TaxTMI 
TaxTMI 
2019 (11) TMI 1353
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....mention of the dissimilar provision is made, a reference to the CGST Act, would also mean a reference to the same provision under the APGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act. 3. BRIEF FACTS OF CASE: 3.1 M/s. Southern Power Distribution Company of Andhra Pradesh Limited., (referred to as 'Discom' or 'APSPDCL', for brevity) is a state-owned company having 'Distribution Licence' as defined in Electricity Act, 2003, and are engaged in distribution of electricity to consumers and also in transmission of electricity from sub-stations. 3.2 As a distribution licensee under Section 2 (17) of the Electricity Act, 2003, main activity of APSPDCL is supply of electricity and for this purpose engages in other ancillary activities in connection and in relation to supply of electricity. Some of the activities it is engaged in and are in connection with supply of electricity to the consumers are mentioned below: (a) Granting electricity connections including re-connection and also supply of equipment such as meters. (b) Creati....
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....pment and Reforms Program supplies made through contractors are liable to 12% GST since they are executed under grants provided by central government and no commercial activity is involved with regards these works? (e) If the answer to the above questions at (A), (B) and (C) is 'NO', whether the execution of the Agricultural Demand Side Management Scheme (AGL) works are liable to 12% GST since they are executed for the purpose of non-commercial? (f) Whether the supply of services and goods made by the applicant through contractors by way of construction, erection, commissioning, or installation of infrastructure for extending electricity distribution network up to the tube well of the farmer or agriculturist for agricultural purpose are exempted vide Notification No.14/2018- Central Tax (Rate) dated 26.07.2018? 5. APPLICANT'S INTERPRETATION OF LAW AND FACTS: 5.1 The applicant submits that as mentioned in the Memorandum of Association, their objectives are supply of quality electricity to the consumers and execution of various infrastructure projects through contractors. The activities of Discom are controlled by Electricity Regulation Commission established ....
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.... Construction vs. CCE, Kolhapur [2014-TIOL-2138-CESTAT-MUM] = 2014 (11) TMI 336 - CESTAT MUMBAI it was clearly held that all the services related to transmission of electricity are exempted under Notification No.11/2010-ST. In the recent case of Narasa Reddy v. UOI and Others in W.P. No.23639/2018 dt.12.12.2018, the Hon'ble High Court of Andhra Pradesh held that all services provided to a distribution licencee are outside the purview of service tax under Notification No.32/2010-ST dt.22.06.2010. However, the applicant was registered with service tax for the purpose of payment of service tax under reverse charge mechanism for certain services received by it as required under Section 68 (2) of the Act and was accordingly discharging service tax and filing returns. 5.6 Even after introduction of GST, the supplies are continued to be exempt. Entry No.25 under heading 9969 in Notification No.12/2017-Central Tax dt.28.06.2017 stipulates that 'transmission or distribution of electricity by an electricity transmission or distribution utility' attracts nil rate of tax i.e., the exclusion from service tax provided in Finance Act, 1994 is continued even in GST regime. All supplies of....
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....provides supply of electricity and services relating to supply of electricity, it is also entrusted to carry out certain projects of Central and State Governments such as Deendayal Upadhyay Gram Jyoti Yojna for Rural Electrification ('DDUGJY'), Integrated Power Development Scheme ('IPDS'), Restructured Accelerated Power Development and Reforms Program etc., relating to strengthening of power distribution network and Rural Electrification for public welfare. These welfare schemes are promoted by the Central/ State Government with extension of grants to the Discom. 5.11 Further, Services supplied by electricity distribution utilities by way of construction, erection, commissioning, or installation of infrastructure for extending electricity distribution network up to the tube well of the farmer or agriculturist for agricultural use are partially exempted vide Notification No.14/2018-Central Tax (Rate) dt.26-07-2018 amending Notification No.12/2017-Central Tax (Rate) dt.28-06-2017. 5.12 Though all the above activities are in relation to principal supply of electricity which is exempted, the applicant opines that the execution of the above services through third-party contractors....
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.... Notification No.12/2017-CT (R) dt.28.06.2017. It is not a non-taxable supply as defined under Section 2 (78) of the Act. Further, this issue was raised before the Hon'ble High Court of Gujarat during the course of arguments in the recent case of Torrent Power Ltd vs. UOI 2019-TIOL-15-HC-AHM-GST = 2019 (1) TMI 1092 - GUJARAT HIGH COURT and the Hon'ble High Court had considered the same and then held that this contention of Revenue is not sustainable. The relevant parts of the decision are extracted below: The Revenue's argument on this issue is mentioned in para 4.2 of the judgment which is extracted below: It was submitted that insofar as the GST regime is concerned, these services are not exempted by the notifications issued under section 11 of the GST Act, and hence, when on one service tax is leviable and the other service is exempted, section 8 of the CGST Act would not apply. It was contended that related/ancillary services are not exempted by virtue of any notification under section 11 of the CGST Act and that the impugned circular merely clarifies that these services are not exempted. The decision of the Hon'ble High Court on this point is in para....
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....ervices are also exempted under entry 25 of Notification no.12/2017 - Central Tax (Rate) dated 28.06.2017 wherein Transmission or distribution of electricity by an electricity transmission or distribution utility. They relied on the decision of Hon'ble High Court of Gujarat in the case of M/s Torrent Power Limited. Vs. Union of India = 2019 (1) TMI 1092 - GUJARAT HIGH COURT. They also sought for certain clarifications on the eligibility of exemption on the issues of services under 'Deendayal Upadhyay Gram Jyoti Yojna for Rural Electrification' (DDUGJY), 'Integrated Power Development Scheme' (IPDS) and Restructured Accelerated Power Development and Reforms Program and also Agricultural Demand Side Management Scheme (AGL). The issues are examined hereunder. 7.2 The entry no. 25 of the Notification No. 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017 reads as follows: 25 Heading 9969 Transmission or distribution of electricity by an electricity transmission or distribution utility. Nil Nil The rate of duty for Transmission or distribution of electricity by an electricity transmission or distribution utility is very clear. Whereas, the applica....
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....OURT, wherein the Five (05) Judge Bench of the Hon'ble Supreme Court held that - "(a) The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous; (b) In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language; (c) Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute; (d) Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature"; (6) Sarabhai M. Chemicals-{2005 (2) SCC 168 = 2004 (12) TMI 89 - SUPREME COURT}- A three member Bench of the Supreme Court held that "it is well settled that an exemption notification has to be strictly construed" and that "the conditions for taking the benefit of the exemption have to be strictly interpreted" ; (7) Tullow India Operations Ltd.-{(2005) 13 SCC 789 = 2005 (10) TMI 502 - SUPREME COURT} The Apex court held "The principles as regards construction of an exemption....
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.... "Transmission or distribution of electricity" only and not to any other services for which separate charges are fixed and collected. 7.3 The applicant relied on the decision of Hon'ble High Court of Gujarat in the case of Torrent Power Ltd vs. UOI 2019-TIOL-15-HC-AHM-GST = 2019 (1) TMI 1092 - GUJARAT HIGH COURT. The said judgment has not attained finality in view of the fact that the Appeal against the said decision by the Government is before the Hon'ble Supreme Court of India. The said decision is examined and found that; (a) The supply of electricity and supply of transmission and distribution of electricity service can be said to be naturally bundled as the supply of electricity is given physical effect by way of transmission or distribution of electricity. A supply which consists of two or more taxable supplies of goods or service or both or any combination thereof, which are naturally bundled and are supplied in conjunction with each other in ordinary course of business, one of which is the principal supply, is a composite supply. The primary elements of a composite supply include that, (i) there should be two or more supplies; (ii) suppli....
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....s a principal supply; Section 2(74) "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; (c) It is clear from the above provisions particularly the illustrations given under section 2 (30) [definition of composite supply] that for a supply to be considered as a composite supply, its constituent supplies should be so integrated with each other that one is not supplied in the ordinary course of business without or independent of the other. In other words they are naturally bundled. The supplies in question as discussed above may or may not be supplied with each other. They are independent supplies, supplied and paid for only if consumed by the....
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....le, the rent charged for metering equipment cannot be considered as a naturally bundled service as the customers have the option to buy their own electricity meter of specifications approved by CEA/ DERC and accuracy norms as per BIS. Similarly, releasing connection of electricity, though a precursor to the supply of electricity, is not naturally bundled with supply of electricity as electricity supply may not necessarily take place after an electricity connection is given due to various reasons such as the residential/ industrial premises remaining vacant. (g) In regard to circular No. 131/3/2010-ST dt. 07.12.2010 it is noticed that the said clarification was issued in the context of the positive list service tax regime, where a service in order to be taxable should have been so specified under section 65 (105). This clarification lost its relevance in the negative list where each service was subject to service tax unless included in the negative list of services or exempted. During the GST regime, the service of installation of electricity meter and consequent collection of hire charges for the meter may have nexus with the supply of electricity but is not naturall....
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....pt supply, cannot be a basis to state that the levy on such supplies is ultra vires the Article 265 of the Constitution of India. 7.4 Further, for a supply to be considered as a composite supply, its constituent supplies should be so integrated with each other that one is not supplied in the ordinary course of business without or independent of the other. In other words, they are naturally bundled. A natural corollary of the above legal provisions and the term naturally bundled used in section 2 (30) would be that the different elements in a composite supply are integral to the overall supply and if one of the elements is removed, the nature of the supply will be affected. However, the supplies in question as discussed above may or may not be supplied with each other. Supply of electricity may take place without the ancillary charges for testing or shifting of meters or for providing duplicate bills and these services are neither integral to the supply or electricity nor the charges levied are linked to electricity energy charges. The provision of related services such as shifting of lines or meters is infrequent, need based and is provided upon specific request of the consumer ....
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..../ consumers; (c) Rural electrification as per CCEA approval dated 01.08.2013 for completion of the targets laid down under RGGVY for 12th and 13^th plans by carrying forward the approved outlay for RGGVY to DDUGJY. * The main objectives of Integrated Power Development Scheme (IPDS) are; (a) Strengthening of sub-transmission and distribution networks in the urban areas; (b) Metering of distribution transformers/ feeders/ consumers in the urban areas; (c) IT enablement of distribution sector and strengthening of distribution network, as per CCEA approval dated 21.06.2013 for completion of the targets laid down under R-APDRP for 12" and 13th plans by carrying forward the approved outlay for R-APDRP to IPDS. * The objective of the Agriculture Demand Side Management Scheme is to reduce peak demand, shift the time during which electricity is consumed to off-peak hours and to reduce the total quantum of consumption. 7.6 The applicant of the view that; * the Government of India, vide Notification No.11/2017-Central Tax (Rate) dt.28.06.2017 notified the rate of GST applicability on supply of services, under this notification ....
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....4/2017-Central Tax (Rate), dated 21.09.2017 clearly mentions that for the construction services provided to Central Government, State Government, Union Territory, a local authority or a Government Authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of -(a) A civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. There is no doubt that the applicant is a government entity and the service of construction of civil works is for creation of the infrastructure for supply of power to the farmers and in rural areas. As far as the commercial nature is concerned, the Discom is providing the services to the rural areas at concessional rate and for farmers it does not charge any amount for the supply of electricity. • The nominal charges it collects from the rural area connections do not make the civil works it creates under the said scheme as commercial nature as upheld in the case of B.G. Shirke Construction Technology Pvt. Ltd. vs. CCE, Pune-III 2014 (33) S.T.R. 77 (Tri- Mum) = 2013 (11) TMI 870....
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....h and also the Government of Andhra Pradesh is having full control over the APSPDCL. However, from the 18th Annual Report for the year 2017-18, available on their website, it is seen that the applicant M/s. SOUTHERN POWER DISTRIBUTION COMPANY OF A.P. LIMITED are a government company and their vision is "To create an organization that is profitable, viable, responsive, serving the needs of the customer, suppliers and employees". Thereby the applicant is a commercial concern and also a business entity, though a government corporation. Further, the works referred by the applicant i.e. strengthening and augmentation of sub-transmission & distribution of infrastructure & networks; strengthening of sub-transmission and distribution networks to reduce peak demand & shifting the time during which electricity is consumed to off-peak hours and to reduce the total quantum of consumption are of industrial nature & for commercial purpose and therefore, this situation cannot be called as non-commercial at no stretch of imagination. The above works referred by APSPDCL are for business purpose and the benefit of Concessional Rate of 12% (6% under Central tax and 6% State tax) are any other c....
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....3 (Tri. - Del.) = 2015 (2) TMI 971 - CESTAT NEW DELHI 7.10 As already discussed at length in para 7.2 above and at para 7.7, the ratio of decisions on interpretation & application of exemption from tax, recorded by the Apex Court are to be followed. First of all, in its entirety, the applicant being an electricity distribution agency is not providing any service for availing the nil rate/ exemption; and Secondly the services referred are done by third parties to the applicant for which exemption is claimed. As per the relied notification, the exemption is not available to the third parties or contractors engaged by the applicant; but it applies for the services done by electricity distribution agency only. As there is no specific mention of extending exemption to the contractors of the applicant in the said notification wording, the same cannot be held applicable. Accordingly we pass the following order. RULING (a) Whether the supply of services such as connection, re-connection, supervision of the works, erection of poles, sub-stations, transmission lines etc., and supply of meters etc., to the consumers for the purpose and during the course of supply of electricity to....