2023 (8) TMI 1349 - AAR - GST

Classification of supply - supply of treated water - effluent treatment plant promoted by dyeing units - water sold as water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) - to be classified under heading 2201 or not. HELD THAT - From the conjoined reading of section 4 of The Sale of Goods Act, 1930 and the Hon ble Supreme Court in State Of Madras vs Gannon Dunkerley Co.,(Madras) 1958 (4) TMI 42 - SUPREME COURT , 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 by the Applicant 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. Whether the classification of water sold as water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) under heading 2201 is correct? - HELD THAT - The water grouped under the heading 22.01 is ordinary water whether or not clarified or purified. And this heading specifically excludes distilled or conductivity water and water of similar purity which arc classified in heading 28.53. Therefore, it is amply clear that, water recovered out of the effluent treatment process nothing but an ordinary water which is suitable for reuse by the dyeing and bleaching units as a solvent and as a washing, rinsing medium. Thus, it aptly fits into SI. No. 99 of Notification No. 02/2017, CT (Rate), dt. 28.06.2017 under the heading 2201 rather than SI.No. 24 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 under the same heading 2201. Thus, the ultimate intention behind the effluent treatment process is to treat the effluent water discharged by textile units to recover water, salt and other chemicals consumed during the course of dyeing and bleaching to the maximum extent possible so as to reuse the same without getting it discharged to pollute water bodies - it is evident that the common effluent treatment plant has been set up in order to comply with the legislative and environment regulations thereby conserving water through recovery and reuse and not to manufacture water or chemicals. Exempted from GST.

Summary

Issues Involved:

1. Classification of supply of outputs as sale of goods.
2. Classification of water sold under heading 2201.

Summary:

Issue 1: Classification of Supply of Outputs as Sale of Goods

The Applicant, a common effluent treatment plant, proposed to purchase effluents from dyeing units, process them, and sell the resultant products. The Authority examined the nature of this transaction under Section 4 of The Sale of Goods Act, 1930, and the Supreme Court judgment in the case of State Of Madras vs Gannon Dunkerley & Co., (Madras). It was determined that the classification of supply by the Applicant as sale of goods is correct if all elements of a sale, as defined by the Act and the Supreme Court judgment, are present. The ruling emphasized that the proposed mode of operation'purchasing raw effluent, treating it, and selling the resultant products'can be classified as a sale of goods if the procedures in the Sale of Goods Act are followed.

Issue 2: Classification of Water Sold Under Heading 2201

The Applicant sought clarification on whether the classification of water sold as 'water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles)' under heading 2201 is correct. The Authority referred to previous Advance Rulings and noted that water recovered from the effluent treatment process is not de-mineralized water as it still contains impurities. The effluent treated water is classified under Heading 2201 as ordinary water, suitable for reuse by dyeing and bleaching units, and is exempt from GST as per Notification No. 2/2017-Central Tax Rate, amended by Notification No. 7/2022-Central Tax (Rate). The ruling confirmed that the classification of water sold by the Applicant falls under SI. No. 99 of Notification No. 2/2017, attracting a Nil rate of GST.

Ruling:

1. Classification of outputs as supply of goods is correct, subject to the condition that the applicant follows the guidelines mentioned in para 4.9 of the order.
2. The classification of water sold by the applicant is correctly classifiable under SI. No. 99 of Notification No. 2/2017-Central Tax Rate, attracting a Nil rate of GST.