Union over the States in the GST Council is re-
affirmed by the manner in which disputes arising out of the recommendations of
the GST Council are resolved. The 101st Amendment Act leaves it to the GST
Council itself to set up the manner in which disputes will be resolved. The 101st
Amendment Act does not provide for any other separate procedure by which the
dispute settlement mechanism must be decided upon leaving one to conclude
that this too will be subject to the rule of super-majority, with the Union
continuing to enjoy a veto over the decisions of the GST Council.

The GST Council, as presently structured, seems to deprive States of a real say
in the decision making around the GST.

[III.III.] Other jurisdiction that imposed GST did not violate the federal
structure:

Two federal systems which have adopted the GST, Canada and Australia,
provide interesting contrasts in terms of how the GST was incorporated into
the federal structure. Whereas Canada and Australia adopted a GST in 1991
and 2000 respectively, neither Canada nor Australia amended their respective
Constitutions to adopt the GST
It is important to note that the GST does not necessarily require the sub-national
units to be in a subordinate position vis-à-vis the federal government when it
comes to their taxing powers. Through the introduction of the GST,
States/provinces have not lost their taxing powers or become subordinate to the
Union either in Canada or in Australia, nor do they have to exercise it in
accordance with the Union's wishes. It is not therefore a necessary requirement
of a GST that the federal unit gains control over the fiscal policies of the sub-
national units.

That said, the 101st Amendment Act does not entirely foreclose the possibility
of the States having a say in the decision-making process in the GST Council.
The Union still needs a majority of the States present and voting to agree with it
in order to be able to take the decisions it wishes to in the context of the GST
Council.

However, the same risks creating "winners" and "losers" among the States in
respect of the decisions taken by the GST Council. The "losers", the ones who
may be adversely affected by a decision of the Council, will still have no
effective remedy against the decisions of the GST Council given that the same
decision-making structure which went against them will also decide how their
grievances will be addressed.

PRAYER FOR RELIEF

Wherefore in light of the issues raised, arguments advanced and authorities
cited, the Counsel for the Petitioner humbly prays before this Hon’ble Court to
kindly adjudge and declare that:
1. The petition is maintainable,
2. The Constitutional (One hundred and first amendment) Act, 2017 is
unconstitutional and must be struck down,
3. The previous system of indirect taxation must be restored

And pass any other appropriate order as the court may deem fit in the interest of
equity, justice and good conscience.
Respondent-

Your lordship the counsel seeks permission to state the second issue of the
case.
Much obliged your lordship!
[II]. THE GST ACT DOES NOT DELEGATE EXCESSIVE POWERS
AND IS THEREFORE CONSTITUTIONAL

The GST Act, neither in toto nor through any of its provisions, delegates
excessive powers to anyone, and is well within the boundaries of the
Constitution of Eutopia.
The petitioners, in the instant matter, have challenged S. 171 of the CGST Act,
on grounds of excessive delegation S. 171 of the CGST Act providing for anti-
profiteering authority.

It has been alleged by the petitioners that bureaucrats, who shall be the “anti-
profiteering authority” have been delegated excessive powers on, as they shall
have the power to decide what “commensurate reduction” would be, and impose
penalty in case a contravention occurs. They further allege that the power of the
anti-profiteering committee to cancel the registration of persons contravening
the above section is also excessive.

It is humbly submitted by the counsel on behalf of the Respondent that the

aforementioned contention is baseless, unfounded and is hereby rejected.

[II.I]. S. 171 delegates powers vis-à-vis Anti-profiteering and is not

excessive
It has been established over the time through judicial precedents, and as was
clearly enunciated in the matter of In re: Delhi Laws Act case, that Powers can
be said to be excessively delegated if:
1. Essential Legislative functions of the legislature are delegated on to an
outside agency.
2. The legislation in question lays no guidelines, i.e. to say that the powers
cannot be unanalysed and uncontrolled.
The same view was also adopted in Gwalior Rayon Mills Mfg. (WVG) Co.
Ltd. V. Assistant Commissioner of Sales Tax. Khanna, J. stated,
“One of the settled maxims in Constitutional Law is, that the power conferred
on legislature cannot be delegated to any other body or authority. Where the
sovereign power of state has located an authority, there it must remain.”
It has thus been settled that excessive delegation of powers is said to occur only
if “essential legislative functions” of the legislature are delegated in an
unanalysed or uncontrolled manner.
Applying the same test to the impugned statute, the GST Act in no manner
delegates essential legislative functions on the bureaucrats as the powers so
delegated are not “essential legislative functions” of the Legislature, but merely
the power to check if producers or sellers of goods and services are passing the
benefit of a tax-reduction to the consumer or not.
It is not a power to tax, which the counsel acknowledges is an essential
legislative function, but only to check if the tax rates in place are actually being
adhered to.

Applying the same test to the impugned statute, the GST Act in no manner
delegates essential legislative functions on the bureaucrats as the powers so
delegated are not “essential legislative functions” of the Legislature, but merely
the power to check if producers or sellers of goods and services are passing the
benefit of a tax-reduction to the consumer or not.

It is not a power to tax, which the counsel acknowledges is an essential

legislative function, but only to check if the tax rates in place are actually being
adhered to.

It was held in Pandit Banarasi Das Bhanot v. State of Madhya Pradesh that-
“it is not unconstitutional for the Legislature to have it to the executive to
determine details relating to the working of taxation laws, such as the selection
of persons on whom the tax is to be paid, the rates at which it is to be charged in
respect of different classes of goods and the like.”

The Constitution Bench of Supreme Court in ‘Kishan Prakash Sharma V.

Union of India, the Supreme Court laid down the test of constitutional limit of
delegated legislation. The Supreme Court in this case held that the Legislature
must:
a. set the limits of the power delegated by declaring the policy of the law, and
b. lay down standards for guidance of those on whom the power to execute the
law is conferred.
These conditions are aptly abided by the GST Acts. The impugned provision
categorically confines the powers of the authority as envisaged to Anti-
profiteering and nothing beyond.
These arguments, in effect, prove that the GST Act does not delegate excessive
powers.

[II.II]. Need for an anti-profiteering provision

The Anti-profiteering provision in discussion was not introduced arbitrarily.

There are substantial reasons to back up the inclusion of the quintessential anti-
profiteering clause.
The GST Council announced the anti-profiteering rules on 18th June 2016, and
is of temporary nature. The provision shall remain in place only so long as the
Transition Period of GST persists.
Such rules are needed as lessons learnt from other countries show that there has
been inflation and prices have increased after GST implementation. For
example, Singapore saw a hike in inflation when it introduced GST in 1994. It
makes it more important for Eutopian administrators to keep tabs on prices after
implementation of GST. India is doing what many countries did: initiate anti-
profiteering measures at the retail level to protect consumers from price
swindling.

The Anti-profiteering provisions are also significant because if there were no

such provisions, the incidental impact ought to be an increase in prices.
Section 171 has been inserted in the GST Act which provides that it is
mandatory to pass on the benefit due to reduction in rate of tax or from input tax
credit to the consumer by way of commensurate reduction in prices.
Therefore, the provision is not arbitrary and is completely constitutional.

Your lordship the counsel seeks permission to state the the third issue of
the case.
Much Obliged your lordship!
The third issue of the case is that:
[III]. THE CONSTITUTIONAL (ONE HUNDRED AND FIRST
AMENDMENT) ACT IS NOT AGAINST THE FEDERAL SETUP OF
EUTOPIA, AND IS ENTIRELY CONSTITUTIONAL –

[III.I]. The GST Council is aligned with the federal setup of Eutopia –

Under the GST regime, the Centre & States will act on the recommendations of
the GST Council. As per Article 279A of the amended Constitution, the GST
Council which will be a joint forum of the Centre and the States.
As per Article 279A (4), the Council will make recommendations to the Union
and the States on important issues related to GST, like the goods and services
that may be subjected or exempted from GST, model GST Laws, principles that
govern Place of Supply, threshold limits, GST rates including the floor rates
with bands, special rates for raising additional resources during natural
calamities/disasters, special provisions for certain States, etc.

The GST Council is therefore the apex body on matters concerning the Goods
and Services Tax in Eutopia. The functioning of the GST Council embodies the
federal spirit enshrined in the Constitution of Eutopia.
According to Article 279-A (9), Every decision of the Goods and Services Tax
Council shall be taken at a meeting, by a majority of not less than three-fourths
of the weighted votes of the members present and voting, in accordance with the
following principles, namely:-
(a) the vote of the Central Government shall have a weightage of one-third of
the total votes cast, and (b) the votes of all the State Governments taken
together shall have a weightage of two-thirds of the total votes cast, in that
meeting.
The very provision discussing the functioning of the GST Council clearly
highlights how states continue to exercise equitable powers of taxation as it did
in the previous regime of indirect taxation. The council is democratic in its
decisions, and the states have fair say in all of these matters.

The allegation becomes even baseless by the fact that so far, none of the
decisions taken by the Council had to be voted. All the decisions that have been
taken by the GST council till date were unanimous, explaining how the spirit of
cooperative federalism prevails in the council.
Further on the demands of the states only certain goods have been exempted
such as alcohol and petroleum and therefore the states cannot take the defence
that this act is against the federal setup.

[III.II]. Provisions of the GST Acts embody the concept of a Federal

System-

The provisions of the GST Acts reflect the federal nature of the law. These
features signify spirit of cooperative federalism:
 Harmonization of GST laws across the country: Even though Centre and
each State legislature have passed their own GST Acts, they are all based on
the Model GST law drafted jointly by the Centre & the States. Consequently,
all the laws have virtually identical provisions.
 There are common definitions, common procedures, common formats in
all laws, even the sections and subsections in CGST Act and SGST Act are
same.
 There is a common compliance mechanism which is known as GSTN.
 In order to ensure smooth rollout of GST, the GST Council has formed a
three-tier structure consisting of: The Office of the Revenue Secretary, GST
Implementation Committee (GIC) and eight Standing Committees. All these
Committees are in the spirit of cooperative federalism to ensure quick
administrative decisions required before and after the rollout and ensure
effective coordination for smooth implementation of GST.
 Joint Capacity Building efforts by Centre as well as all the States are being
organised wherein for the first time the training of officers of Centre and
State is being conducted.
 Centre along with the State Government Officials has been organising Joint
Trade Awareness & Outreach programs.
 There is cross Empowerment of Officers of Centre as well as States.

All of the factors mentioned above, in consonance with one another, contribute
to proving that the GST Act is absolutely constitutional, and is not liable to be
struck down.

PRAYER FOR RELIEF

Wherefore in light of the issues raised, arguments advanced and authorities

cited, the Counsel for the Petitioner humbly prays before this Hon’ble Court to
kindly adjudge and declare that:

1. The petition is not maintainable,

2. The Constitutional (One hundred and first amendment) Act, 2017 is

constitutional and should not be struck down.

And pass any other appropriate order as the court may deem fit in the interest of
equity, justice and good conscience.