The Hon’ble Rajasthan High Court in Jodhpur Vidyut Vitran Nigam Ltd. v. UOI & ors. [D.B. Civil Writ Petition No. 9397/2018, decided on February 5, 2021] quashed Para 4(1) of Circular No. 34/8/2018-GST dated March 1, 2018 (“Impugned Circular”) which clarifies that following activities provided by DISCOMS to consumers are taxable:
i.
Application fee for releasing connection of
electricity;
ii.
Rental Charges against metering equipment;
iii.
Testing fee for meters/ transformers, capacitors
etc.;
iv.
Labour charges from customers for shifting of
meters or shifting of service lines;
v.
Charges for duplicate bill.
Further, held
that, a Circular cannot seek to clarify provisions of statutory notification,
which is otherwise unequivocal.
Facts:
Jodhpur Vidyut
Vitran Nigam Ltd (“the Petitioner”)
is a Public Sector Undertaking engaged in distribution and supply of
electricity in various Districts of Rajasthan. According to the Petitioner, the
services of distribution and supply of electricity fall in negative list of the
services as declared by the Central Government vide Notification No.12/2017 Central
Tax (Rate), dated June 28, 2017 (“Services
Exemption Notification”) wherein services of transmission or distribution
of electricity exempted under GST.
By filing this
writ petition, the Petitioner has challenged Clause 4(1) of Impugned Circular which
was issued by the Department of Revenue on the basis of recommendations of GST
Council made in its meeting held on January 9, 10 and 13, 2018, by way of
which, it was clarified that following activities provided by DISCOMS to
consumers are taxable:
i.
Application fee for releasing connection of
electricity;
ii.
Rental Charges against metering equipment;
iii.
Testing fee for meters/ transformers, capacitors
etc.;
iv.
Labour charges from customers for shifting of
meters or shifting of service lines;
v.
Charges for duplicate bill.
The Petitioner
contended that, once the parent exemption notification exempts the very supply
and distribution of electricity, the Department of Revenue or even GST Council
cannot exclude certain services by way of clarificatory circular and that all
the services enumerated are nothing but a part of complete package/bundle of
services, namely supply and distribution of electricity and the Impugned
Circular carving out an exception and excluding some of the services, which are
essential and integral part of the main function of supply and distribution of
electricity is arbitrary.
Issue:
Whether GST
would be leviable on various allied services of distribution and supply of
electricity that are exempted by the Central Government vide Services Exemption
Notification?
Held:
The Hon’ble
Rajasthan High Court in D.B. Civil Writ Petition No. 9397/2018,
decided on February 5, 2021 held as under:
·
Observed
that, a simple reading of Services Exemption Notification leaves no room for
ambiguity that entire package of services namely transmission or distribution
of electricity has been exempted. Whereas, a perusal of Impugned Circular,
reveals that the GST Council has sought to bring in tax-net five services
enumerated therein, regardless of the fact that complete bundle or package of
services namely transmission and distribution of electricity by an electricity
transmission or distribution utility have been exempted.
·
Attempt
of chipping out some of the services, out of the complete package and treating
them to be taxable is not only arbitrary and unreasonable but such exercise is
also violative of provisions of Section 8 of the Central Goods and Services Tax
Act, 2017 (“CGST Act”).
·
Noted
that, similar issue has been dealt with by the Hon’ble Gujarat High Court in Torrent
Power Ltd. v. Union of India [R/Special Civil Application No. 5343 of 2018,
decided on December 19, 2018] wherein the Court has struck down para
4(1) of the impugned Circular being contrary to the Services Exemption
Notification and ultra vires the provisions of Section 8 of the CGST Act.
·
Held
that, a circular cannot seek to clarify provisions of statutory notification,
which is otherwise unequivocal. There is no room for ambiguity or doubt, for
which the GST Council was required to issue the circular.
·
Relied
and agreed with the view taken by the Hon’ble Gujarat High Court in case of Torrent Power Ltd. (supra) and quashed
para 4(1) of the Impugned Circular.
·
Issued
injunction and restrained the Authorities from raising any demand and/or taking
any coercive measures to recover any tax on the basis of Impugned Circular.
Relevant Provisions:
Entry 25 of
the Exempted Notification:
Sl. No. |
Chapter, Section, Heading, Group or
Service Code (Tariff) |
Description of Services |
Rate (per cent.) |
Condition |
25 |
Heading
9969 |
Transmission
or distribution of electricity by an electricity transmission or distribution
utility. |
Nil |
Nil |
Clause 4(1)
of the
Impugned Circular:
S. No. |
Issue |
Clarification |
4. |
(1) Whether the activities carried
by DISCOMS against recovery of charges from consumers under State Electricity
Act are exempt from GST? |
(1) Service by way of transmission
or distribution of electricity by an electricity transmission or distribution
utility is exempt from GST under notification No. 12/2017- CT
(R), Sl. No. 25. The other services such as, - vi.
Application fee for
releasing connection of electricity; vii.
Rental Charges against
metering equipment; viii.
Testing fee for meters/
transformers, capacitors etc.; ix.
Labour charges from
customers for shifting of meters or shifting of service lines; x.
charges for duplicate
bill; provided by DISCOMS to consumer are
taxable. |
Section 8 of the CGST Act:
“Tax liability on composite and mixed supplies-
8. The tax
liability on a composite or a mixed supply shall be determined in the following
manner, namely:-
(a) a
composite supply comprising two or more supplies, one of which is a principal
supply, shall be treated as a supply of such principal supply; and
(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.
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