2024 (11) TMI 36 - HC - GST

Exemption claim - composite service offered to the consumers - whether the exemption granted to transmission or distribution of electricity by an electricity transmission or distribution utility company would take in the ancillary services offered to its consumers? - stay on penalty proceedings - HELD THAT - The writ petitions stand closed, leaving the parties to abide by the Hon'ble Supreme Court judgment and status quo be maintained with respect to the payments and also the penalty proceedings till judgment is delivered by the Hon'ble Supreme Court in C.A. No. C.A. No. 006278 of 2019. The penalty proceedings will stand stayed till the final decision of the Hon'ble Supreme Court in the matter of exemption regarding ancillary services, and if the issue is held against the assessee, then necessarily penalty will have to be independently considered, on the basis of principles governing imposition of penalties. Petition disposed off.

Summary

Issues:
1. Interpretation of exemption for transmission or distribution of electricity to include ancillary services.
2. Impact of High Court of Gujarat judgment on clarification of exemption.
3. Payment of liability under protest pending Supreme Court judgment.
4. Stay of penalty proceedings pending Supreme Court judgment.

Analysis:
The primary issue in this case before the Patna High Court was the interpretation of the exemption granted to transmission or distribution of electricity by an electricity utility company regarding the inclusion of ancillary services provided to consumers. The petitioners argued that the exemption should cover services listed for levy of tax by the Principal Chief Commissioner. The distribution companies relied on Sections 7 and 8 of the CGST Act, contending that the services provided were composite and exempt from clarification that could dilute the exemption.

The High Court noted the judgment of the High Court of Gujarat in Torrent Power Ltd. v. Union of India, which struck down clarifications affecting the exemption. It was mentioned that a Special Leave Petition had been filed and converted into a case pending before the Supreme Court. The petitioners had paid the liability under protest for the years in question, with ongoing payments subject to the final Supreme Court decision. The Court decided to dispose of the writ petition, leaving parties to abide by the Supreme Court's judgment.

Regarding penalty proceedings, it was highlighted that they were stayed due to the pending writ petitions. The Court clarified that penalty proceedings would not continue until the Supreme Court delivered a final judgment. The writ petitions were closed with the understanding that status quo would be maintained concerning payments and penalty proceedings until the Supreme Court's decision in the pending case. It was emphasized that if the Supreme Court ruled against the assessee, penalty considerations would be based on applicable principles.

In conclusion, the High Court's judgment focused on the interpretation of the exemption, the impact of a previous judgment, the payment of liability under protest, and the stay of penalty proceedings pending the Supreme Court's final decision. The Court ensured that parties would await the Supreme Court's judgment and maintained the status quo regarding payments and penalties until the higher court's ruling.