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TMI Blog2018 (5) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... o the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act /MGST Act would be mentioned as being under the "GST Act" 02 FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- 1 - STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON "ANNEXURE I- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS (S) ON WHICH THE ADVANCE RULING REQUIRED 2. M/s. Reliance infrastructure limited ('the Applicant") is inter alia engaged in the business of generation, transmission and distribution of electricity and is registered under Goods and Service Tax Act ('GST') bearing Registration No. 27AACCR7446Q1ZM. 3. The Applicant has obtained a license under Section 14 of the Central Electricity Act, 2003 ('Electricity Act') to distribute electricity as a distribution licensee. Accordingly, the Applicant is operating and maintaining a robust distribution system for supplying electricity to the consumers in the authorized areas ('area of supply'), in terms of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintenance there of and also the procedure for deposit of compensation payable by the licensee and furnishing of security in respect thereto. 8. The Government of Maharashtra has formulated the Maharashtra Electricity Work of Licensee Rules,2012 ("Electricity Work Rules") for inter alia setting out the procedure to be followed by the licensee for the purpose of carrying out the works given under Section 67 of the Electricity Act. It also lays down lay down the procedure for fencing, guarding and other safety measures relating to the works and the immediate reinstatement of the affected areas and manner of restoration and the payment of the cost of reinstatement to the authority etc. The key provisions laid down in this connection are summarized hereunder: *Rule 11 of the Electricity Work Rules provides that licensee shall be liable to deposit an amount for restoration and maintenance of the affected areas. * Rule 12 of the Electricity Work Rules provides that the distribution licensee shall carry out the restoration and maintenance of the property affected by the works carried out by the distribution licensee. * Proviso to the Rule 12 of the Electricity Work Rules provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be deposited with MCGM with each and every permit can be waived; if the utility agency deposits certain fixed amount of standing security deposit with MCGM for the purpose stated hereinabove. the Astt. Commissioner of respective ward shall decide the amount of such standing security deposit which in his opinion will be sufficient to meet the recoveries from the utility agency. It the utility agency deposits such standing security deposit which the respective ward then no separate security deposit shall be insisted along with demand note" ii) Access Charges: In addition to the payment of the reinstatement charges, the licensee is also liable to pay access charges to the Municipal Authorities for giving right of way to the distribution licensee to carry out the excavation work for laying of underground electric supply lines. The relevant extract of the MCGM Trenching Policy have been provided below: "6A. Access Charges (Right ofway charges): In addition to the regular RI charges; access charges for right of way will be recovered by MCGM from all utilities which lay underground services below MCGM roads. Presently these charges will be recovered at the rate of Rs. 100/- Per Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made similar payments of reinstatement charges and access charges to other authorities namely Mumbai Metropolitan Region Development Authority (MMRDA) and Mira Bhayandar Municipal Corporation. STATEMENT CONTAINING THE APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED 2. SUBMISSIONS OF APPLICANT GST is not payable on Reinstatement charges paid to Municipal Authorities 2.1 In terms of Entry 4 to Notification No. 12/2017 -Central Tax (Rate) dated 28.06.2017 ('NN 12/2017'), services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution are exempt from le of GST. The relevant extract of NN 12/2017 Sl. No. Chapter, Section, heading, Group or Service Code (Tarif Description of Services Rate (percent) Condition 4 Chapter 99 Services by Central Government State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a Municipality under article 243 W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council constituted under the Sixth Schedule to the Constitution; f) a Development Board constituted under article 371 Of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution; 2.7 In terms of Article 243P read with 243S of the Constitution of lndia, a Nagar Panchayat, Municipal Council or a Municipal Corporation would constitute 'Municipality'. Thus, Condition II in Entry 4 to NN 12/2017 stands fulfilled as the MCGM, MMRDA and Mira Bhayandar Municipal Corporation would be treated as local authority Condition III 2.8 The Condition Ill requires that the services should be by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution, 2.9 It is a settled position in law' that the term "in relation to" is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context. 2.10 Further, the functions entrusted to a Municipality under Article 243 W of the Constitution is reproduced hereunder: "Subject to the provisions of the Constitution, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(30) of the CGST Act as under: "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction With each other in the ordinary course Of business, one of which is a principal supply; 2.16 Further, in terms of Section 8 of the CGST Act, the tax liability of a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. 2.17 In the present case, the Municipal Authorities provide services of restoration of roads and also right of way to carry out excavation work. The services of giving right of way and restoration of roads are naturally bundled and are supplied in conjunction with each other in the ordinary course of business of granting permission to the licensee for carrying out the excavation works. Thus, it can be said that it would constitute a composite supply in terms of Section 2(30) of the CGST Act wherein the service of restoration of roads would be the principal supply. 2.18 As discussed above, in terms of Section 8 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral matters listed in Twelfth Schedule to the Constitution, some of the entries under which the activity of road reinstatement may fall are reproduced hereunder: "I. Urban Planning including town planning and 4 Roads and Bridges 17. Public amenities including street lighting, parking lots, bus stops and public conveniences."" 4. The activity of restoration of roads which includes activities such as construction, alteration, repair and maintenance of roads, can be related to any of the above relevant entry and more particularly the entry in respect of "roads and bridges". 5. It is a settled position in law that the term "in relation to" is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context The Applicant has placed reliance on the following judicial precedents: * Doypack Systems Pvt Ltd vs. Union of India [1988 (36) ELT 201 (SC) = 1988 (2) TMI 61 - SUPREME COURT OF INDIA * Home Solution Retail India Ltd vs. Union of India [2009 (237) ELT 209 (Del.) = 2009 (4) TMI 14 - DELHI HIGH COURT 6. The Applicant submits that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following categories: (i) Where the service is exempted from GST without any reference to the service provider or service recipient (refer Entries 2, 9B, 25, 12, etc.) (ii) Where the service is exempted from GST when provided by the specified persons without any reference to the service recipient(Refer 1, 4, 5, etc.) (iii) Where the service is exempted from GST when received by the specified persons without any reference to the service provider (Refer 16, 40, etc.) (iv) Where the service is exempted from GST when received by the specified persons and provided by the specified persons (Refer 8, 11A, etc.) 10. Further, from a perusal of the Entries 13, 17 and 76 to NN 12/2017, it is clear that the NN 12/2017 has in these entries explicitly restricted the exemption to specified services for use by general public. However, under Entry No. 4 the specified service has not been circumscribed by any expression which denotes that exemption on such services is to be restricted to be used by general public at large. 11. Similarly, from a perusal of Entries covered by (iii) and (iv) above, it is clear that wherever the legislature wanted to exempt services provided to particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade or business" is used it necessarily has different and wider connotation than merely 'trade and commerce'. 'Business' may be of varying activities. may or not be for profit. hut it necessarily includes within is ambit 'trade and commerce' so sometime it may be synonymous but its field stretches beyond 'trade and commerce, 14. In support of the above contention, reference may also be made to the following judgements wherein, in the absence of any specific definition of the term 'railways' under the Finance Act, 1994 or any similar restriction limiting the benefit of exemption only to government railways or railways used for public carriage of goods or passengers, it was held inter alia held that benefit of exemption shall also be available to railways constructed for use by private entities: * Steadfast Corporation Ltd 2016(45) STR 583 (AAR) = 2016 (9) TMI 50 - AUTHORITY FOR ADVANCE RULINGS * SMS Infrastructure Ltd vs. CCEI & cus. Nagpur 2017 (47) STR 17 (Tri-Mumbai) = 2016 (9) TMI 843 - CESTAT MUMBAI * Afcons Infrastructure Ltd. v. CCEx, Mumbai-Il 2015 (38) STR 194 (Tri-Mumbai) = 2013 (8) TMI 530 - CESTAT MUMBAI * ETA Engineering Pvt. Ltd. vs. CST, New Delhi 2016 (43) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances." 18. The Applicant also relies on the case of Commissioner of Central Excise, Surat-l Versus Favourite Industries 2012 (278) E.L.T. 145 (S.C.) = 2012 (4) TMI 65 - SUPREME COURT OF INDIA , wherein the Apex Court held as under: "31. Moreover, a liberal construction requires to be given to a beneficial notification. This Court in Commissioner of Customs (Preventive) Mumbai V. M. Ambalal and Company, (2011) 2 SCC 74 2010 (260) ELT. 487 (S.C.) = 2010 (12) TMI 16 - Supreme court of India , (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpretation. 25 The notification requires to be interpreted in the light of the words employed byit and not on any other basis. There cannot be any addition or subtraction from the notification for the reason the exemption notification requires to be strictly construed by the Courts. The wordings of the exemption notification have to be given its natural me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly shall be treated as supply of principal supply and GST would be applicable based on such principal supply. In the instant case, principal supply is the supply of service for restoration of roads which is exempt from the levy of GST in terms of NN 12/2017. Therefore, GST would not be applicable on the access charges collected by the Municipal Authorities. In view of the above submissions, no GST would be leviable on reinstatement charges and access charges recovered by the Municipal Authorities." 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- ''It appears from the application that M/S. RIL, a private company engaged in business of generation, transmission and distribution of electricity claimed that "reinstatement charges" and "access charges paid to Municipality for restoration work of roads damaged by excavation work undertaken by the applicant are exempted from GST in terms of entry no. 4 of the Notification No. 12/2017- Central Tax (rate) dated 28.06.2017. In support of their contention, they have argued that since such services provided by a governmental authority (Municipality) fall under the function entrus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been tendered. 05. OBSERVATIONS We have gone through the facts of the case. The questions raised in the application are as under - 1. Whether reinstatement charges paid to Municipal Authorities would be liable to GST? 2. Whether access charges paid to Municipal Authorities would be liable to GST? The first thing that we notice from a perusal of the questions posed as well as from the documents submitted on record shows thus - a. The questions are raised by the recipient and not by the supplier. b. The supplier has issued a receipt to the applicant showing details thus Municipal Corporation of Greater Mumbai Receipt No. : 2000009002 Date : 07.11.2017 Received From : Reliance Infrastructure Ltd MCGM GST Number 27AAALM0042L3Z4 Sr. No. SAC / Activity Code Description of Activity Amount 1 RI FOR RELIANCE ENERGY LTD 63690.00 2 997212 ACCESS CHARGES FOR POWER CABLES 1000.00 64690.00 90.00 90.00 64870.00 c. There is also a Demand Note No. 783184406 dt.16.10.2017 which informs the applicant in response to their application to undertake excavation in trench. The aforesaid amount has been informed. It is categorically mentioned that payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Supplier of service Recipient of Service (1) (2) (3) (4) 5 Services supplied by the Central Government, State Government, Union Territory of local authority to a business entity excluding,- (1) renting of immovable property, and (2) services specified below- (i) services by the Department of posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. Central Government, State Government, Union territory of local Authority Any business entity located in the taxable territory As can be seen when the services are supplied by the local authority, the GST Act has cast the duty on the recipient of service to pay the tax on reverse charge basis as if he is the person liable to pay the tax in relation to the supply. In the present case, it is informed that the service would be provided by the Municipal authorities. Therefore, in view of the above entry in the notification issued for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there shall be constituted in every State,- (a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Part: ..........................................................." Since there is a reference to the Twelfth Schedule, we also refer to the same thus - TWELFTH SCHEDULE (Article 243 W') l. Urban planning including town planning. 2 Regulation of land-use and construction of buildings. 3 Planning for economic and social development. 4 Roads and bridges. 5 Water supply for domestic, industrial and commercial purposes. 6 Public health, sanitation conservancy and solid waste management. 7 Five services. 8 Urban forestry, protection of the environment and promotion of ecological aspects. 9 Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10 Slum improvement and upgradation. 1l. Urban poverty alleviation, 12. Provision of urban amenities and facilities such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is restoration required to be done. This restoration work would not result in performing of the sovereign function. The sovereign has already been performed by constructing the road or undertaking maintenance works roads. The restoration work can be equated neither to construction work nor to maintenance work as suo-motu undertaken by the Municipal Authorities. The restoration charges are also not in the nature that the Municipal Authorities are performing any job of construction for the applicant. The street or pavement or road that is dug up is a general road. In view of all above, we are of the firm view that it should not be disputed that the recovering of charges for restoring the patches which have been dug up by business entities of the nature as the applicant cannot be equated to performing a sovereign function as envisaged under article 243 W of the Constitution. Further, we find that there is specific entry in Notification No. 12/2017-Central/State Tax (Rate) dated 28.06.2017 which reads as udner- Si. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Service Rate(per cent) GST+MGST=IGST] Condition 4 Chapter 99 Services by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of trenches] as provided by the applicant state that in addition to the regular RI charges, access charges for right of way will be recovered by MCGM from all utilities which lay underground services below MCGM roads. This statement helps to understand the position as respects MCGM [Municipal Corporation of Greater Mumbai]. That these charges would be exigible to CST is not doubtful even to the applicant and we agree with the same. However, the applicant has made a general query as regards access charges paid to Municipal Authorities. We have no further information than the receipt raised and the policy guidelines of MCGM. To determine whether it is a composite supply by Municipal Authorities, the available information is insufficient as the question posed is in respect of Municipal authorities in general and not any specific Municipal Authority with complete details and therefore is not answered. 06. In view of the detailed deliberations held hereinabove, it is ordered thus - ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-11/2017/B- 14 & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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