Judicial approach of Courts towards tax legislations during extraordinary times

In the matter of Gurcharan Singh Vs. Ministry of Finance (Department of Revenue), Government of India in Writ Petition (Civil) No. 5149/ 2021 decided on 21.05.2021 by the Delhi High Court.

Facts: The Petitioner challenged the imposition of integrated GST on import of oxygen concentrator gifted to him for his personal use on the ground that such imposition of tax is discriminatory, unfair, and unreasonable and that it impinges upon his right to life and health.
The Petitioner impugned customs notification dated 03.05.2021 whereby the Govt of India exempted imposition of IGST where-(a) such concentrator was imported free of cost by a canalizing agency for Covid relief; (b) the equipment is imported for free distribution in India for Covid relief up till 30.06.2021. The Petitioner did not fall in the above two categories and was required to pay IGST.

Issues: i. Whether the State’s action, of imposing IGST on oxygen concentrators, which were directly imported by individuals, runs afoul of Article 14 of the Constitution for the reason of creating an unreasonable classification?
ii. Whether Article 21 of the Constitution, which includes the right to health and affordable treatment, would require the State to demonstrate that levy and collection of the impugned tax in times of pandemic would subserve public interest?
iii. Whether Article 21 of the Constitution, imposes on the State, a positive obligation to provide adequate resources for protecting and preserving the health and well-being of persons residing within its jurisdiction?

Held: The Delhi High Court started with taking judicial notice of the fact that nearing the peak of second wave of the pandemic medical oxygen was in short supply not only in Delhi but in the entire country. Furthermore, the second-best alternative was oxygen concentrators whose production and supply were far lesser than the demand thereof. This situation moved citizens to find supply of oxygen concentrators abroad.

As regards the first issue, the Delhi High Court held that exemption from IGST in cases of import of oxygen concentrators for COVID relief through a canalizing agency is a manifestly arbitrary and creates an unreasonable distinction between two identically circumstanced users. The exclusion of individuals, such as the petitioner, from the benefits of exemption only because they chose to receive the oxygen concentrators as a gift, albeit directly, without going through a canalizing agency was held to be violative of Article 14 of the Constitution.

With respect to the second issue, the Delhi High Court observed that even though the state does not have inexhaustible resources, however, this principle acquires a different hue in times of the present pandemic which affects majority of citizens and their capacity to pay taxes. Ordinarily there is no equity in taxation however, the present times call for an equitable approach.

The Court held that the grave situation called for a humanistic interpretation of law and reiterated the essence of the concept of social contract by recording that if one aspires for a civilized society, then those who are obligated by law should pay their taxes. Likewise, the State should relent, or at least lessen the burden of exactions which take the form of taxes, duties, rates and cess, in the very least, in times of war, famine, floods, epidemics and pandemics since such an approach allows a person to live a life of dignity which is, a facet of Article 21 of the Constitution.
The Court referred to the judgment of the Supreme Court in the matter of Small Scale Industrial Manufacturers Association where despite acknowledging the fact the matter involved was a policy issue, the apex court granted limited relief keeping in mind the unusual context of the issue. Further, the Court observed that it was mindful of the principles enunciated by the State involving tax legislation/ delegated legislation however, the present case was distinguished due to its unique context and circumstances.