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2022 (4) TMI 822 - HC - GSTExemption from GST - supply related to supply of electricity - composite supply or not - Constitutional Validity of para 4 (1) of the impugned Circular No.34/8/2018-GST dated 1.3.2018 - seeking to declare that charges such as application fee, meter rent, testing fee, etc collected by the Petitioners towards activities directly and closely connected with the transmission or distribution for electricity are exempt from tax under Entry 25 of Notification No.12/2017 dated 28.6.2017 - HELD THAT - The writ applicant is of the view that in the event, if the Union succeeds before the Supreme Court then it will have to deduct service tax and/or GST and pay the same to the Government. One of the consumers objected to this action on the part of the writ applicant in obtaining such undertaking. The matter was carried before the Consumer Grievance Redressal Forum, Ahmedabad. The Consumer Grievance Redressal Forum passed an order dated 30.04.2021 below the Complaint No.18 of 2021 holding that it is permissible for the writ applicant to obtain such undertaking from its consumers. The matter thereafter, was carried further by the very same complainant before the Ombudsman of the Gujarat Electricity Regulatory Commission. The Ombudsman of the Commission has passed an order dated 20.12.2021 taking the view that as the Electricity Act, 2003 does not provide or empower the company to obtain such undertaking, it is not permissible for the writ applicant to obtain such undertaking from the consumers. In other words, the Ombudsman is of the view that the writ applicant as a generation, transmission and distribution of electricity company cannot compel the consumers to furnish such undertaking. If the consumer on its own free will and volition agrees to furnish such undertaking then there should not be any problem. Let Notice be issued to the respondents, returnable on 06.07.2022.
Issues:
1. Interpretation of a circular regarding GST exemption for electricity-related charges. 2. Nature of services provided by the petitioner as a composite supply. 3. Legality of obtaining undertakings from consumers regarding service tax and GST. Interpretation of Circular: The litigation arose from a previous case where the writ applicant sought relief against a government circular, claiming charges related to electricity transmission and distribution were exempt from GST. The High Court allowed the writ, stating that services related to electricity transmission and distribution are naturally bundled and should be treated as a single service exempt from tax. The court emphasized that the meaning of "transmission and distribution of electricity" remains consistent across regimes, and any change in interpretation cannot affect the exemption status. The judgment highlighted that services bundled in the ordinary course of business should be treated as a single service for tax purposes. Nature of Services Provided: The High Court declared that the services provided by the petitioner constitute a composite supply under the CGST Act. It ruled that if the principal supply of transmission and distribution of electricity is tax-exempt, related services should also be treated accordingly. The court emphasized that tax liability for bundled services should be determined based on the essential character of the bundle, with exemptions applying to the entire bundle if the principal service is tax-exempt. Legality of Obtaining Undertakings: Following the High Court's judgment, the writ applicant began obtaining undertakings from consumers regarding service tax and GST pending the Supreme Court's decision. A consumer objected, leading to a complaint before the Consumer Grievance Redressal Forum, which permitted the writ applicant to obtain such undertakings. However, the Ombudsman of the Gujarat Electricity Regulatory Commission later ruled that the writ applicant cannot compel consumers to provide undertakings, stating that it lacks the authority under the Electricity Act of 2003. The Ombudsman's decision is now challenged in this writ application. In conclusion, the judgment addressed the interpretation of a circular regarding GST exemptions for electricity-related charges, affirmed the nature of services provided as a composite supply, and examined the legality of obtaining undertakings from consumers regarding service tax and GST, leading to further legal challenges and a pending hearing before the High Court.
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