TaxTMI 
TaxTMI 
2025 (1) TMI 887
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....lay of 15 days in filing Rejoinder) in W.P.(C) 10680/2024 Bearing in mind the disclosures made in the application, the delay of 15 days in filing a rejoinder is condoned. The application stands disposed of. CM APPL.73285/2024 (for delay of 07 days in filing of Counter Affidavit) in W.P.(C) 14723/2024 Bearing in mind the disclosures made in the application, the delay of 07 days in filing the counter affidavit is condoned. The application stands disposed of. W.P.(C) 10680/2024 & CM APPL. 43919/2024 (Stay) W.P.(C) 14723/2024 & CM APPL. 61848/2024 (Stay) 1. The Central Electricity Regulatory Commission [CERC] as well as the Delhi Electricity Regulatory Commission [DERC] have petitioned this Court assailing the validity of Show Cause Notices [SCN] dated 29 May 2024 and 23 July 2024 respectively pursuant to which the respondents have sought to call upon them to discharge liabilities emanating from the Central Goods and Services Tax Act, 2017 [CGST Act] and the Integrated Goods and Services Tax Act, 2017 [IGST Act] in respect of the fee received by them in the course of discharge of their regulatory functions under the Electricity Act, 2003 [Electricity Act]. The r....
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....nctioning as a distribution utility, it cannot claim exemption from payment of GST. 4. The SCNs' impugned before us appear to have been preceded by various notices which were issued by the respondents seeking to elicit the stand of the two statutory bodies. From the disclosures which were made by the CERC, the respondents had taken note of the following amounts received by it under the heads of filing fee, tariff fee, license fee, annual registration fee and miscellaneous fee. This is evident from a reading of Para 4 of the notice issued to CERC and which is reproduced hereinbelow: - "Whereas, it was observed from the Annual Reports uploaded by CERC on its official website- "::: Central Electricity Regulatory Commission :::(cercind.gov.in)" that CERC is majorly having its income from 'Fees' collected. The amount of Income from Fee has been taken as declared under Schedule of 'Income from Fee' or Schedule of 'CERC Fund-Direct Income' forming part of Balance Sheet of each Financial Year and is as tabulated below (RUD-6)- Table-I (Amount in Lakh) Financial year Filing Fee/ Tariff Fee Licence Fee Annual Registration Fee Miscellaneous Fee Total Fee ....
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....e event in the GST regime is supply of goods or services or both. The term, "supply" has been inclusively defined in the Act, Section 7 of CGST Act, 2017 (hereinafter referred as the CGST Act) read with Section 2 (21) of IGST Act, 2017 (hereinafter referred as the IGST Act) define the scope of supply which reads as under:- (1) For the purposes of this Act, the expression - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by person in the course or furtherance of business; 6.1.1. Further, "services" is defined under sub-section 102 of Section 2 of CGST Act, 2017 ( as amended) read with Section 2 (24) of the IGST Act, 2017 ( as amended) which states that "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. Therefore, anything other than goods, money and securities will also i....
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.... (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) [activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and] (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; 6.3.1. The contention of CERC in regard to non-applicability of GST on the activities carried out by them being not a commercial business activity, as fees collected by them are deposited with Government in the Public Account of India and that CERC is funded by Grants-in-Aid by the Ministry of Power, Central Government and thus having no monetary benefit does not hold good. It is evident from above that any activity performed irrespective of having a pecuniary benefit is covered under the definition of 'business '. The intention of law is amply clear here as any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged a....
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....ment or local authorities for the purposes of the GST Acts. Question 10: Are various regulatory bodies formed by the Government covered under the definition of 'Government'? Answer: No. A regulatory body, also called regulatory agency, is a public authority or a governmental body which exercises functions assigned to them in a regulatory or supervisory capacity. These bodies do not fall under the definition of Government. Examples of regulatory bodies are - Competition Commission of India, Press Council of India, Directorate General of Civil Aviation, Forward Market Commission, Inland Water Supply Authority of India, Central Pollution Control Board, Securities and Exchange Board of India. 6.4.2. Thus, in view of above, the financial consideration so received by CERC is towards a function/service rendered by them and in absence of any blanket exemption available to CERC the said services appear to be taxable under the CGST/ IGST Act, 2017." 11. They have thus come to conclude that the fee received by CERC is in respect of business and the said regulatory authority itself being liable to be construed as a business entity. Basis the aforesaid con....
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....of Section 79 of the Electricity Act, 2003). These regulatory tasks fall outside the purview of quasi-judicial functions and remain solely within the realm of regulatory activities. Therefore, it's clear that the adjudicatory power of CERC is circumscribed, avoiding the trappings of a full-fledged Court, while functions like issuing licenses and fee imposition remain distinctly regulatory. xxxx xxxx xxxx 7.2. However, in para 3 of the said Office Memorandum, it is clarified that CERC has other functions which are in the nature of a regulator for which fees are levied. It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not, so long as the payment is made for fee charged for getting a service in return (i.e., as a quid pro quo for the service received). It is regarded as a consideration for that service and taxable irrespective of by whatever name such payment is called." 13. The issue of taxability also appears to have been examined by the Fitment Committee as would be evident from a reading of Para 7.3 of the im....
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.... of the above judgment is as under (RUD-10 Supra)- "81. We may also look to the nature and functions performed by the State Commission. Functions of the State Commission are prescribed under Section 86 of the said Act. The enumerated functions are determination of tariff, regulation of electricity purchase and procurement process of distribution licensees, facilitating intra-state transmission, issuing licences to persons, promoting cogeneration and generation of electricity from renewable sources, levy fee, specify or enforce standards, fix trading margins. All these functions are regulatory in character rather than adjudicatory. The real adjudicatory function is only provided in sub-clause (f) whereupon the Commission has the option of adjudicating the disputes between the licensees and generating companies, or to refer such disputes to arbitration." 8.3. As per the above observation of the Hon'ble Supreme Court, the functions of the State Commission such as determination of tariff, regulation of electricity purchase and procurement process of distribution licensees, facilitating intra-state transmission, issuing licences to persons, promoting cogeneration and g....
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....able to tax under the Section 9 of the CGST Act read with Section 5 of IGST Act, 2017. xxxx xxxx xxxx 12.1. Accordingly, the service provided by CERC, so far as it relates to Fees (Tariff Fee/ Licence Fee/ Annual Registration Fee, Miscellaneous Fee) received by them, appears to be classifiable under support services to electricity transmission & distribution services with SAC 998631 and IGST chargeable thereon @18% as per sl. no. 24(ii) of Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017 (as amended). 13. On scrutiny of 'income from fee ' ledger provided by CERC vide its letter dated 22.09.2023 (RUD-8 Supra), Statement showing details of fee collected by CERC as provided vide its letter dated 16.04.2024 (RUD-9 Supra) and further M/s CERC's failure to provide bifurcation of fee collected by them for providing inter-state & intra-state supply of services, thus the entire supply of service made by M/s CERC has been considered to be inter-state supply and accordingly, the total amount of IGST payable under the IGST Act, 2017 has been calculated involving the period from April, 2019 to March, 2023, the same is as tabulated below- Period Inc....
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.... (i) IGST of Rs. 112,83,21,226/- (Rupees One Hundred Twelve Crore Eighty-Three Lakh Twenty-One Thousand Two Hundred and Twenty-Six only) should not be demanded and recovered from them under Section 73 (1) of the CGST Act, 2017 (as amended) read with the Section 20 of Integrated Goods & Services Tax Act, 2017 (as amended) and; (ii) Interest at the appropriate rates on the amount of GST demanded at Sr. No. (i) above, should not be recovered from them, under Section 50(1) of the CGST Act, 2017 (as amended) read with Section 20 of Integrated Goods & Services Tax Act, 2017 (as amended); (iii) Penalty under Section 73 of the CGST Act, 2017 read with Section 122 of the CGST Act, 2017 (as amended) read with the Section 20 of the Integrated Goods & Services Tax Act, 2017 (as amended), should not be imposed upon them, for the reasons mentioned in paras 17 to 20 above." 16. We had the benefit of the erudite submissions addressed by Mr. Vohra and Mr. Ghosh, learned senior counsels who appeared for the writ petitioners and Mr. Singh and Mr. Amritanshu, learned counsels for the respondents. For reasons which we assign and set forth hereafter we find ourselves unable to sust....
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....ommerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax." 18. In terms of the charging section referred to above, the tax becomes leviable on a supply of goods, services or both. The scope of the expression "supply", which appears repeatedly in the CGST Act, is defined by Section 7 and reads thus:- "7. Scope of supply.- (1) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made o....
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....thin its fold activities or transactions of a person, other than an individual, in relation with its members or constituents. The third limb of services which are included in the scope of supply is the import of services for a consideration whether or not in the course or furtherance of business as well as activities specified in Schedule I, even though the same may be made without a consideration. 20. Insofar as the facts of the present matters are concerned, it was not the case of the respondents that the regulatory function as discharged by the writ petitioners would fall within Schedule I. We are also not concerned with subjects which form part of clauses (aa) and (b) of Section 7 (1). 21. In order to evaluate the correctness of the stands struck by the respondents it would thus be apposite at the outset to extract Schedules II and III of the CGST Act and which spell out activities which are liable to be treated as a supply of goods or services. Schedules II and III of the CGST Act read as under: - "SCHEDULE II [See Section 7] Activities [or Transactions] to be treated as supply of goods or supply of services 1. Transfer (a) any transfer o....
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.... first occupation, whichever is earlier. Explanation.-For the purposes of this clause- (1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:- (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerat....
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.... outside India but before clearance for home consumption.] [9. Activity of apportionment of co-insurance premium by the lead insurer to the co-insurer for the insurance services jointly supplied by the lead insurer and the co-insurer to the insured in co-insurance agreements, subject to the condition that the lead insurer pays the central tax, the State tax, the Union territory tax and the integrated tax on the entire amount of premium paid by the insured. 10. Services by insurer to the reinsurer for which ceding commission or the reinsurance commission is deducted from reinsurance premium paid by the insurer to the reinsurer, subject to the condition that the central tax, the State tax, the Union territory tax and the integrated tax is paid by the reinsurer on the gross reinsurance premium payable by the insurer to the reinsurer, inclusive of the said ceding commission or the reinsurance commission.] Explanation [1].-For the purposes of paragraph 2, the term "court" includes District Court, High Court and Supreme Court. [Explanation 2.-For the purposes of paragraph 8, the expression "warehoused goods" shall have the same meaning as assigned to i....
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....d Hem Raj v. Lt. Governor, H.P. [(1971) 2 SCC 747] this Court has held that power to tax is a legislative power which can be exercised by the legislature directly or subject to certain conditions. The legislature can delegate that power to some other authority. But the exercise of that power, whether by the legislature or by the delegate will be an exercise of legislative power. The fact that the power can be delegated will not make it an administrative power or adjudicatory power. In the said judgment, it has been further held that no court can direct a subordinate legislative body or the legislature to enact a law or to modify the existing law and if courts cannot so direct, much less the tribunal, unless power to annul or modify is expressly given to it. 52. In Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [(1985) 1 SCC 641 : 1985 SCC (Tax) 121] this Court held that subordinate legislation is outside the purview of administrative action i.e. on the grounds of violation of rules of natural justice or that it has not taken into account relevant circumstances or that it is not reasonable. However, a distinction must be made between delegation of legislative....
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...., however, seek to discern a distinction between the adjudicatory function performed by a regulatory commission as distinguishable from what they assert to be the exercise of a power to regulate. According to the respondents, any income or receipts derived by those Commissions in the course of discharge of their regulatory function would be exigible to tax under the CGST Act. 24. It becomes pertinent to note that the CGST Act not only deals with the supply of goods or services per se, it also brings within its ambit composite and mixed supplies in terms of Section 8. Composite supplies are those which are spelt out and enumerated in serial 6 of Schedule II. The supply of services generically is dealt with in serial 5. Undisputedly, the regulatory function discharged by Commissions can neither be said to be akin to renting of immovable property, construction of a complex or building, temporary transfer or permissive use or enjoyment of an intellectual property right, development, design of software, transfer of the right to use goods and which are subjects enumerated in serial 5 of Schedule II. The regulatory power which is wielded by Commissions under the provisions of the Elect....
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.... of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;" 27. The definition clauses referred to above assume significance in light of the language employed in Section 7 and which speaks of the supply of goods, services or both provided by a person for consideration being in the course or furtherance of business. When we revert to Section 2 (17), we find that the statute defines the said expression to mean any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity irrespective of whether it be for a pecuniary benefit or not. Clauses (b) and (c) of Section 2 (17) are again coupled to clause (a). Clause (d) of Section 2 (17) is concerned with the supply or acquisition of goods, while clauses (e), (f), (g) and (h....
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....re thus of the considered opinion that the view as expressed by the respondents in the SCNs' impugned before us are rendered wholly arbitrary and unsustainable. 31. As was noted hereinbefore, Schedule III in express and unambiguous words excludes services rendered by a court or tribunal. Once that exclusion had come to be expressly incorporated, we fail to appreciate how the respondents could have undertaken an exercise to bifurcate or draw a wedge between the adjudicatory and regulatory role of Commissions. Mixed as well as composite supplies of services or goods are aspects which are duly and independently defined and explained. Even those provisions cannot possibly be interpreted or stretched so as to hold that the fees received by Commissions could have been subjected to tax. The assumption of jurisdiction in terms of the notices impugned before us is thus found to be ex facie wholly untenable. 32. Of significance is the respondent observing "Therefore, anything other than goods, money and securities will also include the activities of "regulating the tariff of generating companies owned or controlled by the Central Government, regulating the inter-State transmission of e....