Tax rates for various products are notified after recommendation of GST council, same cannot be challenged.

Case Title: Manufacturers Traders Association v. Union of India

Court: High Court of Delhi

Petition No.: W.P.(C) No. 597 of 2019

Category of Dispute: GST Rate – Classification under Chapters 56 to 59

Date of Judgement: 15 September 2020

Relevant Sections: Article 279A of the Constitution of India; Section 9(1) of CGST Act, 2017; Section 5(1) of IGST Act, 2017

Relevant CGST Notifications: Notification Nos. 1/2017-CT (Rate), 1/2017-IT (Rate), 1/2017-ST (Rate)

Facts of the Case [Paras 3–5]:

1. The petitioner, a society representing manufacturers of fabrics, challenged GST notifications issued by the Central and State Governments levying GST at 12% on certain fabrics (Chapters 56 to 59), claiming they were contrary to the GST Council’s recommendation of a uniform 5% rate for all fabrics under Chapters 50 to 63.
2. Petitioners relied on the 15th and 16th GST Council meetings (especially para 9.8.10) where, they contended, a uniform rate of 5% for all fabrics was approved.
3. The Central Government argued that 12% rate was applicable only to specialized/technical fabrics under Chapters 56 to 59, as discussed in para 9.8.11.

Questions in Consideration [Para 5, 6, 9]:

• Whether the GST Council recommended a uniform GST rate of 5% for all fabrics under Chapters 50 to 63, or allowed a differentiated rate (12%) for technical/specialized fabrics under Chapters 56 to 59?
• Whether the Government notifications were in conformity with the recommendations of the GST Council?

Observations of the Court [Paras 6–10]:

1. The Court initially opined that the affidavit filed by the Respondent No. 3 (GST Council) appeared to reflect only a proposal and not a final decision (Para 6).
2. Hence, the Court directed the GST Council to re-express its official position on this aspect in its next meeting (Para 6).
3. In the 38th GST Council Meeting, the Council confirmed that it had indeed recommended a 12% GST rate for specialized/industrial fabrics under Chapters 56–59, while 5% was for general apparel fabrics made by MSMEs (Paras 7–8).
4. The Court rejected the petitioner’s reliance on Parliamentary answers, observing that such replies could not override Council deliberations or form legal bases to challenge its recommendations (Para 10).
5. The GST Council’s structure under Article 279A as a deliberative federal forum was emphasized; its decisions are not subject to judicial review unless patently arbitrary or unconstitutional (Para 10).

Judgement of the Court [Para 10]:

The Court held that the GST Council did not recommend a uniform 5% GST rate for all fabrics but maintained 12% for technical/specialized fabrics under Chapters 56–59. Consequently, the notifications issued by the Government were in line with the Council’s recommendation. The writ petition was dismissed and all pending applications were disposed of.

Between Fine Lines:

• The Court confirmed that GST Council’s deliberative process and resolutions are paramount and final unless proved arbitrary.
• The GST Council differentiated between general apparel fabrics and technical/industrial fabrics for tax purposes.
• Petitioners’ reliance on meeting minutes without full context was insufficient to override official clarifications.
• The distinction between Council proposals and decisions was crucial in determining legality of Government notifications.
• Judicial review does not extend to substituting Court’s opinion for Council’s recommendations unless contravening the Constitution.

Summary of Referred Cases:

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