TaxTMI 
TaxTMI 
2024 (7) TMI 358
X X X X Extracts X X X X
X X X X Extracts X X X X
....he applicant by fraud or suppression of material facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as an Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s Mannarai Common Effluent Treatment Plant Private Limited, No. 209/2A, S. Periyapalayam Post, Uthukuli Road, Tiruppur - 641605 (hereinafter called as the 'Applicant') is registered under the GST Act with GSTIN: 33AACCM4445J1ZJ. 2. The applicant had filed an appeal before the Tamil Nadu Appellate Authority for Advance Ruling (hereinafter referred as AAAR), against the order No. 20/AAR/2023 dated 19.06.2023, passed by the Tamil Nadu State Authority for Advance Ruling (hereinafter referred to as AAR), in respect of the Application for Advance Ruling filed by the Applicant. In th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsidering the materials submitted by the applicant. 5.4. The learned AAR erred in not considering the decisions of M/s Hojwala Infrastructure Limited (AAR Gujarat GUJ/GAAR/R/2002/48) and M/s Kasipalayam Common Effluent Treatment Plant Private Limited (AAR Tamil Nadu 23/AAR/2021) wherein it has been held that demineralized water for industrial use is classifiable as water taxed at 18%. 6. Further, the applicant furnished the following documents before the AAAR, which were not earlier available to the AAR while deciding the matter, viz.,- (i) Test report No. V2300446A dated 12.10.2023 of the South India Textile Research Association Laboratory (in short SITRA) (ii) Consent Order No. 2308150947958 dated 24.03.2023 of Tamil Nadu Pollution Control Board, for renewal of consent for the operation of tire plant and discharge of sewage and/or trade effluent under Section 25 of the Water (Prevention and control of pollution) Act 1974, as amended in 1988. (iii) Process Explanation furnished by the appellant,., etc., 7. Based on the above contentions and documents produced, the appellant prayed before the AAAR to pass orders to set aside/modify the imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowing points; 9.1. The input in the treatment processing done by their plant is the effluent discharged from the textile dyeing industries. The effluent contains dyes, chemicals, salts etc., and the total dissolved solids is 7932 mg/1. 9.2. The effluent is subject to extensive processing at the treatment plant which includes equalization, biological aeration, nitrification, de-nitrification, biological degradation, secondary clarifier, oxidation reduction, filtration and evaporation. 9.3. The intention of the processing is to achieve zero liquid discharge as mandated by the Hon'ble Madras High Court and to make the resulting products fully reusable in the dyeing industries. The outputs of the processing and the mode of disposal / usage as per the consent order of Tamil Nadu Pollution Control Board are as follows:- Description of outlet Point of disposal Sewage Industry's own land Trade effluent I (RO Permeate, MEE Condensate) Distributed to member units for reuse Trade effluent II (Brine solution, Recovered Salt) Distributed to member units for reuse Trade effluent III (Sale Residue) ATFD 9.4. That they had applied for Advan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the characteristics of the dyeing effluent and sewage are entirely different. Further the norms for sewage plants are different, as the treated sewage water is allowed to be permitted to be used for irrigation, discharged into water bodies. But the RO Permeate can only be discharged for reuse in dyeing units and cannot be used for irrigation or discharged into water bodies. Hence the exemption given to treated sewage water under the heading 2201 is not applicable to the RO permeate. This has been upheld by Gujarat AAR in case of Palsano Enviro while holding, "This clearly shows the intention of the legislature that any type of water which are being sold in terms of commercial purpose have been kept out of the purview of exemption as provided under entry No. 99 of the Notification." d) Therefore, the RO permeate, do not get covered under the Chapter 22, "Beverages, Spirits, Vinegars", and that the same is classifiable under either of the following headings, viz., 2853 00 99 - Other Inorganic Compounds Since the RO permeate which is not fit for human consumption does not have the characteristic of water covered under 2201, it is classifiable under this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and sell the products to any of the units based on their requirement to do their operations without any backlog. With the above factual matrix the Applicant is before us seeking for Advance Ruling on the following:- 1. Whether the classification of supply of outputs as sale of goods is correct? 2. Whether classification of water sold as "Water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavored (other than drinking water packed in 20 litre bottles) under heading 2201, is correct? 11. Discussion on Classification as to whether Supply of Outputs as sale of Goods is Correct? 11.1. In the statement of relevant facts filed by the Applicant, they have stated that they purchase the effluents from the member units and the Applicant becomes the owner of the effluent. After processing of the effluent, the applicant sells the resulting products to any of the member units based on the market price and as per the requirements of the member units. The Applicant has contract with member units for minimum quantity of effluent to be supplied and may charge a fee if the said quantity is not achie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hen there is an agreement to sell and not a completed sale, (emphasis applied)." 11.4. From the conjoined reading of Section 4 of The Sale of Goods Act, 1930 and the Hon'ble Supreme Court judgement cited supra, it is clear that the modus of operation as purchase of effluent and sale of output is applicable only if all the elements cited in the Section and judgement cited are present. If that is the case, then the classification of supply of treated water, salt and other products, as sale of goods is correct. However, it is emphasized that the mode of operation intended by the applicant i.e. purchase of raw effluent, treating the same and selling the resultant products, can be classified as sale of goods, if and only if, the applicant follows the procedures envisaged in the Sale of Goods Act and rationale of the observations of Hon'ble Supreme Court. If such is the case, the proposed mode of purchase of raw effluent, treat it on own account and supply of output, can be treated as 'sale of goods' and consequently the first question is answered in the affirmative. 12. Classification, of Treated Water: 12.1 As far as the second question i.e., the "classificatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... like distilled water, conductivity water are grouped here. 12.4. The applicant has stated that without prejudice to the above contention that tire RO permeate/ treated water is classifiable under 2853 00 99 -i.e., under Other Inorganic Compounds, it is classifiable as water under 2201, as Demineralised water' since most of the minerals and chemical elements including Phosphate, Fluoride, Nitrate, Iron, Silica are reduced to non-deductible or very negligible levels. This view has been followed in Hojwala Infrastructure Limited (AAR Gujarat), Palsano Enviro Protection Limited (AAR Gujarat) and Kasipalayam Common Effluent Treatment Private Limited (AAR TamilNadu), by which the product in question falls under SI.No 24 of Schedule-III of Notification No 1/2017-CT(Rate) dated 28.06.2017. 12.5. In view of the above contentions of the applicant, it is imperative to examine the case, as to whether the R.O permeate is to be treated on par with the treated sewage water and qualify for the Nil rate of tax? (or) As to whether the R.O permeate falls under the heading 2853 00 99 - Other Inorganic Compounds and classifiable under this residuary head, comparable products like di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hose pores are so small, almost all contaminants-both organic and inorganic impurities are gets removed or trapped and cannot pass through. In this process significant portion of mineral ions that are too large to pass through the membrane are removed and very tiny particles of the impurities can pass through the membrane, which results in the retention of certain quantity of minerals depending upon the specifications of R.O unit adopted and the quality of input water to be purified. 13. Whether the R.O. permeate is to be treated on par with the treated sewage water and qualify for the Nil rate of tax? 13.1 As per Circular No. 179/11/2022, dated 03.08.2022, issued by Ministry of Finance, regarding applicability of GST on various goods and services, it has been clarified that treated sewage water attracts Nil rate of tax. The relevant portion of the Circular stated supra, is as under:- "5. Treated sewage water attracts Nil rate of GST: 5.1. Representations have been received seeking clarification regarding the applicable GST rate on treated sewage water. Treated sewage water was not meant to be construed as falling under "purified" water for the purpose of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de by the Fitment Committee for making changes in GST rates or for issuance of clarification in relations to goods - Annexure I', the very same issue involving Treated Sewage Water', has been dealt with and the extract of the same is reproduced below for appreciation, i.e., Sl. No. Description / HSN Present GST rate Requested GST rate Comments 7 Sewage Treated Water [2201] 18% Nil 1. The description at S. No. 99 of notification 2/2017-CT(Rate) providing Nil GST rate reads as -"Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, demineralized and water sold in sealed container]". 2. Advance Ruling Authority, Maharashtra, in two separate instances has ruled that these goods are covered under S. No. 24 of Schedule III, attracting 18% GST. 3. As per these Rulings, the issue is whether the word 'purified' in S. No. 99 covers 'treated sewage water' as well, as a result of which the said goods will be excluded from exemption and covered under 18% GST. 4. It is clear from these entries that premium; commercial water products were to be taxed, whilst regular water such as municipal supply, etc is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....get overall recovery of 80-85% of product water by removal of dissolved inorganic salts. From the South India textile Research Association (SITRA) Laboratory Analytical report No. V2300446A, dated 12-10-2023, furnished by the applicant, it is observed that TDS (Total Dissolved salts) present in the Raw effluent is 7932 mg/L, which has been reduced to 148 mg/L, after processing at their CETP. Further, detailed analysis of the aforesaid report also reveals the removal of major constituent dissolved salts, suspended solids and turbidity, colour from the effluent water, as follows: Sl.No. Parameter Quantity present in Raw Effluent Quantity present in Treated water 1 Colour as Hazen 176 1 2 Total Suspended solids 168 mg/L 4 mg/L 3 pH 7.42 5.88 4 Phenolphthalein alkalinity 30 mg/L 0 mg/L 5 Turbidity 181 1 6 Phosphate as PO4 15.1 mg/L 0.1 mg/L 7 Fluoride as F- 0.62 mg/L ND (Lo D:0.01) 8 Nitrate-N 3.1 mg/L 0.4 mg/L 9 Iron as Fe 0.86 mg/L 0.02 mg/L 10 Silica as Si 02 28 mg/L ND(LoD) 11 Total Dissolved salts 7932 mg/L 148 mg/L 13.7 From the above ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s like distilled water, conductivity water? 14.1. As discussed at para 12.6, water produced by methods like reverse osmosis is not completely free of impurities and the mineral content present in the purified water depends on the source water and the process specifications. That is to say, most of the minerals have been removed but not all. In general, if an application required highly purified water, then distilled water or most purified conductivity water should be used depending upon the application. But, the intention of the CETP, in the case of the applicant is to achieve zero liquid discharge as mandated by the Handle Madras High Court and to make the resulting products fully reusable in the dyeing industries whereby the dissolved solids are reduced from 7932 mg/L to 148 mg/L. 14.2. We are the view that if the technique/process employed in the CETP of the Applicant is meant to yield the output water comprising of Total dissolved solids of zero mg/L or minuscule quantity of dissolved salts, then the resultant treated water would be equated with distilled water or conductivity water and water of similar purity and would be classified under the heading 2853 90 10. 14.3.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It is seen that the entry 24 of Schedule - III to Notification No. 01/2017-Central tax (Rate) mentions Waters including natural or artificial mineral waters and aerated waters and excludes waters containing added sugar or other sweetening matter or flavoured and also Drinking water packed in 20 litres bottles from the said entry. 15.3 From the foregoing we are of the view that the R.O permeate is not falling under any of the exclusion clause. Though the R.O permeate / Treated water, for which the advance ruling sought is not explicitly reflected in the entry, the phrase "Waters, including...." enables the entry to hold R.O permeates under its ambit. The word "including" used in the entry reveals that the legislature doesn't intend to restrict the entry. It makes the entry enumerative but not exhaustive and the term 'water' retains its ordinary meaning and its scope will be extended to bring the de-mineralized water of the applicant's case, within its ambit. 15.4 We further observe that the following rulings that dwell on similar cases involving treated water obtained from CETP, supports the above stand, i.e., 1. In the case of M/s Hojiwla Infrastructure L....