M/S V.S. PRODUCTS VS. UNION OF INDIA [2022 (1) TMI 380 (KARNATAKA HIGH COURT)]

This case comment examines the Karnataka High Court’s decision in M/S V.S. Products v. Union of India, considering the constitutional validity of charging Central Excise Duty along with Goods and Services Tax (GST) on tobacco products after the adoption of the GST regime in India. The petition, by a manufacturer of tobacco, objected to the twin levy as being contrary to Articles 14, 19(1)(g), and 265 of the Constitution on the ground that GST had absorbed excise duty on goods. The Union of India justified the twin levy, contending that excise duty is levied on manufacture, whereas GST is on supply, hence different taxable events.

The court supported the viability of both levies, underlining that the 101st Constitutional Amendment and Article 246A don’t repeal Parliament’s power under Entry 84 of the Union List to continue imposing excise duty on some commodities, like tobacco. The ruling reiterates the principle that several taxes can coexist if they rest upon different taxable events and legislative authority. It also makes it clear that double taxation is not in and of itself unconstitutional unless arbitrary or discriminatory treatment is the result.

The decision has far-reaching implications for India’s constitutional structure of indirect taxation, particularly in balancing new GST powers and reserved taxation jurisdiction under the old entries of the Union List.