GST on free power under hydro-power arrangements stayed interimly amid prima facie challenge to taxability and jurisdiction

Free power supplied as a 12% share under hydro-power arrangements was found to raise a substantial prima facie challenge to GST demand, because the supply may be compensation rather than taxable consideration. The Court also accepted that part of the cause of action arose within Himachal Pradesh, given the petitioner's registered office there and the liabilities relating to units situated in the State, supporting territorial jurisdiction. Noting the petitioner's reliance on a prior service tax adjudication on the same arrangement, the Court granted interim stay against further proceedings under the impugned order pending further hearing.

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Issues: Whether the impugned GST demand on free power supplied by the petitioner as 12% share to the State Governments could be stayed at the interim stage, and whether the petitioner had shown a prima facie case on the nature of the supply and territorial jurisdiction.

Analysis: The order records a prima facie view that the petitioner had a substantial challenge to the GST demand because free electricity supplied under the hydro-power arrangements may be in the nature of compensation rather than consideration for a taxable supply. It also notes that part of the cause of action arose within the territorial jurisdiction of the Court, since the petitioner had its registered office in Himachal Pradesh and the impugned demand covered liabilities relating to units situated there. The Court further considered the petitioner's contention that the GST department had taken a view opposite to the service tax adjudication order on the same free-power arrangement, and found force in the plea for interim protection pending further pleadings.

Conclusion: Interim stay was granted against further proceedings pursuant to the impugned order.

Final Conclusion: The proceedings were not finally decided, but the petitioner obtained interim protection against enforcement of the impugned demand pending further hearing.

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