Madras High Court Holds Central Government Bound by GST Council Recommendations When Issuing Notifications Under Sections 9 and 11 of CGST Act; Ratification Power Not Vested in GST Council

Background and Issues
The writ petitions before the Madras High Court concerned the validity of certain notifications issued by the Central and State Governments under the CGST Act, 2017, which imposed GST on pulses sold under brand names not registered under the Trade Marks Act or Copyright Act. The petitioners, suppliers of pulses, challenged the notifications as ultra vires Article 279A of the Constitution and the CGST Act, arguing that the notifications went beyond the recommendations of the GST Council.

Legal Questions
The Court identified two principal issues: (a) whether notifications issued by the Central Government under Sections 9 and 11 of the CGST Act can go beyond the recommendations of the GST Council, and (b) whether the GST Council has the power to ratify any notification issued by the Central Government under these sections.

Court’s Analysis on Binding Nature of GST Council Recommendations
The Court examined the constitutional and statutory framework, particularly Article 279A and Sections 9 and 11 of the CGST Act. It relied on the Supreme Court’s decision in Union of India v. Mohit Minerals Pvt. Ltd. (2022) 10 SCC 700, which held that while the GST Council’s recommendations are not binding on the legislature in enacting primary legislation, they are binding on the Government when exercising rule-making powers. The Madras High Court extended this principle to the issuance of notifications under Sections 9 and 11, holding that such notifications must be “on the recommendations” of the GST Council.

The Court reasoned that both rules and notifications constitute subordinate legislation and are subject to the same constitutional and statutory constraints. It emphasized that the GST regime’s objective of uniformity and cooperative federalism would be undermined if the Central Government could unilaterally depart from the Council’s recommendations when issuing notifications.

Findings on the Impugned Notifications
Upon comparing the impugned notifications with the GST Council’s recommendations, the Court found that the notifications included the additional phrase “enforceable right in a court of law,” which was not part of the Council’s recommendations. The Court held that this addition was not supported by any recommendation and thus exceeded the authority conferred by Sections 9 and 11, rendering the notifications ultra vires to the extent of the added expression. The remainder of the notifications, which reflected the Council’s recommendations, were upheld.

GST Council’s Power of Ratification
The Court addressed the second issue by holding that the GST Council does not possess the statutory or constitutional power to ratify notifications issued by the Central Government. Citing Supreme Court and High Court precedents, the Court explained that ratification is not equivalent to a recommendation and cannot retrospectively validate an act that was not authorized in the first instance. The Court concluded that the Council’s ratification of the impugned notifications in its 22nd meeting was without jurisdiction and legally ineffective.

Outcome
In conclusion, the Madras High Court declared the impugned notifications ultra vires to the extent they incorporated the phrase “enforceable right in a court of law,” and held that the GST Council’s post facto ratification was without legal effect. The show cause notices issued pursuant to these notifications were set aside, with liberty to the department to issue fresh notices in accordance with the notifications as upheld.

The writ petitions were allowed, and the connected miscellaneous petitions were closed.