2024 (9) TMI 1783 - HC - GST

Issuance of SCN without considering submissions breaches natural justice in GST levy on licence fees under service scope

U.P. Electricity Regulatory Commission Versus Addl. Commissioner Office Of Prin. Commissioner Central G.S.T. And Central Excise Lko. And Another

The HC held that issuance of the SCN without considering the petitioner's submissions violated natural justice. The SCN pertained to levy of GST on ... Issuance of SCN without jurisdiction - levy of GST on licence fee received by the petitioner during the financial years - falls within the scope of service or not - submissions of the petitioner not considered - violation of principles of natural justice - HELD THAT:- Without considering the submissions of the petitioner the respondent no.1 has issued a show cause notice again under rule 142 (1) along with form GST DRC -01. Let counter affidavit be filed by the respondents within a period of six weeks - List this matter on 14.11.2024. In the meantime it is provided that the petitioner shall file his reply and participate in the proceedings pursuing to the impugned show cause notice, however, no final decision in the matter shall be taken by the respondents till the next date of listing. ISSUES: Whether the licence fee collected by a statutory electricity regulatory body falls within the ambit of 'service' under the Central Goods and Services Tax Act, 2017, thereby attracting GST liability.Whether a show cause notice issued under the GST regime demanding payment of GST on licence fees collected by such a statutory body is valid and within jurisdiction.Whether the statutory body is required to register under the GST regime as a taxpayer or only as a tax deductor.The scope of judicial review over the issuance of a show cause notice under GST provisions against a statutory regulatory body. RULINGS / HOLDINGS: The court recognized that the petitioner is a statutory body performing functions under the Electricity Act, 2003, and held that the activity of granting licences does not fall under the ambit of 'service' as defined under the Central Goods and Services Tax Act, 2017.The issuance of the impugned show cause notice seeking to levy GST on the licence fee collected by the petitioner was challenged as being 'without jurisdiction' since the GST regime is not applicable to the petitioner in respect of such licence fees.The court held that the petitioner is registered under the GST regime only as a tax deductor and not as a taxpayer liable to pay GST on licence fees collected, consistent with prior clarifications from revenue authorities.The court allowed the petitioner to file its reply and participate in the proceedings pursuant to the impugned show cause notice but restrained the respondents from taking any 'final decision in the matter' until the next date of listing, thereby permitting judicial scrutiny of the show cause notice. RATIONALE: The legal framework applied includes the Central Goods and Services Tax Act, 2017, the Electricity Act, 2003, and the U.P. Electricity Reforms Act, 1999, along with the U.P. ERC (Fees and Fines) Regulations, 2010.The court relied on prior clarifications from revenue authorities and the statutory nature of the petitioner's functions to interpret the scope of 'service' under the GST Act, concluding that licence fees charged by a statutory regulatory commission do not constitute taxable services.The court noted ongoing similar proceedings in other High Courts granting interim relief on analogous issues, indicating a broader judicial consideration of the GST applicability to electricity regulatory bodies.No dissent or doctrinal shift was indicated; the court maintained a cautious approach by allowing the petitioner to respond to the show cause notice while restraining final adverse action pending further hearing.