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2025 (1) TMI 887 - HC - GSTLevy of GST - Regulatory fees collected by the Central Electricity Regulatory Commission (CERC) and the Delhi Electricity Regulatory Commission (DERC) - respondents have sought to draw a dichotomy between the adjudicatory and regulatory functions which these two statutory bodies discharge to essentially hold that the revenue earned from the latter would be subject to tax under the CGST and IGST Acts - HELD THAT - Whilst the supply of goods or services stands comprised in Schedule II, Schedule III to the CGST Act lists out activities which are neither liable to be treated as a supply of goods nor a supply of services. Schedule III assumes significance since one such genre is prescribed to be services rendered by a tribunal established under any law. The fact that an electricity regulatory commission acts as a tribunal cannot perhaps be disputed bearing in mind the judgment rendered by the Supreme Court in PTC India Ltd. v. Central Electricity Regulatory Commission 2010 (3) TMI 1209 - SUPREME COURT and where it was held that ' the Central Commission is the decision-making authority. Such decision-making under Section 79(1) is not dependent upon making of regulations under Section 178 by the Central Commission. Therefore, functions of the Central Commission enumerated in Section 79 are separate and distinct from functions of the Central Commission under Section 178. The former are administrative/adjudicatory functions whereas the latter are legislative. '. The respondents, however, seek to discern a distinction between the adjudicatory function performed by a regulatory commission as distinguishable from what they assert to be the exercise of a power to regulate. According to the respondents, any income or receipts derived by those Commissions in the course of discharge of their regulatory function would be exigible to tax under the CGST Act - It becomes pertinent to note that the CGST Act not only deals with the supply of goods or services per se, it also brings within its ambit composite and mixed supplies in terms of Section 8. Composite supplies are those which are spelt out and enumerated in serial 6 of Schedule II. The supply of services generically is dealt with in serial 5. Undisputedly, the regulatory function discharged by Commissions can neither be said to be akin to renting of immovable property, construction of a complex or building, temporary transfer or permissive use or enjoyment of an intellectual property right, development, design of software, transfer of the right to use goods and which are subjects enumerated in serial 5 of Schedule II. The regulatory power which is wielded by Commissions under the provisions of the Electricity Act would also not fall within the ambit of clause (e) of serial 5 and which speaks of an obligation to refrain from doing an act or toleration of an act or situation. Whether the power to regulate, as exercised, could be said to be an activity akin to trade, commerce, manufacture, profession, vocation, adventure, voyager and which are activities enumerated in Section 2 (17) (a)? - HELD THAT - The expression local authority is defined by Section 2 (69) to include local bodies such as Panchayats, Municipalities, Municipal Committees, Cantonment Boards or Regional Councils and other authorities which may come to be constituted in terms of Articles 371, 371A, 371J or the Sixth Schedule to the Constitution. A Commission which is constituted under the Electricity Act would undisputedly not fall within the ken of such authorities - The word consideration , in our considered opinion, would necessarily have to draw colour and meaning from Section 2(31) and which speaks of payment made in respect of, in response to or for the inducement of a supply of goods. When we revert to Section 2 (17), we find that the statute defines the said expression to mean any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity irrespective of whether it be for a pecuniary benefit or not. Clauses (b) and (c) of Section 2 (17) are again coupled to clause (a). Clause (d) of Section 2 (17) is concerned with the supply or acquisition of goods, while clauses (e), (f), (g) and (h) would also have no application whatsoever considering the nature of activities which are contemplated therein. The word consideration , in our considered opinion, would necessarily have to draw colour and meaning from Section 2(31) and which speaks of payment made in respect of, in response to or for the inducement of a supply of goods. Suffice it to note that it was not even remotely sought to be contended by the respondents that the payments in the form of fee as received by Commissions were an outcome of an inducement to supply goods or services. More importantly we find that by virtue of Section 7, a supply would necessarily have to be of goods or services not only for consideration but more importantly in the course or furtherance of business. We have in the preceding parts of this decision clearly found that the regulatory function discharged by Commissions would clearly not fall within the scope of the word business as defined by Section 2 (17). Thus, even if the fee so received by such Commissions were to be assumed as being consideration received, it was clearly not one obtained in the course or furtherance of business. We are thus of the considered opinion that the view as expressed by the respondents in the SCNs impugned before us are rendered wholly arbitrary and unsustainable. Role and Functions of Electricity Commission - HELD THAT - The Electricity Act makes no distinction between the regulatory and adjudicatory functions which it vests in and confers upon a Commission. Those functions are placed in the hands of a quasi-judicial body enjoined to regulate and administer the subject of electricity distribution. Electricity, undoubtedly, is a natural resource which vests in the State. There are no hesitation in observing that the SCNs infringe the borders of the incredible and inconceivable - A notification would neither expand the scope of the parent entry nor can it be construed as taking away an exemption which stands granted under the CGST Act. There cannot possibly be even a cavil of doubt that a Schedule constitutes an integral part and component of the principal legislation. Conclusion - The regulatory function discharged by Commissions would clearly not fall within the scope of the word 'business' as defined by Section 2 (17). Petition allowed. 1. ISSUES PRESENTED and CONSIDERED The core legal questions addressed in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: GST Applicability on Fees Received by CERC and DERC
Issue 2: Bifurcation of Adjudicatory and Regulatory Roles
Issue 3: Classification as Business Entities
Issue 4: Exemption under Schedule III
Issue 5: Validity of Notifications and Interpretations
3. SIGNIFICANT HOLDINGS
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