2024 (8) TMI 1313 - HC - GST

Refund of the input tax credits available to the petitioner - petitioner had not filed the bill of shipping for supply of electricity - taxability of continuous supply of goods - HELD THAT - Section 12 (2) of the CGST Act provides for fixing the time of supply on either of two eventualities. The time of supply can be fixed on the date when the invoice for such supply is prepared and sent by the supplier or on the date on which the payment for such supply is made by the person receiving such goods. However, the legislature has also stipulated that the earlier of these two eventualities would be treated as the time of supply for the purpose of assessment of tax - the time of continuous supply of goods is not relevant and it is only the point of time when the invoice is raised or price is paid, whichever is earlier, that would be relevant for determining the point of tax in time and consequently, the period of supply of goods for which an invoice is raised should be taken into account, rather than the point of time at which the invoice has been raised, should be taken as the relevant period . In the present cases, the undisputed fact is that the petitioner was required to raise an invoice for the supply of electricity for a particular month by the 7th day of the succeeding month. This stipulation is contained in the power purchase agreement executed between the petitioner and M/s. Bangladesh Power Development Board. This would mean that though supply of electricity was done in the month of December, the time of supply, by legal fiction, would be the date on which the bill was presented in the month of January and so on and so forth. In such circumstances, furnishing of the REA for the preceding month, while making an application for refund in the succeeding month would be in accord with the said provisions of the Act and Rules. These Writ Petitions are allowed, setting aside the orders in appeal and the orders in original.

Summary

Issues:
Refund of input tax credits under the Integrated Goods and Services Tax Act, 2017 based on export sale; Interpretation of Rule 89 of the Central Goods and Services Tax Rules, 2017 regarding proof of export; Applicability of the amendment to Rule 89 in a retrospective or prospective manner; Determination of the relevant period for considering refund applications in the context of continuous supply of goods; Disagreement between the petitioner and the tax authorities on the interpretation of relevant provisions.

Analysis:
The petitioner, a power generator, sought a refund of input tax credits for supplying electricity to M/s. Bangladesh Power Development Board, claiming it as an export sale exempt from tax under the IGST Act. The tax authorities rejected the refund applications due to the absence of bill of shipping. The petitioner argued that electricity being intangible, the bill of shipping requirement was inapplicable. A previous judgment deemed an amendment to Rule 89 of the CGST Rules as retrospective, allowing proof of export through the Regional Energy Account (REA) maintained by the Regional Load Dispatch Center. The tax authorities insisted on the REA for the specific month of refund application, leading to rejection of the petitioner's claims.

The dispute centered on the interpretation of Rule 89 and the relevant period for refund consideration. The petitioner contended that the REA of the previous month should suffice, as invoices for electricity supply were issued in the succeeding month. The tax authorities, however, maintained that only the REA for the refund month was relevant. The court analyzed the CGST Act provisions on continuous supply of goods and time of supply, emphasizing the importance of invoice issuance for determining tax liability.

The court concluded that the time of supply for continuous goods should align with invoice issuance, not the supply period. As per the power purchase agreement, invoices for electricity supply were raised in the succeeding month, making the REA of the previous month pertinent for refund applications. Consequently, the court allowed the writ petitions, directing the tax authorities to consider refund applications with the previous month's REA as proof of export. The orders in appeal and original were set aside, with no costs imposed.

In summary, the judgment resolved the dispute by interpreting relevant provisions of the CGST Act and Rules, emphasizing the significance of invoice issuance for determining the time of supply in continuous goods transactions. The decision favored the petitioner's argument, allowing the use of the previous month's REA for refund applications, thereby granting relief in the form of refund consideration based on the revised interpretation.