2019 (1) TMI 1092 – GUJARAT HIGH COURT – TMI – Transmission or distribution for electricity – exemption from tax under Entry 25 of Notification No.12/2017 dated 28.6.2017 – period of the negative list regime – scenario post GST Regime – validity of clarification issued in para 4 (1) of the Circular No.34/8/2018-GST dated 1.3.2018 – includibility of charges such an application fee, meter rent, testing fee, etc collected by the Petitioners – composite supply – Section 43 (2) of the Electricity Act – It is the case of the petitioners that service by way of transmission or distribution of electricity continued to be kept out of the tax net even post 1.7.2012, and, the petitioners, therefore, neither collected nor paid any tax under the Finance Act on charges collected in connection with transmission of electricity even post 1.7.2012.
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Whether services relating to transmission and distribution of electricity fall within the ambit of clause (k) of section 66D of the Finance Act and, ar
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are concerned, vide circular No.131/13/2010-ST dated 7.12.2010, it was clarified that supply of electricity meters for hire to consumers being an essential activity, having direct and close nexus with transmission and distribution of electricity, the same is covered by the exemption for transmission and distribution of electricity extended under relevant notifications.
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From the very manner in which the respondents have treated the services related to transmission and distribution of electricity during the pre-negative list regime, such services would stand covered by the exemption granted to transmission and distribution of electricity by virtue of inclusion of such services in the list of negative services under section 66D (k) of the Finance Act as well as by virtue of exemption notification issued under the CGST Act.
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Scope of bundled service – It is evident that a licensee, on an application by the owner or occupier of any premises, is required to supply electricity to s
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onsumer fall within the ambit of electrical plant as defined under section 2(22) of the Electricity Act. Sub-section (2) of section 43 of the Electricity Act casts a duty upon the licensee to provide if required electric plant or electric line for giving electric supply to the premises – all the services related to transmission and distribution of electricity are naturally bundled in the ordinary course of business of the petitioner and are required to be treated as provision of the single service of transmission and distribution of electricity which gives the bundle its essential character.
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A perusal of the GERC Regulations indicates that the services which are sought to be taxed now are the services, which the petitioner is required to mandatorily provide at the rate prescribed by GERC, a statutory authority constituted under the provisions of the Electricity Act. In the opinion of this court, all these services are essential activities which have a direct and close nexus with
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ST Act – principal supply is exempt from levy of service tax – Held that:- There is nothing in section 8 of the Act to read any such construction. What the section says is that the tax liability of a composite or a mixed supply shall be determined in the manner provided thereunder. In a given case, the tax liability may be nil, but that would not take such service out of the purview of section 8 of the Act, which would be attracted if the supply is either composite or mixed in nature, notwithstanding that the end result may be nil tax liability.
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The related supplies cannot be supplied separately nor are the principal supply and related supplies independent of each other. The related supplies are dependent on the principal supply of transmission and distribution of electricity and vice versa, neither service can be provided independent of the other. The transmission and distribution of electricity cannot be done without the help of electric line, electric plant and electric meter,
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ons to the extent the same is based upon item No.4 (1) of the impugned circular dated 1st March, 2018. – R/SPECIAL CIVIL APPLICATION NO. 5343 of 2018 Dated:- 19-12-2018 – MS HARSHA DEVANI AND DR A. P. THAKER, JJ. For The PETITIONER (s) : MR SN SOPARKAR, SENIOR ADVOCATE with MR UCHIT N SHETH (7336) For The RESPONDENT (s) : MR JAIMIN A GANDHI (8065) AND MR ANKIT SHAH (6371) ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this petition under Article 226 of the Constitution of India, the petitioners seek the following substantive reliefs:- 46. ………… A. This Hon ble Court may be pleased to issue a writ striking down and declaring the clarification issued in para 4 (1) of the impugned Circular No.34/8/2018-GST dated 1.3.2018 (annexed at Annexure A) by the Government of India as ultra vires the provisions of the GST Acts as well as the notifications issued thereunder: B. This Hon ble Court may be pleased to declare that charges such as application fee, meter rent,
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ar dated 7.12.2010. E. This Hon ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ or order directing the learned Respondents to drop proceedings sought to be initiated on the basis of the impugned circular by issuing summons dated 28.3.2018 (annexed at Annexure L); 2. The facts giving rise to the present petition are that the petitioner No.1 is a public limited company (hereinafter referred to as the petitioner company ) and the petitioner No. 2 is the executive director and authorized signatory of the first petitioner. The petitioner company is, inter alia, engaged in the business of generation, transmission and distribution of electricity in the State of Gujarat and is duly registered under the Goods and Service Tax Acts. The petitioner company has distribution licence in the cities of Ahmedabad, Surat, Gandhinagar and the Dahej SEZ. It also has a distribution franchisee for Bhivandi in the State of Maharashtra and for Agra in
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Section 43 (2) of the Electricity Act provides that it shall be the duty of the distribution licensee to provide, if required, electric plant or electric line for giving electric supply to the premises of the consumer. The proviso thereto says that no person shall be entitled to demand or continue to receive the supply of electricity for any premises having a separate supply unless he has agreed with the licensee to pay to him such price as determined by the Appropriate Commission. The petitioners collect charges as well as deposit for extending the electricity connection line to the premises of the new consumer. 2.3 Once a line of connection is established, the petitioners start distribution of electricity to the consumer. The petitioners are required to charge price for distribution of electricity in accordance with tariffs as fixed by the appropriate commission from time to time and as per the conditions of the licence. Since the billing of such distribution would depend upon actua
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he Gujarat Electricity Regulatory Commission (Licensee s Power to Recover Expenditure incurred in providing supply and other Miscellaneous Charges) Regulations, 2005 (hereinafter referred to as the GERC Regulations ). Such regulations provide for the activity as well as quantum of charges that can be collected by the distribution licensee for such activity. 2.6 It is the case of the petitioners that the GERC Regulations empower the petitioners to recover the charges as well as fix the quantum charges for various kinds of activities, which are part of the distribution process such as registration, testing charges, disconnection charges etc. The meter rent is also stipulated in the GERC Regulations. The GERC has also framed an exhaustive electricity supply code, which enlists the obligations of the transmission and distribution companies, such as the petitioners. According to the petitioners, they are also entitled to recover some miscellaneous charges under such code. It is the case of
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ed from consumers relating to transmission and distribution of electricity. The Government of India issued Notification No. 11/2010-Service Tax on 27.2.2010, exempting taxable service provided to any person by any other person for transmission of electricity. Another Notification No. 32/2010-Service Tax was issued on 22.6.2010, exempting taxable service provided to any person by a distribution licensee/franchisee for distribution of electricity. In the meantime, the petitioners as well as other distribution/transmission companies received show cause notices proposing to impose tax under the Finance Act on various charges collected by such companies, in respect of the activities relating to transmission and distribution of electricity for the periods prior to the issuance of the exemption notifications dated 27.2.2010 and 22.6.2010. Representations came to be made to the Government for intervention since the entire sector of transmission/distribution companies bona fide believed that no
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smission and distribution of electricity and was, therefore, covered by the exemption for transmission and distribution of electricity. 2.9 On the basis of trade notice dated 20.7.2010, and the circular dated 7.12.2010, a show cause notice came to be issued to the petitioners proposing to impose service tax on different kinds of charges collected in connection with transmission and distribution of electricity, which came to be dropped by the adjudicating authority by observing that all such charges were in connection with transmission and distribution of electricity and therefore not taxable. 2.10 The negative list regime came to be introduced in the Finance Act, 1994 (hereinafter referred to as the Finance Act ) with effect from 1.7.2012. Section 66D of the Finance Act provides for negative list of services, which would not be taxable under the Finance Act. Clause (k) of Section 66D of the Finance Act, which is relevant for the present purpose, reads as under:- (k) transmission or dis
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8.6.2017 providing for list of exempted services. Identical notifications have been issued under the State Goods and Services Tax Act by the respective State Governments. By virtue of Entry 25 of Notification No. 12/2017, transmission or distribution of electricity by an electricity transmission or distribution utility is taxed at nil rate. It is the case of the petitioners that as such the legal position as prevailing under the Finance Act was continued even under the Goods and Services Tax Acts and tax leviable on service of transmission or distribution of electricity by an electricity transmission or distribution utility was exempted from tax under the GST Acts. The petitioners, therefore, neither collected nor paid tax under the GST Acts with effect from 1.7.2017 on the charges collected for activities directly connected with transmission and distribution of electricity in accordance with the provisions of the Electricity Act and the GERC Regulations. Thereafter, the Government of
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ty, have been declared to be taxable. 2.13 Subsequently, the Directorate General of Goods and Service Tax Intelligence, that is, the fourth respondent herein, issued summons to the petitioners on 28.3.2018 requiring them to submit details relating to charges as mentioned in the impugned circular right from the year 2012-13. Tax is proposed to be levied under the Finance Act as well as under the GST Acts on such charges. Being aggrieved, the petitioners have filed the present petition seeking the reliefs, noted herein above. 3. Mr. S. N. Soparkar, Senior Advocate, learned counsel with Mr. Uchit Sheth, learned advocate for the petitioners, submitted that the impugned circular issued by the Government of India clarifying that the charges recovered for the activities directly connected with the distribution and transmission of electricity such as application fee, meter rent, testing fee, labour charges for shifting meters and shifting of service line, etc. (hereinafter referred to as relat
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datorily required to be carried out by the petitioners for the purpose of supply and distribution of electricity and, in fact, it is not even possible to supply electricity without undertaking such activities. It was contended that, all charges, such as application fee, meter rent, testing fee etc. are towards the service of transmission and distribution of electricity and, therefore, the clarification to the effect that they would not be covered by entry relating to exemption of transmission or distribution of electricity is contrary to express words as well as intent of the exemption notification and, therefore, bad and illegal. 3.1 It was contended that all the charges such as application fee, meter rent, testing fee etc. are towards transmission and distribution of electricity and, therefore, exempt by virtue of the inclusion of transmission and distribution of electricity in the negative list and by virtue of exemption notifications issued under the CGST Act, and, therefore, all s
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services do not form part of the services of transmission and distribution then they fall within the ambit of section 66F (3), which provides for taxability of bundled service. It was submitted that, wherein an element of provision of one service is combined with an element or elements of provision of any other service or services, such services are considered to be a bundled service, and by virtue of clause (a) of sub-section (3) of section 66F, if various elements of such service are naturally bundled in the ordinary course of business, it is required to be treated as provision of the single service, which gives such bundle its essential character. It was submitted that, in this case, the ancillary/incidental services are elements of provision of services of transmission and distribution of electricity and, hence, they have to be treated as provision of such service, which gives the bundle its essential character. 3.4 It was submitted that the related services are part of main servic
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ed services were also exempt by virtue of the exemption notifications issued in the past. It was submitted that if the respondents intend to revoke such exemption, it has to be done prospectively by a notification and not by a clarificatory circular. It was submitted that by virtue of section 173 read with section 174 (2) (c) of the CGST Act, all privileges and rights under that Act would continue and, therefore, what was covered by a notification cannot be withdrawn by a circular and, in any case, it cannot be done retrospectively. In support of his submission, learned counsel for the petitioners placed reliance upon the decision of the Bombay High Court in the case of Unit Trust of India v. P. K. Unny, 2001 (249) ITR 612. 3.7 It was further submitted that principle of promissory estoppel would also apply in this case, inasmuch as the respondents had considered these very services to be covered by the exemption notifications, and hence, they cannot now be permitted to take a contrary
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rvices were considered to be part of the service of transmission and distribution, this position continued even during the negative list regime and keeping in view the same, the petitioners neither collected nor paid the tax under the Finance Act on charges collected in this regard nor did the respondents raised any such demand. 3.9 It was submitted that assuming for the sake of argument that related services are not covered by the service of transmission and distribution of electricity, even then, in view of the provisions of sub-section (3) of section 66F of the Finance Act, these services which are naturally bundled in the ordinary course of business with the services of transmission and distribution of electricity would be treated as a provision of the single service, which gives the bundle its essential character, namely, transmission and distribution of electricity. It was submitted that since all these services are bundled together in the ordinary course of business, they would,
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uted under the provisions of the Electricity Act and all these services are closely and directly connected with the transmission and distribution of electricity and, therefore, would clearly fall within the ambit of bundled services as contemplated under sub-section (3) of section 66F of the Finance Act and would, therefore, would be taxable in terms of the main service, namely, transmission and distribution of electricity. 3.10 Insofar as the third phase is concerned, it was submitted that this phase relates to the post-negative list regime, namely, the Goods and Services Tax Act regime. It was pointed out that by virtue of exemption notifications issued under section 11 of the CGST Act, 2017, transmission and distribution of electricity has been exempted from payment of service tax. It was pointed out that, therefore, the related services would stand included in the service of transmission and distribution of electricity and, therefore, would be exempt from service tax. It was submit
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, one of which is a principal supply. It was submitted that since all these services are naturally bundled along with the service of transmission and distribution of electricity, the same would clearly fall within the ambit of composite supply as envisaged under section 2 (30) of the Act. 3.11 Reference was made to the definition of principal supply as defined under section 2 (90) of the Act, which provides that principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. It was submitted that, therefore, the distribution and transmission of electricity is the principal supply which constitutes the predominant element of the composite supply and the related/ancillary services form part of that composite supply. It was submitted that, therefore, even by virtue of the provisions of section 8 (a) of the CGST Act, the related/ancillary services to tran
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ion 11 of the CGST Act, transmission and distribution of electricity by an electricity transmission or distribution utility is exempt. It was urged that when the notification under the parent Act exempts the principal supply, a circular cannot impinge upon the notification and seek to hold the composite supply taxable. It was submitted that the circular cannot run contrary to the notification, and hence, the impugned clarification deserves to be set aside to the extent the same clarifies in respect of the services in question. It was submitted that once the impugned circular is set aside, the rigours of the summons, whereby the petitioner is called upon to furnish details with regard to the services in question would also be required to be set aside. 3.14 It was further contended that, in any case, the impugned circular cannot be given retrospective effect as is sought to be done in the present case. In support of such submission, learned counsel placed reliance upon the decision of th
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ground that the petition is directed against a summons issued by the respondent authorities. Reliance was placed upon the decision of the Madras High Court in the case of Media Graphics v. Commissioner of Customs, Chennai, 2018 (359) ELT 172 (Mad.), wherein the court had declined the prayer to set aside the summons. Reliance was also placed upon the decision of the Madras High Court in the case of K. Elumalai v. Commissioner of Customs, Chennai, 2017 (355) ELT 241 (Madras), for the proposition that a writ petition challenging a summons is not maintainable. It was submitted that the respondent authorities have powers to issue summons and that the summons is, therefore, not illegal and, consequently, cannot be subject matter of challenge in a writ petition. 4.1 On the merits of the case, it was submitted that the exemption notifications, exempting the services in question from liability of service tax, were issued prior to the coming into effect of the negative list regime inasmuch as al
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ervices cannot be bundled with goods falling under section 66D. It was submitted that the previous notifications had been issued prior to the year 2012 and came to be rescinded by the notification dated 20.6.2012 and hence, the clarificatory circular dated 7.12.2010, which had been issued in the context of the earlier exemption notifications would not survive. 4.2 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. 4.3 The learned senior standing counsel further placed reliance upon sub-section (22) of section 65B of the Finance Act, which defines dec
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y to enter into the merits of this submission. 4.4 The learned Senior Standing Counsel submitted that the related services are not included in the negative list and cannot be considered as services bundled with the services of transmission and distribution of electricity and furthermore, would not fall within the ambit of composite services under section 8 of the CGST/SGST Acts by considering the services of transmission and distribution of electricity as principal supply and that the petition being devoid of merits, be dismissed and the petitioners be directed to respond to the impugned summons. 5. Mr. Jaimin Gandhi, learned standing counsel for the respondent No. 3, submitted that the only challenge in the petition is to the retrospective applicability of the circular dated 1.3.2018. It was submitted that since retrospective applicability can be interpreted even by the appellate authority, the petition deserves to be dismissed on the ground of availability of an efficacious alternati
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circular, stands automatically rescinded. 5.1 Reference was made to sub-section (1) of section 66F of the Finance Act, as amended in 2012, which provides that unless otherwise specified, reference to a service (hereinafter referred to as main service) shall not include reference to a service, which is used for providing main service. It was submitted that, therefore, the intention of the legislature is clear, viz., that it intended to expand the tax net which resulted in the introduction of the negative list regime. It was submitted that section 66F clarifies the intention of widening the tax net and, accordingly, with effect from 1.7.2012, the Legislature consciously discontinued the additional exemption provided to related/ancillary services by the circular dated 7.12.2010. 5.2 It was submitted that the exemption notifications issued under section 11 of the CGST/SGST Acts exempt the services of transmission and distribution of electricity only, and, hence, the related/ancillary serv
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roposition that an exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause of the exemption notification. Reliance was also placed upon the decision of the Supreme Court in the case of Novopan India Limited v. Collector of Central Excise and Customs, Hyderabad, 1994 (Suppl.3) SCC 606, for a similar proposition of law. It was submitted that the exemption notifications exempt the services of transmission and distribution of electricity alone. The said notifications are to be construed strictly, and hence, related services which have not been specifically included within the purview of such notifications cannot be said to have been included therein. 5.4 Insofar as the retrospective applicability of the impugned circular is concerned, it was submitted that the circular simply clarifies the position as existing as well as the position, which existed earlier,
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y interpreted and, in case of ambiguity, the benefit of doubt should go to the revenue. 5.5 The learned standing counsel further contended that even after the introduction of the GST Act regime, only the service of transmission and distribution of electricity are exempted with effect from 1.7.2017. It was submitted that no exemption has been granted for any allied activity including the service of renting meters. It was submitted that subsection (30) of section 2 read with section 8 of the CGST Act deals with composite services , which are not exemption provisions and cannot be interpreted so as to extend exemption to non-exempt service. Further, as per the definition of 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. It was contended that the supply of the subject services may not necessarily be supplied so as to provide services of transmission and dist
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regime and now that such services were to be notified in the negative list, there was no requirement for any exemption, inasmuch as exemption is required provided the service is taxable. It was submitted that by virtue of section 8 of the CGST Act, if the principal supply is not taxable, the related/ancillary service will also be exempted. It was submitted that by virtue of legislative provision, one cannot look at individual items at all. If they have to be looked into, then under section 66F (3) of the Finance Act and section 8 of the CGST Act, the tax is at the rate of principal supply. It was submitted that a circular cannot go contrary to the exemption notification read with section 8 of the CGST Act. It was submitted even otherwise, by virtue of section 8 of the CGST Act and section 66F (3) of the Finance Act, the transaction is not required to be taxed. It was, accordingly, urged that the petition requires to be allowed in terms of the reliefs prayed for. 7. In the backdrop of t
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from shifting of HT Lines received from MEGA. This part is not subject matter of challenge in the petition] (vii) revenue from power supply/transmission income for the financial year 2012-13 to the financial year 2017-18, which is clearly in terms of the impugned circular dated 1.3.2018, item-4 whereof clarifies that services by way of transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under Notification No.12/17-CT(R) No.25; the other services such as (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 line; (v) charges for duplicate bill provided by DISCOMS to consumers are taxable. Thus, it is crystal clear, that the impugned summons, except to the extent the same relates to services provided to MEGA, has been issued on t
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and the challenge to the impugned summons is only an ancillary relief sought in connection therewith. Besides, the clarificatory circular cannot be challenged before the statutory authorities who are bound by the same, and can be challenged only by way of a writ petition under article 226 of the Constitution of India. 8. Adverting to the merits of the case, from the affidavit-inreply filed on behalf of the respondents, it is evident that it is in two parts; the first part is with respect to the taxability of the service provided to M/s. Metro Link Express for Gandhinagar and Ahmedabad (MEGA), which according to the respondents is a declared service falling within the ambit of clause (e) of section 66E of the Finance Act; the second part is with regard to the related/ancillary services of transmission and distribution of electricity, which, according to the petitioners, were exempted by virtue of notifications dated 27.2.2010 and 22.6.2010. It is clear that insofar as the taxability of
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ispute, therefore, relates to the period of the negative list regime and the CGST/SGST regime. 11. Insofar as the second phase, namely, the negative list regime is concerned, with effect from 1.7.2012, section 65B of the Finance Act, 1994 came to be amended and service tax became leviable on all services, other than those services specified in the negative list. Admittedly, transmission and distribution of electricity by an electricity transmission or distribution utility, finds place in the negative list and, is therefore, not exigible to service tax. 12. The first question that arises for consideration is whether services relating to transmission and distribution of electricity fall within the ambit of clause (k) of section 66D of the Finance Act and, are therefore, exempt. In this regard, it may be noted that prior to the coming into force of the negative list regime, goods and services were exempted by virtue of notifications issued in exercise of powers under sub-section (1) of se
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electricity, the same is covered by the exemption for transmission and distribution of electricity extended under relevant notifications. 13. Thus, the reason for saying that supply of electricity meters for hire to consumers is covered by the exemption notification is that such service is an essential activity having direct and close nexus with transmission and distribution of electricity. This circular only provides an interpretation of when a service would stand included in another service, namely, when such service is an essential activity having direct and close nexus with the exempted activity. Therefore, the fact that the exemption notifications came to be rescinded would have no bearing inasmuch as the circular only clarifies what according to the Government of India would stand included in another service. Such interpretation would not change merely because such exemption is now granted under some other provision. 14. It may be noted that insofar as the exemptions prior to th
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ts is that in view of the fact that the exemption notification stands rescinded, the clarification also stands rescinded. What is lost sight of is that the clarification was only in respect of electric meters, whereas all related services were included within the ambit of transmission and distribution of electricity and given the benefit of the exemption notifications. Moreover, the clarificatory circular merely clarifies the stand of the Government as regards what would stand included within the meaning of transmission and distribution services namely, essential activities having direct and close nexus with the transmission and distribution of electricity. The respondents having themselves considered the services in question as being covered by the exemption for transmission and distribution of electricity as such services were essential activities having a direct and close nexus cannot be now permitted to take a U-turn and seek to exclude such services without pointing out any specif
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by virtue of inclusion of such services in the list of negative services under section 66D (k) of the Finance Act as well as by virtue of exemption notification issued under the CGST Act. 16. Examining the issue from the alternative argument advanced on behalf of the petitioners, if related services are per se not covered within the ambit of transmission and distribution of electricity, the question that next arises for consideration is whether such services would fall within the ambit of bundled services as contemplated under section 66F (3) of the Finance Act and within the ambit of composite service as defined under section 2 (30) of the CGST/SGST Acts, and, therefore, liable to be taxed at the rate of the principal supply. Another question is whether section 66F (3) of the Finance Act would cover cases where the single service which gives such bundle its essential character is placed in the negative list and section 8 of CGST/SGST Acts would cover the cases of composite supply wher
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f service tax by virtue of inclusion of the main service in clause (b) of the negative list in Section 66-D and hence, such service is leviable to service tax. (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. (3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely:- (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax. Explanation.- For the purposes of sub-section (3), the expression bundled service means a bundle of provision
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ing to the respondents, this case at best would fall under sub-section (1) of section 66F of the Finance Act and would not be exempted from levy of service tax. It has also been contended that as services in the negative list are not chargeable to tax, section 66F would not apply to services falling in the negative list and, consequently, the benefit of bundling under section 66F (3) would not be available. 19. Sub-section (3) of section 66F of the Finance Act provides for the manner in which a bundled service is to be determined. Clause (a) thereof, which is relevant for the present purpose provides that if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character. The explanation thereof defines bundled service to mean a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of p
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g this issue independently, reference may be made to certain provisions of the Electricity Act. Sections 43 and 45 of the Electricity Act, which are relevant for the present purpose, read as under:- 43. Duty to supply on request: (1) Save as otherwise provided in this Act, every distribution licensee, shall, on an application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply: Provided that where such supply requires extension of distribution mains, or commissioning of new sub-stations, the distribution licensee shall supply the electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate Commission: Provided further that in case of a village or hamlet or area wherein no provision for supply of electricity exists, the Appropriate Commission may extend the said period as it may consider necessary for e
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es: (1) Subject to the provisions of this section, the prices to be charged by a distribution licensee for the supply of electricity by him in pursuance of section 43 shall be in accordance with such tariffs fixed from time to time and conditions of his licence. (2) The charges for electricity supplied by a distribution licensee shall be – (a) fixed in accordance with the methods and the principles as may be specified by the concerned State Commission; (b) published in such manner so as to give adequate publicity for such charges and prices. (3) The charges for electricity supplied by a distribution licensee may include – (a) a fixed charge in addition to the charge for the actual electricity supplied; (b) a rent or other charges in respect of any electric meter or electrical plant provided by the distribution licensee. (4) Subject to the provisions of section 62, in fixing charges under this section a distribution licensee shall not show undue preference to any person or class of per
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ectricity Act to mean any line which is used for carrying electricity for any purpose and includes (a) any support for any such line, that is to say, any structure, tower, pole or other thing in, on, by or from which any such line is, or may be, supported, carried or suspended; and (b) any apparatus connected to any such line for the purpose of carrying electricity. Electric plant has been defined under sub-section (22) of section 2 of the Electricity Act to mean any plant, equipment, apparatus or appliance or any part thereof used for, or connected with, the generation, transmission, distribution or supply of electricity but does not include – (a) an electric line; or (b) a meter used for ascertaining the quantity of electricity supplied to any premises; or (c) an electrical equipment, apparatus or appliance under the control of a consumer. 22. Thus, any line which is used for carrying electricity for any purpose as well as any apparatus connected to any such line for the purpose of c
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f electric line and electric plant is the meter used for ascertaining the quantity of electricity supplied to any premises. However, insofar as installation of electricity meter and hire charges collected in respect of electricity meters are concerned, by the circular dated 7th December, 2010, the Government of India has clarified that supply of electricity meters for hire to the consumers is an essential activity having direct and close nexus with transmission and distribution of electricity and therefore, is covered by the exemption for transmission and distribution of electricity extended under the relevant notifications. Evidently therefore, all the services related to transmission and distribution of electricity are naturally bundled in the ordinary course of business of the petitioner and are required to be treated as provision of the single service of transmission and distribution of electricity which gives the bundle its essential character. 23. Besides, a perusal of the GERC R
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nsmission and distribution of electricity. 24. It has been contended on behalf of the respondents that sub-section (3) of section 66F of the Finance Act would not apply where the single service which gives the bundle of services its essential character is exempt from the levy of service tax. In the opinion of this court, there is nothing in the language employed in sub-section (3) to section 66F to read into it a requirement that such service should not be exempt from tax. All that the sub-section provides is that taxability of bundled services shall be determined in the manner provided therein. The term taxability means liability to taxation. Thus the term taxability would take within its sweep not being taxable also inasmuch as liability to taxation would also mean not being liable to any tax. Thus, the liability to tax of a bundled service has to be determined in the manner provided under sub-section (3) of section 66F of the Finance Act. If the services are naturally bundled in the
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tricity and, would therefore, be exempt from payment of service tax. 26. Insofar as the phase relating to the CGST/SGST Acts regime is concerned, section 8 of the CGST Act makes provision for tax liability on composite and mixed supplies and postulates that the tax liability on a composite or a mixed supply shall be determined in the manner provided in clauses (a) and (b) thereunder. Clause (a) says that 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 clause (b) says that 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. To fall within the ambit of clause (a) the supply has to be a composite one. Composite supply has been defined under section 2(30) of the CGST Act to mean a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or an
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ply is the supply which gives the bundle its essential character. Reverting to the facts of the present case, the principal supply of transmission and distribution of electricity is naturally bundled and supplied in conjunction with the related/ancillary services in the ordinary course of business, accordingly, in view of the provisions of clause (a) of section 8 of the CGST Act, the tax liability of such composite supply is required to be determined by treating the same as a supply of the principal supply namely, transmission and distribution of electricity. 27. It has been contended on behalf of the respondents that clause (a) of section 8 of the CGST Act would not be applicable where the principal supply is exempt from levy of service tax. In the opinion of this court, there is nothing in section 8 of the Act to read any such construction. What the section says is that the tax liability of a composite or a mixed supply shall be determined in the manner provided thereunder. In a give
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n with each other by a taxable person for a single price where such supply does not constitute a composite supply. The illustration thereunder reads thus: 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;" The above illustration gives an indication of the intent of the legislature, viz. it makes it clear that what is to be treated as mixed supply is a combination of supplies wherein each of the items forming part of the supply can be supplied separately and are independent of each other, but are supplied in conjunction with each other. Adverting to the facts of the present case, the related supplies cannot be supplied separately nor are the principal supply and related supplies independent of ea
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ion of electricity is exempt from levy of service tax, the tax liability of the related services shall be determined accordingly. 29. TO SUMMARISE: – The preliminary contention regarding the petition not being maintainable is rejected. – As per the circular dated 7th December, 2010, the reason for saying that supply of electricity meters for hire to consumers is covered by the exemption notification is that such service is an essential activity having direct and close nexus with transmission and distribution of electricity. This circular only provides an interpretation of when a service would stand included in another service, namely, when such service is an essential activity having direct and close nexus with the exempted activity. Therefore, the fact that the exemption notifications came to be rescinded has no relevance inasmuch as all that the circular clarifies is what according to the Government of India would stand included in another service. Such interpretation would not chang
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egative services under section 66D (k) of the Finance Act as well as by virtue of exemption notification issued under the CGST Act. – Any line which is used for carrying electricity for any purpose as well as any apparatus connected to any such line for the purpose of carrying electricity is mandatorily required to be provided to the consumer by the licensee. The term electrical plant takes within its sweep any plant, equipment, apparatus or appliance or any part thereof used for, or connected with, the generation, transmission, distribution or supply of electricity, except for electric meter and any electrical equipment, apparat- us or appliance under the control of a consumer. Sub-section (2) of section 43 of the Electricity Act casts a duty upon the licensee to provide, if required, electric plant or electric line for giving electric supply to the premises. Therefore, providing electric line and electric plant are elements of service which are naturally bundled in the ordinary cours
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etitioner and are required to be treated as provision of the single service of transmission and distribution of electricity which gives the bundle its essential character. – The term taxability means liability to taxation. Thus, the term taxability would take within its sweep not being taxable also inasmuch as liability to taxation would also mean not being liable to any tax. Thus, the liability to tax of a bundled service has to be determined in the manner provided under sub-section (3) of section 66F of the Finance Act. If the services are naturally bundled in the ordinary course of business, the bundle of services shall be treated as provision of the single service which gives the bundle its essential character and where the services are not naturally bundled in the ordinary course of business, the same is required to be treated as provision of the single service which results in highest liability of service tax. Accordingly, where the services are naturally bundled in the ordinary
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n and distribution of electricity is exempt from levy of service tax, the tax liability of the related services shall be determined accordingly. 30. For the foregoing reasons, the petition succeeds and is, accordingly, allowed to the following extent: Paragraph 4 (1) of the impugned circular No.34/8/2018-GST dated 1.3.2018 to the extent the same reads as under is hereby struck down as being ultra vires the provisions of section 8 of the Central Goods and Services Tax Act, 2017 as well as Notification No.12/2017- CT (R ) serial No.25: 4. (1) Whether the activities carried out by DISCOMS against recovery of charges from consumers under the State Electricity Act are exempt from the 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,- i. Application fee for releasing connection of electricity; ii. Rental Charges against me
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