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TMI Blog2019 (3) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of consumption of electricity by them. Coming to the taxability of the supply of electricity, we find that electrical energy has been classified under tariff item No. 27160000 under Customs Tariff Act, 1975 and value of its supply has been exempted vide entry No.104 of the notification No. 02/2017- Central Tax (Rate) dated 28.06.2017 - As per Section 15(2) ibid, delayed payment charges should form part of the value of supply of electricity. When value of supply of electricity itself stands exempted by virtue of the above exemption notification dated 28.06.2017 incremental value (i.e. consideration for delalyed payment of the electricity bills as discussed above) would also remain exempted. Levy of GST - cheque dishonor fee collected by the appellants - Held that:- If any person tolerates any act or a situation and recovers a certain amount for such tolerance then it is supply of service. In the instant case, the appellants is tolerating the situation of dishonor of cheques, tendered by the consumers of electricity for payment of electricity bill, by charging certain amount from the consumers, hence, it is a supply of service in terms of the above clause 5(e). Needless t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arterly Audits of the company. The Taxation matter of the appellants are looked after by Mr. Kailash Mali. Since, Mr. Kailash Mali was busy in the Quarterly Audit, the Appeal against the impugned Advance Ruling could not be filed within the aforementioned time limit. Consequently, there is a delay of 29 days in filing the appeal. 6. The appellants has requested to condone this delay and accept the appeal. 7. Considering the facts and circumstances narrated by the appellants, we condone the delay in filing the appeal and accept it for disposal. BRIEF FACTS OF THE CASE 8. Tata Power Company Limited ('TPCL') has entered into a Distribution Franchisee Agreement ('DFA') with Ajmer Vidyut Vitran Nigam Limited ('AVVNL'). In terms of the aforesaid DFA, TPCL has undertaken to supply Electricity to the customers of AVVNL in Ajmer district, Rajasthan, for a period of 20 years. 9. In order to fulfill its obligation under the DFA entered into with AVVNL, TPLC has set up a Special Purpose Vehicle ('SPV') under the name of M/s. TP Ajmer Distribution Limited ('Appellants'). 10. The Appellants are registered under Central Goods and Services Tax Act, 2017 ('CGST Act') and holding GST Registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch charges are leviable to GST. 19. Aggrieved by the above ruling passed by the AAR, the appellants has filed this appeal in respect of the 'Cheque Dishonour Fees' and 'Delayed payment charges', on the following amongst other grounds which are without prejudice to each other. CASE FOR THE PARTY 20. The delayed payment charges collected towards the delay in payment of consideration for supply of Electricity is not taxable under GST in terms of Section 15(2) of CGST Act. A.1 In the present case, the appellants are engaged in making supply of Electrical energy to the customers in Ajmer. The appellants recover Electricity charges for aforesaid supply from the customer as per the tariff rates fixed by RERC. A.2 Further, the appellants are also recovering Delayed payment charges from the customers in case where the customer fails to make payment of consideration for the supply of Electricity, by the due date. The Delayed payment charges is in nature of interest charged on consideration for the supply of Electricity. Sample copies of Invoices raised by appellants for recovering Delayed payment charges are enclosed as Appendix-3. A.3 The supply of 'Electrical energy', classified unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually paid or payable for such supply between unrelated parties, and where the price is sole consideration for supply. B.2 Section 2(31) of the CGST Act, defines 'consideration', in relation to the supply of goods or services, as under: "consideration" in relation to the supply of goods or services or both includes- a. Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the recipient or by any other person but shall not include any subsidy given by the Central or State Government; ……" ….emphasis supplied B.3 Thus, a payment would qualify as 'consideration' for a supply only if such payment is made 'in respect of', 'in response to', or 'for the inducement of' a supply. In other words, there must be a direct relation between a supply being made and the payment received. B.4 In the present case, the appellants recover Cheque Dishonour fees from the customer in cases where the cheque given by the customers is dishonoured upon presenting it to the bank. Sample copies of Invoices raised by appellants for recovering Cheque dishonour fees are enclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cost to be recovered from consumers, the Non-Tariff Income are excluded from the above component of fixed cost. DISCUSSION AND FINDINGS 23. Having gone through the decision of the Authority for Advance Ruling (AAR) and submissions made by the appellants in written form as well as those made during the course of personal hearing, we find that the issues before us to decide are:- 1. whether the delayed payment charges collected from the consumers for delay in payment of consideration for supply of electricity is liable to GST in terms of Section 15(2) of the CGST Act, 2017; and 2. whether the cheque dishonor fee collected by the appellants is liable to GST. Taxability of delayed payment charges under Section 15(2) of the CGST Act, 2017 24. For the sake of convenience, we are reproducing the Section 15(1) and the Section 15(2) of the CGST Act. 15(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. 15 (2) The value of supply shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the Appellants. Taxability of cheque dishonour fee collected by the appellants 27. Now we come to the next question whether the cheque dishonor fee collected by the appellants is liable to GST or not. The appellants is collecting this fee from those consumers of electricity whose cheque upon presenting to the bank are being dishonoured. The appellants have pleaded that since bank is charging penalty from them when any cheque gets dishonourd, this fee is nothing but compensation for penal charges paid by them to bank. 28. For the sake of convenience, we are reproducing clause 5 (e) of the Schedule-II of the CGST Act. 5. Supply of services The following shall be treated as supply of services, namely:- (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; 29. Going by the above caluse 5(e), it is evident that if any person tolerates any act or a situation and recovers a certain amount for such tolerance then it is supply of service. In the instant case, the appellants is tolerating the situation of dishonor of cheques, tendered by the consumers of electricity for payment of electricity bill, by charging certain amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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