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TMI Blog2021 (4) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 2. Under Section 103 (1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a). On the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling; (b). On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Transmission of Electricity respectively under the Electricity Act, 2003. TANGEDCO and TANTRANSCO enter into transactions between them in the course of generation, transmission, and distribution of electricity in Tamil Nadu. 2.3 The Appellant has sought Advance Ruling on the following questions (i) GST applicability on the transactions between TANGEDCO Ltd. & TANTRANSCO Ltd (ii) Applicability of GST on Deposit Contribution Works (iii) Whether TANGEDCO ltd can be considered a "Government Entity" (iv) Applicability of GST on Transmission Charges for Natural Gas. 3.1 The AAR pronounced a ruling that 1. GST is applicable on the following as the same are 'supply of goods' to TANTRANSCO: a. Supply of Operation and maintenance materials used in the regular day to day functioning; and b. Transfer of capital Assets 2. GST is applicable on the deployment of employees to TANTRANSCO as the same is supply of Service 3. GST is not applicable on the following as the same are transaction in money: a. Transactions of physical fund flow between the companies by the way of repayment of existing loan, availment of fresh loans, etc. on actual basis without any intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the AAR order, the reasoning of the AAR is untenable for the following grounds: i. While discussing levy of GST on electricity, the government has stated that electricity duty was in Schedule 7 of the Constitution (State List) and that the present value chain was exempt from tax (page 14 in the Minutes of the 5th GST Council Meeting held on 2-3 December 2016 - http://www.gstcouncil.gov.in/sites/default/files/gst%20rates/Signed%20Minutes%20-%205th%20GST%20Council%20Meeting.pdf). Therefore, the above activities which are in the value chain for electricity transmission and distribution are exempt from GST i.e, beyond the purview of GST. ii. Notwithstanding the fact that the Central Government did not have powers to levy tax/duty on electricity, the historical exemption for electricity from service tax and central excise duty too validated the above position. Notification No. 45 ST dated 20.07.2010 directed that service tax payable on all taxable services relating to transmission and distribution of electricity provided by a person to any other person - upto 26.02.2010 for transmission, and up to 21.06.2010 for distribution - shall not be required to be paid. For the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods or services. The facts, on the other hand, are that the appellant and Tantransco drew from each other's stores and accounted such stores drawn as receivable / payable as the case may be. v. Construction of sub-station, Buildings, erection of transformers is being carried out by construction circles of either of the company on behalf of other company. Since TANTRANSCO has the general construction circles throughout Tamil Nadu certain specific capital expenditure i.e., Example-Construction of 33 KV Transformers is being done by TANTRANSCO. Very few assets transfers happen from TANGEDCO to TANTRANSCO. For Example 110 KV lines cables and networks 66 KV and above substations and its ancillaries. At the time of segregation of circles, the assets relating to TANTRANSCO may be identified and transferred to the related companies i.e., TANTRANSCO and vice versa. For dealing with this activity, the impugned ruling refers to SI. No.4(a) in Schedule II. Schedule II read with section 7(1A) enables classification of an activity as supply of goods or service. This by itself does not lead to an activity being taxable supply as the transferee agents of the TNEB are functioning in a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in an inter-miscible manner as Final Transfer Scheme for employees has not yet been notified by the Government of TN. Consequent to Tamil Nadu Electricity (Reorganisation and Reforms) Transfer Scheme, 2010 published by G.O.(Ms).No.100 dated 19.10.2010 in exercise of the powers conferred by sections 131 and 133 of the Electricity Act, 2003 and in terms of clause 6 of the said Scheme all personnel of the Board (excluding Chairman and Director of the Board)stood transferred to and absorbed in TANGEDCO (the appellant herein) on a provisional basis, subject to finalisation of Employee Transfer scheme by the State Government. The Tripartite Agreement envisaged under the said Scheme has not yet happened. In view of this background, the impugned ruling erred in construing the deployment of the employees of erstwhile TNEB by the newly created Tangedco - the appellant herein - as supply of manpower. iv. The impugned ruling, on the other hand, concluded in paragraph 7.3.4 thereof that 'It is stated that the services of employees in the Roll of the applicant, when utilized by TANTRANSCO, the salary, related allowance and other advances payable to such staff are accounted in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otes in the beginning the appellant's clarification that "... transactions being in the course of generation, transmission and distribution of electricity by an electricity transmission or distribution utility is exempt under Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017". In this regard, it may be noted that in terms of G.O.(Ms).No.100 dated 19.10.2010 - clause 11 (6) - being Tamil Nadu Electricity (Reorganisation and Reforms) Transfer Scheme, 2010 - it is stated that "In terms of section 14 read with section 131 of the Act, the Transferee concerned shall he a deemed Licensee for the activities and functions of the Board transferred to them which require licenses, under the provisions of the Act". Under Schedule A Part III "Functions and duties of TANGEDCO", appellant is distribution licensee and has to undertake the electricity sub-transmission distribution and retail supply in the State of Tamil Nadu or outside. As appellant's functions, among other things, encompass sub-transmission distribution, appellant is covered by service code 99691 in general and both the sub-codes 996911 and 996912. The said Si. No.25 is for the code 9969 in general and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iking down the above circular. The ruling states that SLP has been filed against the H.C. decision. The ruling provides no answer to appellant's reliance on Section 15 which is noted in the ruling. Per section 15, the value of the exempted supply of electricity and its distribution would automatically include the value of the incidental expenses and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of or before delivery of goods or supply of services. Thus, the ruling given is erroneous. 5. In respect of the Ruling in paragraph 8.2.5 but not finding place in the final paragraph 12 This ruling is that "8.2.5 Activity of payment of expenses incurred by TANTRANSCO relating to vehicle hire charges, maintenance of sub-stations, salary payments, etc and paid by TANGEDCO & accounted as receivable in the books of the applicant as discussed in Pam 7.3.5 supra. The said activity is not one involving services of distribution of electricity and therefore the exemption under SI. No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is not available for the stated transactions." It is noted position in SI. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f electricity by an electricity transmission or distribution utility" sl. No.25 12-CTR/28 June 2017. b) Historical value chain exemption in the activities of transmission and distribution of electricity in view of the Constitutional position is the crucial backdrop to this entry of GST levy exemption. c) Paragraph 2(z) in the notification 2-CTR/ 28 June 2017 defines that "electricity transmission or distribution utility" means the Central Electricity Authority; a State Electricity Board; the Central Transmission Utility or a State Transmission Utility notified under the Electricity Act, 2003 (36 of 2003); or a distribution or transmission licensee under the said Act, or any other entity entrusted with such function by the Central Government or, as the case may be, the State Government". d) The activities of transmission and distribution are, therefore, to be understood and comprehended as envisaged in the Electricity Act. If the Electricity Act is not referred to, then, the understanding of the defined terms 'transmission utility' and 'distribution licensee' would be lost - which is not permissible. Even otherwise, Electricity Act is the statutory authority fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me but subject always to the terms and conditions of his licence, within his area of supply or transmission or when permitted by the terms of his licence to lay down or place electric supply lines without the area of supply, without that area carry out works such as- (a) to open and break up the soil and pavement of any street, railway or tramway; (b) to open and break up any sewer, drain or tunnel in or under any street, railway or tramway; (c) to alter the position of any line or works or pipes, other than a Math sewer pipe; (d) to lay down and place electric lines, electrical plant and other works; (e) to repair, alter or remove the same; (e) to do all other acts necessary for transmission or supply of electricity". m) The definition 2(z) in the notification is inter-linked to the definitions, and entrusted functions, and duties under the Electricity Act.. n) Therefore, the exemption entry "Transmission or distribution of electricity by an electricity transmission or distribution utility" has necessarily to be read with the provisions of the Electricity Act. o) Only an affirmative answer arises in the facts of the case for the question whether the activity is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the above the service. 2. Regarding Ruling in paragraph 12(2):- GST is applicable on the deployment of employees to TANTRANSCO as the same is supply of Service. Consequent to Tamil Nadu Electricity (Reorganization and Reforms) Transfer Scheme, 2010 published by G.O.(Ms.).No.100 dated 19.10.2010 in exercise of the powers conferred by sections 131 and 133 of the Electricity Act, 2003 and in terms of clause 6 of the said Scheme all personnel (excluding Chairman and Director of the Board) of the erstwhile Tamil Nadu Electricity Board constituted under section 5 of the Electricity (Supply) Act, 1948 stood transferred to and absorbed in TANGEDCO (the appellant herein) on a provisional basis, subject to finalization of Employee Transfer scheme by the State Government. i) Since the Final Transfer Scheme for employees have not yet been notified by the Go TN. all the employees are under the role of TANGEDCO, but utilization is depending upon the requirement of TANGEDCO and TAN FRANSCO. The pay packages of the respective employees are similar and transactions between these two entities are also common. Based on utilization of manpower in the respective entity, the actual expenses on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under GST. 6.2 The appellant cites the statement of the Secretary of GSTC in the meeting held on 2-3 December 2016 that electricity duty was in Schedule 7 of the Constitution (State list) and the present value chain was exempt from tax. The appellant has interpreted it as a value chain to mean the entire value chain of electricity transmission and distribution. The appellant has contended that therefore the entire value chain of electricity and transmission distribution are much beyond the purview of GST under the constitution. He has failed to note that it is only a statement of Secretary, GSTC and not the view of the council. 6.3 Electricity duty is a tax on consumption or sale of electricity and is levied under entry 53 of Part-II State list of Schedule 7 of the Constitution. Therefore, clearly the constitution leaves out only tax on consumption for sale of electricity from the purview of GST. The contention of the appellant is therefore rejected. 6.4 In respect of the contentions of the appellant against the rule in para 12(1) of the AAR order, the appellant has argued that supply of operation and maintenance materials used in regular day to day functioning and transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only a process for delivery of the supply of electricity. 6.8 TANGEDCO is indisputably a generation company and a distribution utility. TANTRANSCO on the other hand is a transmission utility. It is not the case of the appellant that the appellant company is providing transmission services to TANTRANSCO. The appellant contends that the various services extended to TANTRANSCO constitute distribution services. However, as already been stated above, distribution service can be supplied only to consumers in the area of supply of the licensee. Therefore, the services extended by TANGEDCO to TANTRANSCO cannot constitute distribution service. 6.9 With respect to deployment of employees to TANSTRANSCO from the appellant, as a matter of fact it has been averred by the appellant that there are two modes, one in which the employees deputed from the appellant to TANTRANSCO are paid by TANTRANSCO and the expenses are debited in that company's books of accounts only. The second mode involves where salary payments are made by the appellant and the same is accounted as receivable from TANTRANSCO. This distinction was not made during the time of hearing before the AAR. In our view, the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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